After Ben Bernanke's announcement on September 13, 2012, of a new round of quantitative easing, which open-endedly committed the FOMC to purchase $40 billion agency mortgage-backed securities per month until the "labor market improves substantially", some media outlets began hailing him as the "blogger who saved the economy", for popularizing the concept of nominal income targeting.
In 2015, Sumner published The Midas Paradox: A New Look at the Great Depression and Economic Instability. The book argued that the Depression was greatly extended by repeated gold market shocks and New Deal wage policies.
Sumner contends that inflation is "measured inaccurately and does not discriminate between demand versus supply shocks" and that "Inflation often changes with a lag...but nominal GDP growth falls very, very quickly, so it'll give you a more timely signal stimulus is needed". He argued that monetary policy can offset fiscal austerity policies such as those pursued by the British government in the wake of the 2007 economic crisis.
In April 2011, the Reserve Bank of New Zealand responded to Sumner's critique of inflation targeting, arguing that a nominal GDP target would be too technically complicated, and make monetary policy difficult to communicate. By November 2011, however, economists from Goldman Sachs were advocating that the Federal Reserve adopt a nominal income target. Nathan Sheets, a former top official at the Federal Reserve and the head of international economics at Citigroup, proposed that the Federal Reserve adopt a nominal consumption target instead.
Sumner has argued that one cannot account for the impact of fiscal policy without first considering how monetary policy may affect the outcome; fiscal stimulus may not succeed if monetary policy is tightened in response. Economic journalists have referred to this as the Sumner Critique, akin to the Lucas critique. Summarizing this thinking, The Economist suggested:
...the economy will almost certainly not grow at a 5.3% rate no matter what Congress does. Arguments to the contrary are subject to what econ bloggers have come to call the Sumner Critique, after economist and blogger Scott Sumner. It is reasonable to assume, by this critique, that the Federal Reserve has a general path for unemployment and inflation in mind and it will react to correct any meaningful deviation from that path. A 5.3% growth rate is well outside the range of current Fed projections. Growth that rapid would almost certainly bring down unemployment quite quickly, triggering Fed nervousness over future inflation and prompting steps to tighten monetary policy.
Well known in Bentley's economics department as a "technophobe", Sumner, who purchased his first cell phone in 2011, apparently "triggered expressions of surprise and amusement when he informed his colleagues that he was starting a blog".
Sumner, Scott B. (2015). "What Would Milton Friedman Have Thought of Market Monetarism?". In Cord, Robert A.; Hammond, J. Daniel. Milton Friedman: Contributions to Economics and Public Policy. Oxford University Press. pp. 246–264. ISBN 9780198704324.
Sumner, Scott B. (2012). "5. How Nominal GDP Targeting Could Have Prevented the Crash of 2008". In Beckworth, David. Boom and Bust Banking: The Causes and Cures of the Great Recession. Independent Institute. pp. 129–165. ISBN 978-1-59813-076-8.
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