The new monetary policy

If David Uren is right about the new Governor of the Bank of England, Mark Carney, wanting to drop inflation targeting for nominal economic growth, the world will soon be returning to an era of high inflation and high unemployment. I think stagflation is on its way back.

I find it interesting that many so-called macroeconomists who considered that soft monetary policy from the Fed was a critical factor leading to the global financial crisis (ie: excessive liquidity driving up asset prices) now advocate even more liquidity and debt. Or that continuing to print money faster than the growth of the economy will not cause inflation to increase.

If unemployment is high, it cannot be reduced by inflation.

Personally I’m skeptical of Carney, and surprised by hagiographic reports greeting his appointment. To me he is like Joseph P. Kennedy – the fox put in charge of the hen-house, or the hunter turned game keeper.