All the fans of NGDP targeting out there can now make a fashion statement about their beliefs. Will Luther has created t-shirts that advocate stabilizing aggregate demand (i.e. total current dollar spending) as the policy goal for monetary policy. For those coming late to this discussion this approach amounts to the Fed adjusting the M and Vpart of the MV=PY equation such that PY is stabilized in some fashion (e.g. PY grows according to to some target rate). And yes, the Fed has enough power to adjust both M and V if it really wanted to do so. Here are the shirts (click on figures to enlarge):
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These t-shirts speak to the increasing popularity of targeting NGDP. I just hope all the new converts realize and support all the implications--e.g. sometimes deflation is appropriate--of this approach to monetary policy.
hat tip: Scott Sumner
Sorry, I think I will continue to wear my "Abolish the Fed" t-shirt.
ReplyDeleteIf the events of the last 20 years have shown anything, it is the wisdom of those who have argued through the centuries that central banking is the largest contributor to diverting the powerful beneficial freshwater flows of market capitalism so elegantly limned by Smith, into the brackish waters of unethical crony capitalism.
And for many, end the Fed is not a fashion statement but an expression of a very real anger.