Goldman Idea Could Let Inflation Out of the Bottle: Amity Shlaes

Nov. 3 (Bloomberg) -- There are bad ideas, and there’s theproposal that economists from Goldman Sachs Group Inc. releasedOct. 14. They suggested that the Federal Reserve Board target anominal gross-domestic-product growth rate of 4.5 percent todecide how much money to inject into the economy. The econo-speak name for this practice is “NGDP targeting.” The questionis whether that unlovely abbreviation makes it into mainstreamEnglish and becomes policy.

In practice, NGDP targeting means the Fed will create moneyby a variety of methods, such as purchasing bonds, until theU.S. growth rate hits the magic level on paper. The extra moneypours into the hands of consumers and companies, who spend.Voila: 4.5 percent growth.