Wednesday, January 23, 2013

Cole and Nunes' New E-Book on Market Monetarism

Marcus Nunes and Benjamin Cole have an e-book out, Market Monetarism Roadmap to Economic Prosperity.      The emphasis of the book is the value of nominal GDP level targeting.    The approach is historical, focusing on the Great Inflation, the transition to the Great Moderation, the Great Moderation, and then the Great Recession.    They blame the Great Inflation on increasing rates of nominal GDP growth due to unemployment targeting.   The blame the Great Recession on the decrease in the growth path of nominal GDP due to inflation targeting.

As might be expected in a book by Marcus Nunes, there are many, many diagrams that  help illustrate their account.    Some of the diagrams describe the housing market and support their skepticism that excessively low interest rates in about 2002 were central to housing market problems and the Great Recession.    They argue that housing was not overbuilt and while there were some markets where housing prices rose very fast, that was due to draconian zoning restrictions in those markets.   More importantly, the run up in housing prices in those markets often began well before the period when policy rates were expecially low.

Perhaps their most unique argument is their skepticism about central bank independence, arguing that it might be better for money creation to return to the Treasury and be subject to democratic control.   I must admit that my own goal of a monetary constitution would greatly limit the discretionary authority of central bankers.    Still, my agenda for privatization of money is very much the opposite of turning it over day to day adjustments in the quantity of money or interest rates to policians.

I strongly recommend this book at an introduction to Market Monetarism.

1 comment:

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