{"id":7076,"date":"2013-03-19T03:26:27","date_gmt":"2013-03-19T07:26:27","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=7076"},"modified":"2013-03-19T03:26:27","modified_gmt":"2013-03-19T07:26:27","slug":"fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/","title":{"rendered":"Fed NGDP targeting would greatly increase global financial stability &#124; Market Monetarist"},"content":{"rendered":"<p>Lars Christensen describes how NGDP targeting would help the global economy withstand shocks like another eurozone crisis:<\/p>\n<blockquote style=\"background-color:#ddddff;\"><p>Lets look at two different hypothetical US monetary policy settings. First what we could call an \u2018adaptive\u2019 monetary policy rule and second on a strict NGDP targeting rule.<\/p>\n<p><strong>\u2018Adaptive\u2019 monetary policy \u2013 a recipe for disaster<\/strong><\/p>\n<p>By an adaptive monetary policy I mean a policy where the central bank will allow \u2018outside\u2019 factors to determine or at least greatly influence US monetary conditions and hence the Fed would not offset shocks to money velocity&#8230;..<\/p>\n<p>In that sense under an \u2018adaptive\u2019 monetary policy the Fed is effective[ly] allowing external financial shocks to become a tightening of US monetary conditions. The consequence every time that this is happening is not only a negative shock to US economic activity, but also increased financial distress \u2013 as in 2008 and 2011.<\/p>\n<p><strong>NGDP targeting greatly increases global financial stability<\/strong><\/p>\n<p>If the Fed on the other hand pursues a strict NGDP level targeting regime the story is very different.<\/p>\n<p>Lets again take the case of an European sovereign default. The shock again \u2013 initially \u2013 makes investors run for safe assets. That is causing the US dollar to strengthen, which is pushing down US money velocity (money demand is increasing relative to the money supply). However, as the Fed is operating a strict NGDP targeting regime it would \u2018automatically\u2019 offset the decrease in velocity by increasing the money base (and indirectly the money supply) to keep NGDP expectations \u2018on track\u2019. Under a futures based NGDP targeting regime this would be completely automatic and \u2018market determined\u2019.<\/p>\n<p>Hence, a financial shock from an euro zone sovereign default would leave no major impact on US NGDP and therefore likely not on US prices and real economic activity&#8230;..<\/p><\/blockquote>\n<p>Read more at <a href=\"http:\/\/marketmonetarist.com\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability\/?utm_medium=twitter&amp;utm_source=twitterfeed\">Fed NGDP targeting would greatly increase global financial stability | The Market Monetarist<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Lars Christensen describes how NGDP targeting would help the global economy withstand shocks like another eurozone crisis: Lets look at two different hypothetical US monetary policy settings. First what we could call an \u2018adaptive\u2019 monetary policy rule and second on a strict NGDP targeting rule. \u2018Adaptive\u2019 monetary policy \u2013 a recipe for disaster By an &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Fed NGDP targeting would greatly increase global financial stability &#124; Market Monetarist&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,34],"tags":[2470],"class_list":["post-7076","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-us-canada-countries-regions","tag-ngdp-targeting"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Fed NGDP targeting would greatly increase global financial stability &#124; Market Monetarist - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fed NGDP targeting would greatly increase global financial stability &#124; Market Monetarist - the patient investor\" \/>\n<meta property=\"og:description\" content=\"Lars Christensen describes how NGDP targeting would help the global economy withstand shocks like another eurozone crisis: Lets look at two different hypothetical US monetary policy settings. First what we could call an \u2018adaptive\u2019 monetary policy rule and second on a strict NGDP targeting rule. \u2018Adaptive\u2019 monetary policy \u2013 a recipe for disaster By an &hellip; Continue reading &quot;Fed NGDP targeting would greatly increase global financial stability &#124; Market Monetarist&quot;\" \/>\n<meta property=\"og:url\" content=\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/\" \/>\n<meta property=\"og:site_name\" content=\"the patient investor\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/profile.php?id=61572934660810\" \/>\n<meta property=\"article:author\" content=\"https:\/\/facebook.com\/people\/The-Patient-Investor\/61572934660810\/\" \/>\n<meta property=\"article:published_time\" content=\"2013-03-19T07:26:27+00:00\" \/>\n<meta name=\"author\" content=\"Colin Twiggs\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Colin Twiggs\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/\"},\"author\":{\"name\":\"Colin Twiggs\",\"@id\":\"https:\/\/thepatientinvestor.com\/#\/schema\/person\/d42b18d516a80149d739845749ac6454\"},\"headline\":\"Fed NGDP targeting would greatly increase global financial stability &#124; Market Monetarist\",\"datePublished\":\"2013-03-19T07:26:27+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/\"},\"wordCount\":316,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/thepatientinvestor.com\/#organization\"},\"keywords\":[\"NGDP targeting\"],\"articleSection\":[\"Banks &amp; Interest Rates\",\"US &amp; Canada\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/\",\"url\":\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/\",\"name\":\"Fed NGDP targeting would greatly increase global financial stability &#124; Market Monetarist - the patient investor\",\"isPartOf\":{\"@id\":\"https:\/\/thepatientinvestor.com\/#website\"},\"datePublished\":\"2013-03-19T07:26:27+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/19\/fed-ngdp-targeting-would-greatly-increase-global-financial-stability-the-market-monetarist\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/thepatientinvestor.