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Discussion: (1 comment)

  1. Aside from the merits or lack thereof in Sumner’s core argument, there is a problem with his solution: real-time measurement. Interest rates are known on a daily basis. Posted prices (and therefore inflation) can be tracked weekly. Unemployment numbers provide a more erratic benchmark, with different measures leading to widely differing results. Still, some measures are available on a weekly basis, such as the number of applicants for unemployment compensation. GDP is not only impossible to calculate on a current basis, it usually requires constant revision. Even years after the fact, numbers are being revised, so that economists can try to figure out what was actually happening back when. Nominal GDP is no easier to track than real GDP. If the Fed were to use this as its target, it would be flying blind, with only some low-resolution, backward-pointing radar to guide it.

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