Every now and then it helps to step back and paint in broad strokes, and this post is just to highlight some of the reasons why I'm so partial to market monetarism. Over time, different aspects of MM have become more apparent to me - but I've still got much to learn about macroeconomics even as I try to make better sense of my own thought processes through writing.
One thing that is so encouraging in times which still feel recessionary: people who think in market monetarist terms refuse to be bound by the seeming economic limitations of the past. The MM discipline is forward looking in terms of market expectations, even as it would draw upon recent monetary activity to maintain stability. Through level targeting, this potential measuring rule would continue to reflect ongoing circumstance as closely as possible, in terms of actual spending capacity. What's more, all of this is possible to achieve without the grandstanding and drama which continue to accompany monetary activity now.
Instead of being bound by bank lending capacity, nominal targeting responds to spending capacity on the part of all economic actors, through incremental means. Many who grew up in times when people frequently went into business or bought properties with cash instead of bank loans, can appreciate the not so subtle difference in focus. What's more nominal targeting provides an apt starting point, for a citizen's dialogue to redefine the purpose of wealth in the 21st century. Even though policy makers in Washington still seek ways to make homeowners of us all, MM helps to shift the discussion away from passive wealth holdings towards more active forms of wealth.
It is especially freeing to be able to step away from the idea of bank loans as primary for economic activity. At best, loans are a complement to ongoing activities and at worst, a detractor from human potential. Just the same, making a clean break with finance is no easy task, for it remains integrated in the same sets of circumstance which caused so much grief for governments in the first place. Adopting a nominal targeting rule is an important first step to find a way out of the present day finance quagmire.
Market monetarism is in some ways a plea for governments to stop the cycles of overreaction to market conditions and the destabilization which follows. To a degree, governments and their citizens created a protracted business cycle with housing, because of a lack of consensus as to what future wealth creation might actually consist of. While such dialogue may have been a matter for government responsibility in the 20th century, it is a responsibility for everyone in the 21st. Today, the future can be shaped by knowledge and skill, much as it was once shaped by fossil fuels and the automobile.
Market monetarists are nothing if not optimistic. And, it is good to know that the most important components of GDP measure and nominal targeting are just as applicable for dynamic wealth formation in the 21st century, as they were for the 20th - if not more so. To be sure there is still a lot of confusion how to move forward in the present, but this is something that no follower of MM is going to shy away from, and there are plenty of perspectives to be had all around.
In spite of all this, the biggest argument for nominal targeting is somewhat hidden in the background, which is why some may not readily recognize it. When spending capacity is accurately portrayed, it makes other economic elements a lot easier to tend to, than they would be otherwise. That's no small matter, at all.