Lately, Nick Rowe has given a lot of time and thought to get a handle on “Neo Fisherism”. I think that at the end of his latest post on the subject he nails it:
I am of the view that the Bank of Canada targets 2% inflation (or NGDP or whatever), and it adjusts the nominal interest rate (or base money or whatever) to hit that target, and its actions affect its profits, and those profits affect the government’s spending and taxation decisions. In the long run, the government adjusts its budget to be consistent with the Bank of Canada’s actions. Not vice versa. We saw that adjustment in 1995.
Zimbabwe, under Mugabe, is different. The guy with the AK47 chooses how much currency you print for him to spend, even though he does give you a bond in return. And the higher the price level the more currency he wants you to print for him. Raising the nominal rate of interest on bonds lets you sell more bonds and withdraw currency from circulation, but also means you must print currency even faster to pay the higher interest. Because the guy with the AK47 is going to make you print enough additional currency to pay the interest on the bonds he issued. That’s a Neo-Fisherite world.
The “show-case” for Market Monetarists is quite different (and much more palatable). You can choose from things like the “Great Moderation” or Australia´s quarter century absence of recession!