At this exact time last year all the hoopla was about the Dow closing at 13,000 points. (Note it´s always the Dow that ‘sets the milestone’). One year later another occasion to ‘celebrate’ – just count the number of posts and pieces written today on the 14,000 ‘breakthrough. This time it´s even more special because it breaks the pre-crisis nominal record high.
The chart shows that at the end of last year (just over two months ago), the Dow was still at 13,000! In other words, between early March and late December 2012 the Dow just ‘fluctuated directionless’.
QE3 introduced in September doesn´t seem to have ‘cut it’. Maybe the discussion followed by the announcement of numerical thresholds for unemployment and inflation to complement QE3 in December did the trick. Or maybe, again, it´s just a temporary quirk, and in 10 months’ time we´ll still be ‘kissing 14,000’. QE 4 (cum more aggressive thresholds anyone)?
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Mr Nunes,
This is totally unrelated to this post but I recently read yours and Coles’ book “Market Monetarism” and I hope you don’t mind if I offer some constructive criticism.The book was very good and I specifically like the fact it was very concise and not time consuming, without loss of important facts. But I felt a few important questions were left unanswered:
1. Why is an NGDP target better than a broad money target. So why target MV instead of just M?
2. Why is the “level” a better target than the “growth”?
3. What if trend NGDP is 5%, so we aim for 5%, but then suffer supply side problems. Do we put up with 5% inflation.
I would be fully persuaded to NGDPLT if these questions were answered. At the moment I believe that low and stable broad money growth is necessary for macro stability but that the trend should be adjusted in accordance with RGDP trend so as to keep inflation at, say, 2-ish%.
Chris, answers have been sento to your -mail