John B Taylor and Chris Romer are half right

Macro and Other Musings approves of a consistent rule based monetary policy. So does John and Chris, as does everyone who believes in money.

By consistent, Beckworth, Romer, and Taylor want a rule that targets the equilibrium growth rate. The problem with this, as the Austrians point out, is that during adaption of the economy we would have to carry inappropriate prices through the dip and rebound. The effect is that the banker yield curve dips below the real goods yield curve at the start of dips and risies above real goods yield curves after the rebound. It becomes the tail that swings too much in either direction.

Is this extra stress (chain risk) good? I doubt it, quite frankly.  It does magnify the signals and hurries things a long, as I point out here, but there is this wash of money that passes between income groups during the dips and rebounds. We get a waste in transaction costs during the swings. For example, as the Fed is pumping, Timmy is out plotting socialist banking. During this second dip, Timmy is going to be a sad little boy.  How does turning the Secretary of Treasury in a manic-depressive help?  

There is something that overwhelms Ben's money digitizer, and that is the robot traders. Anything Ben does is quickly analyzed and counter traded by the robots.