Tuesday, November 16, 2010

Opinion of the day

I'm with David Beckworth. The "conservatives'" open letter to Bernanke is a shame. Respectable conservatives shouldn't echo talking points from Sarah Palin, who just regurgitates Glenn Beck's nonsense. Milton Friedman would have favored Fed operations in the face of falling inflation expectations and in the worse drop in NGDP since the Great Depression. He would have supported QE two years ago, would have said the Fed is playing "catch up" today.

Reading John Taylor's blog, I think if the FOMC had announced a specific target-- NGDP target, price level target, inflation target, etc.-- he and others would not have signed that letter. They want to see coherent policy rule, and Bernanke hasn't clearly communicated that at all.

I've mentioned before that I believe in something called aggregate demand. Milton Friedman believed in it, too. But talking about "stimulating aggregate demand" gets you labeled a "Keynesian" in the current political climate.

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