The Federal Reserve should set a “nominal target” for growth in the nation’s gross domestic product that is well above its current low rate for coming out of a recession, said Christina Romer, now an economics professor at the University Of California, Berkeley.“One thing I think it would do is pack a really big expectations wallop,’’ said Romer, speaking at the Super Bowl of Indexing wealth management conference here. “A new operating strategy is something that could really break through and affect people’s behavior.” Such a “new operating strategy” is needed to get the economy on the kind of course normally seen after a recession. In the first nine quarters after the 1982 version, the economy grew at an annual rate of 6.3 percent. In the first nine quarters of this edition, the rate has been 2.4 percent, barely at the nation’s historical rate of growth. And if a new approach is not taken, it could be decades before the nation is back at full employment.
via Romer: Expectations Wallop Needed to Avert 40-Year Recovery.
This is ridiculous. Setting a target had nothing to do with the growth in the 80’s. The 80’s had to do with the first conservative in the white house in over a 100 years and hope for the right changes which started but did not finish.
Setting a target and acheiving it are two different things. Do we acheive it by forcing money supply or tweaking interest rates or cap spending or …? What is with these types of nonsense statements that we get? Any stimulus to create supply doesn’t address demand. Has the law of supply and demand been downgraded to a working paper?
The only structural reform will come through de-leveraging, deflating and devaluing assets, entitlements and wages. Unless, of course, we want uncontrolled inflation. Maybe that is what the politicians want. It would solve some of their problems to pay out promises with inflated dollars.