Thursday, October 20, 2011

Sumnerary Judgement

Scott Sumner has been talking up having the Fed go to nominal gdp (gross domestic product) targeting. Paul Krugman, Goldman-Sachs and Tyler Cowen are on board. That should be a sign right there that the singularity is near.

So what does it mean? Kevin Drum explains and provides a helpful graph:

The basic idea is that gdp took a huge hit during the economic meltdown, and the
idea is to pump up the nominal economy (that is, the economy in uninflated dollars) to the pre-depression trend line. In practice, this means tolerating some inflation.

I say "Do it!"