As I mentioned in my previous post, over recent weeks I found myself in a conversation with Scott Sumner about the inevitability of debt-creation and debt-destruction cycles, and about what that means for effective monetary policy under today’s conditions.
Anyone who is interested in these questions may want to check out our back-and-forth in the comments section of this posting: http://www.themoneyillusion.com/?p=11077
This conversation becomes even more interesting in light of the recent groundswell in support of Scott’s longstanding proposal that the Fed should shift its policy to one of explicitly targeting Nominal Gross Domestic Product (NGDP)as opposed to targeting some balance of low inflation and full employment. Scott has been pushing this idea for a long time, and now it seems the idea is quickly gaining traction on a lot of different fronts.
I think this is a HUGE deal, and a hugely positive turn of events (for reasons I will offer in a coming post).
As with any blog comments sections, there are comments a reader may want to skip over (comments that were all posted in the first few days). Within those early comments, though, Scott and I begin our conversation–a conversation that then continues to unfold after all the other commenters have moved on.
The discussion peters out a bit at the end… Actually, we picked it up again in a discussion surrounding one of his more recent posts about Matt Yglesius (http://www.themoneyillusion.com/?p=11252), but I think there is a lot in here that people who care about this stuff might find interesting.