Must-Read: David Glasner: Repeat after Me: Inflation’s the Cure not the Disease

Must-Read: 1931 was the once-in-a-century time for a monetary régime change in the twentieth century (and, if we are allowed one every half-century, 1978 was the time for the second). And it looks to me very much like 2009 was the time for a monetary régime change in the first half of the twenty-first century:

David Glasner: Repeat after Me: Inflation’s the Cure not the Disease: “The question… depends not on an abstract argument about the shape of the LM curve…

…but about the evolution of inflation expectations over time. I’m not sure that I’m persuaded by DeLong’s backward induction argument–an argument that I like enough to have used myself on occasion while conceding that the logic may not hold in the real word–but there is no logical inconsistency… different conjectures about the evolution of inflation expectations in a world in which there is uncertainty about what the future monetary policy of the central bank is going to be (in other words, a world like the one we inhabit)…. The problem with monetary policy since 2008 has been that the Fed has credibly adopted a 2% inflation target… [which it] prefers to undershoot…. Monetary policy is impotent at the zero lower bound, but that impotence is… self-imposed by the credibility of the Fed’s own inflation target…. Changing the inflation target is not a decision… the Fed [should] take lightly… [but] in a crisis, you… take a chance… hope… credibility can be restored by future responsible behavior…. HAWTREY:

Orthodox Central Banking… is like conventions at bridge; you have to break them when the circumstances call for it…. A gold reserve exists to be used… once in a century… for the governing purpose, provided you have the courage to use practically all of it…