L. Randall Wray — The Circular Logic Behind Scott Sumner’s Claim That the Fed’s Policy is Contractionary

I came across, and commented on, a piece by Scott Sumner a few days ago. (DID SCOTT SUMNER FIND MMT’S ACHILLES’ HEEL? ) He claimed he had proof MMT is wrong: if the Fed doubles the base then ipso facto nominal GDP must double and ipso facto MMT is wrong. Well, the Fed tripled the base and nominal GDP didn’t budge. In any case, even if that had worked, it is not evidence against MMT. All Sumner did was to string together a series of non-sequiturs.

Sumner’s also behind an inane proposal that the Fed ought to use its demonstrated impotence to target nominal GDP. Right. I wish the Chairman would reduce the earth’s wobble instead.

A reader thought I’d been too hard on him. But in his latest piece, he’s removed all doubt. What puzzles me is that some people seem to take this seriously. I don’t get it.

New Economic Perspectives
The Circular Logic Behind Scott Sumner’s Claim That the Fed’s Policy is Contractionary
L. Randall Wray | Professor of Economics and Research Director of the Center for Full Employment and Price Stability, University of Missouri–Kansas City