...If only this "great divide" existed in a single "dimension," pertinent issues of the day could be somewhat more understandable. But it's not just the disconnect between representatives for aggregate supply and demand, which lacks any common (public) meeting place for discussion or mutual concern. There is also the equally thorny problem, regarding a lack of consensus that money remains the best tool for real growth in the present. Indeed, some see money as a "necessary evil", rather than a vital aspect of human economic interaction. One of the interesting things about the recent quiz I took re political stance: supply side leanings on the part of anyone who seemed Democrat in other respects, could completely undermine a liberal social identity, in the eyes of those who believe monetary blogs are for trolls and misfits.
One reason it is so difficult to make headway is the fact that there are competing contexts for the discussion itself. Even though this is an important time to make changes which could "stick" for the long run, they nonetheless need to be fully operational within a short run framework which has clarity and meaning. And the biggest problem in that regard is the fact that nominal targeting is still short in terms of aggregate demand. Even as third quarter growth came in better than expected, Kathleen Madigan of the WSJ points out that final sales growth lagged GDP increases in the first three quarters of 2013.
Like Brink Lindsey (HT Marcus Nunes) I am especially concerned about the long term prospects of monetary policy, in that even if NGDPLT were adopted right now, by no means would my blogging mission be complete. Just the same, as Britmouse points out in this post, too many supply siders are happy to remain on the sidelines, and act as though the difficulties of the Great Recession never even took place. He states that inflation has no place in macro and on that, I certainly agree. However his frustration also extends to endless rounds of productivity dialogue which seem to go nowhere and is used mostly for excuses. Thus, Britmouse stresses the need for a stable NGDP path while the supply side sorts through its own puzzle.
If only they would! What's more no one can afford to ignore them, just because they refuse to play the monetary game on fair and reasonable terms. Fine, I'm more than glad to be a pit bull and hang on so as to give them plenty of grief. Too many policy makers and supply siders have too little incentive to sort things out, especially when they are completely entrenched in the status quo. Indeed it is that status quo which makes people throw up their hands, even as I hope that representatives of the supply side can move forward and find common ground with aggregate demand goals. In fact - given the chance - not only would some tight money advocates reduce growth for the long term, but they would continue to thwart short term economic stability for the same reasons.
For many, this also comes down to a continued emphasis on credit channels as the primary or only means of economic growth - even as banks refuse to loan money. And for others, government is supposedly the main provider of all economic life - no matter how local and individualized. Both mindsets unfortunately imply no way forward for wealth creation, in the present. For in both circumstance, these particular camps still see little role for money printing, even though it has clearly made a big difference for economic outcomes in 2013. And of course as Scott Sumner indicated, he knows that weakness still exists, but QE has improved a situation - especially this year - which could have been much worse.
Some say that women hold more closely to personal takes on issues than men, and lately I feel as though I have been "true to form" in that regard. Regular readers know that I remain frustrated, that the vital importance of monetary issues remains lost on a large segment of the population. As Nick Rowe recently said, monetary policy is a bus that we all ride together. And unfortunately, too few recognize the significance of the bus itself. Both government and finance work in unison to make people feel as though monetary activity is not something integral to their own lives.
But anytime the public remains convinced that monetary matters can be left entirely for someone else to figure out, there will always be some among the responsible group who will be tempted to take advantage of the fact that the public doesn't really know what's going on. That's why the particular formation of responsibility for monetary printing never presents a "final" solution. History has always pointed to a dearth of responsible and benevolent rulers: hence society has a much better chance at overall goal sets when it understands the most basic elements of how the economic game is played. Granted, while nominal targeting is still in relatively early stages of consideration, its actual importance to the entire game board remains far from understood. That's just another way of saying, there's lots more work to be done.
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