David Frum

08.09.12

AEI Economics: Better Late Than Never

AEI economics blogger James Pethokoukis has a new podcast up where he speaks for an hour with Professor Scott Sumner of The Money Illusion. Sumner is famous for arguing that the Federal Reserve should set monetary policy by targeting a stable trend line of growth in Nominal Gross Domestic Product. (I've written very favorably about this policy proposal before.)

Sumner has called for action from the Federal Reserve that could lead to a lot of asset buying and likely some inflation in the short-term, positions that typically have not been supported in Republican circles.

So it is good that conservatives who have been resistant to these ideas in the past, like Pethokoukis, are coming around. In his podcast Pethokoukis asks the most important question conservatives will have when they hear about this policy for the fist time: Isn't this just promoting inflation? In response, Sumner clearly explains why short term inflation is not the same as the Carter-era inflation that many conservatives fear might repeat itself.