Препечатвам особено интересния пост на Скот Съмнър за проблемите на американската парична политика. Впрочем, Съмнър твърди, че балончетата не водят до макроикономическа нестабилност, но се съмнявам, че това има практическо значение. Лошото е, че когато се пука балона, се разразява реалната криза.
Generation Depression -> Generation Inflation -> Generation Bubble
People form their views of politics and economics when they are young, and are given the reins of power when in their late fifties. Any thoughtful person in the 1930s could have easily predicted what would go wrong in the 1960s. The generation that grew up in the Great Depression would have a single-minded obsession with boosting AD to prevent mass unemployment. They would see everything as a demand issue, and ignore the supply side. Thus the “Liberal Hour” of 1961 turned into the Great Inflation.
Any thoughtful person in the 1970s could have easily predicted the policy mistakes of the 2000s. The generation that came of age during the 1970s would be obsessed with the threat of inflation—seeing it just around the corner whenever there was a spike in the money supply, a dip in interest rates, or a blip in the CPI from commodity prices. The 1970s generation (including me) would overreact until NGDP growth was driven so low that interest rates fell to zero, making conventional monetary policy impotent. The inflation targeting consensus turned into the Great Recession.
The young people today have grown up in a world dominated by two giant bubbles. To see how strange this is, consider that as late as 1998 the economics profession paid almost no attention to bubbles. After all, the EMF said markets were efficient, and the policymakers of 1998 had experienced exactly zero real estate bubbles in the past 60 years, and the only stock market bubble (1987) crashed without even a tiny blip in GDP growth. Bubbles? Who cares?
Any thoughtful person today can predict that the macroeconomics policy failures of 2040 will be produced by a generation of late middle-aged policymakers obsessed with preventing bubbles. And boy will they have lots of bubbles to worry about! The coming Asian century will produce a tsunami of savings and a crash in population growth, which will drive real interest rates to ultra-low levels. Perfect for endless bubble formation. (Of course I still believe in the EMH, so whenever I say ‘bubble’, I actually mean “bubble” with scare quotes.) Yes, bubbles don’t actually cause macro instability, but what matters is that they appear to.
Right now that future generation of mischievous policy-makers are still young—in a sort of embryonic state—studying in our graduate schools. But someday they’ll be in power. And then watch out!
What strange beast slouches . . .
PS. Many commenters have sent me a post by M.C.K. at Free Exchange. Some perceive it to be critical of NGDP targeting. I see it as supportive, pointing out that NGDP targeting during the late 1990s might well have been preferable to Greenspan’s actual (inflation targeting) policy. But the post does express some concern that central banks might refrain from implementing NGDP targeting during a period of strong productivity growth. I don’t happen to share that fear. If they decide that NGDPLT is to be the target, they’ll do a pretty good job of hitting the target.
PPS. Imagine a sci-fi movie with hoards of young Austrian economics in giant test tubes . . . waiting for their chance.
Or will it be MMTers?