Ramesh Ponnuru has a new Bloomberg article where he responds to the FOMC's discussion on nominal GDP Targeting. Some excerpts:
NGDP targeting seeks to stabilize expectations about the future path of the economy, making it easier for people to make long-term plans. Keeping nominal spending, and thus nominal income, on a relatively predictable path is especially important because most debts, such as mortgages, are contracted in nominal terms. If nominal incomes swing wildly, so does the ability to service those debts.
From the standpoint of macroeconomic stability, then, NGDP targeting is superior because it allows inflation to accelerate and slow to counteract fluctuations in productivity. It moves the money supply only in response to changes in the demand for money balances, and not to supply shocks that mimic the effect of these changes on prices but call for a different monetary response.
If only the Fed would listen to Ramesh Ponnuru and start targeting some pre-crisis trend path for nominal GDP. Not only would it be good for the U.S. economy, it would also do wonders for the Eurozone economy.