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Fed NGDP targeting would greatly increase global financial stability &#124; Market Monetarist\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/thepatientinvestor.com\/#website\",\"url\":\"https:\/\/thepatientinvestor.com\/\",\"name\":\"The Patient Investor\",\"description\":\"Smart. 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He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008\/2009 and 2020 bear markets well ahead of actual events. 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He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008\/2009 and 2020 bear markets well ahead of actual events. 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He describes the traditional problem of inadequate response by central banks to market shocks like the collapse of Lehman Brothers: Although wages hold steady when nominal income falls, unemployment tends to rise\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5952,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/10\/31\/should-the-fed-be-targeting-inflation\/","url_meta":{"origin":7076,"position":1},"title":"Why the Fed should not target inflation","author":"Colin Twiggs","date":"October 31, 2012","format":false,"excerpt":"Scott Sumner, Professor of Economics at Bentley University, proposes that the Fed target nominal growth in GDP (\"NGDP\") rather than inflation as Ben Bernanke has long advocated: \"Even he [Bernanke] must be surprised and disappointed with how poorly [inflation targeting] worked during the recent crisis.\" The primary problem, Sumner points\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13626,"url":"https:\/\/thepatientinvestor.com\/index.php\/2016\/07\/29\/why-the-fed-should-use-ngdp-targeting\/","url_meta":{"origin":7076,"position":2},"title":"Why the Fed should use NGDP targeting","author":"ColinTwiggs","date":"July 29, 2016","format":false,"excerpt":"Good point made by R.A. in The Economist as to why the Fed should target nominal GDP rather than inflation: One of the strongest points in favour of NGDP targeting, in my view, is that it implied a need for far more action from the Fed far earlier in this\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/07\/2016-07-29-ffr.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/07\/2016-07-29-ffr.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/07\/2016-07-29-ffr.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/07\/2016-07-29-ffr.png?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/07\/2016-07-29-ffr.png?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":6036,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/06\/is-the-fed-finally-listening-to-scott-sumner\/","url_meta":{"origin":7076,"position":3},"title":"Is the Fed finally listening to Scott Sumner?","author":"Colin Twiggs","date":"November 6, 2012","format":false,"excerpt":"Brendan Greely writes of Scott Sumner. Sumner who holds a Ph.D. from the University of Chicago, made a suggestion in the late 1980s to the New York Federal Reserve. He proposed that the Fed set a target for nominal GDP\u2014real growth in GDP plus the rate of inflation. He felt\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":7004,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/16\/ngdp-level-targeting-the-true-free-market-alternative-we-try-again-the-market-monetarist\/","url_meta":{"origin":7076,"position":4},"title":"NGDP level targeting \u2013 the true Free Market alternative (we try again) &#124; The Market Monetarist","author":"Colin Twiggs","date":"March 16, 2013","format":false,"excerpt":"Scott Sumner suggests that NGDP targeting is a far more conservative approach than the current inflation targeting practiced by the Fed and many other central banks: Most of the blogging Market Monetarists have their roots in a strong free market tradition and nearly all of us would probably describe ourselves\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":62206,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/07\/31\/fed-stands-firm-so-does-boj\/","url_meta":{"origin":7076,"position":5},"title":"Fed stands firm, so does BOJ","author":"Colin Twiggs","date":"July 31, 2025","format":false,"excerpt":"Key Points The Fed held the funds rate target steady at 4.25% to 4.50% The Bank of Japan followed up, holding its policy rate steady at 0.5% The S&P 500 and Dow Jones Industrial Average eased slightly The US Dollar Index jumped, weakening demand for gold Fed Chair Jerome Powell\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"S&P 500","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-07-30-spx.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-07-30-spx.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-07-30-spx.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/7076","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=7076"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/7076\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=7076"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=7076"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=7076"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}