Friday, January 6, 2012

FDR on the Recession: Monetary Targeting

From Rortybomb (via @TimHarford), some political comics of FDR as the grand architect of society. Normally this is a phrase that makes me shudder, but there is something very interesting about this picture. Notice pillar 7 of Pulitzer-Prize winning editorial cartoonist John T. McCutcheon, October 25th, 1933. Oh, wait, is it too small for you? Let's zoom in:

Pillar 7 translates as "target a particular price level" rather than an inflation rate. No inflation, which hawks ought to love; rules based; but in a circumstance like this would encourage the Fed to do a lot more easing than they have. As Rortybomb puts it:
Notice that Pillar 7 isn’t “Buy $X amount worth of Y” (like QE does) but “set the level.”  It’s not a floor or a step but a destination.  The cartoonist understands that the administration must do whatever it takes across all available monetary tools to get us to the targeted destination.

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