While this subject continues to get short shrift in public dialogue, monetary representation has also been overshadowed by non-monetary concerns where it matters most: monetary policy. Somehow, I get the feeling it wasn't always this way. Only consider dialogue from U.S. historical accounts, before governments became so heavily involved in the economy. Even though many individuals only partially understood what was at stake, presidents, policy makers and citizens alike appeared more concerned with monetary representation, than policy makers or citizens of the present
Whereas today, monetary representation takes a back seat to practically everything else imaginable. This makes it too easy for the Fed to obscure from the public, that they are gradually pulling away the monetary foundation of aggregate spending capacity - albeit in slow motion. Even now, too few realize what is happening to the long term growth trajectory, or how tight monetary conditions could generate further political instability.
Given the abundance of present day statistics and measuring capacity, why is it difficult to recognize where monetary representation exists? Even though there was less measuring capacity during the Great Depression, many forms of product still existed in simpler terms. Traditional manufacture played a much larger role, and the measurement uncertainty of services product was far less of a concern. As a result, aggregate wages and income were easier to correlate with overall product formation. So long as this was obvious to the average citizen, monetary representation for the average individual was doubtless more important in the public's mind.
Even though the challenges to GDP as "appropriate" measure must seem odd to market participants, the lack of correlation of GDP with understandable product formation is not lost on the public. Plus, much of GDP represents intangible wealth such as housing - also difficult to recognize as the primary capital formation now held in common. Just the same, calls to find something more "meaningful" than GDP do not take into account its central necessity for monetary representation. In other words, were it not for the ongoing capacity of GDP measure, monetary stability would be even more difficult to achieve, than has been the case already, particularly with a Fed which appears to have lost its monetary bearings.
Complexities regarding taxation, could also play into the seeming lack of concern regarding monetary representation. Even for students of economics, the quantity theory of money may not necessarily square with what is perceived to be government's role in the economy. Add in the difficulty of visualizing what gets spent on real product, and one does not even know how subjective values can be considered in context. When product formation becomes unrecognizable in economic activity, monetary representation cannot be far behind.
Another area of confusion regarding monetary policy, is that aggregate numbers are beginning to overwhelm the average individual. How does one think of monetary representation in personal terms, when the amounts are in the trillions? Indeed, this may be part of a growing rationale, to throw up one's hands and rely on "infinite money" (no backing) to tend to the enormous responsibility of financial matters. Even though trillions still make sense for the aggregate resource capacity of the world, it is difficult to understand where or how to match this capacity to the finite and limited capacity of time aggregates. One internet joke put it thusly, "CNN just said the world is 40 trillion dollars in debt. Who the *#&% does the world owe...Jupiter?"
Some of this might explain why central banks insist their current monetary policy has been "expansionary" when it most definitely has not, and have gotten away with this declaration for so long. For the average layperson, it has been easier to take the opinion of pundits at face value, than to dig deeper to discover what is actually occurring. Plus, the task of digging deeper - while rewarding in the sense of discovering the truth - is not going to make anyone popular at dinner parties!
Of course a lot more is at stake than popularity contests, and this is particularly true for the Fed. As David Beckworth recently indicated, it is time for the Fed to end their guessing game, and get back to a rule based framework which once again places monetary representation front and center. Granted, there are other important considerations for economic stability in the months and years ahead. Just the same, the Fed needs to get real with the public, as to what its most important job actually consists of.