By Adam Ozimek, Contributor

Via Scott Sumner, there is an interesting discussion from blogger Alex Jutca about having lunch with Greg Mankiw. What stands out most to me is that Mankiw tells him he was one of three that Bush had selected to replace Greenspan. That means we came close to having Federal Reserve Chairman Greg Mankiw: He laughed that he was one of President Bush‘s three finalists to replace Alan Greenspan, remarking that he didn’t even know it at the time. This begs the question of what kind of chairman Mankiw would have been. I think the evidence indicates he would have given us more inflationary policies. Throughout In 2009 he was calling for Fed commitments to “significant inflation”: Given the Fed’s inability to cut rates further, Mankiw says the central bank should pledge to produce “significant” inflation. That would put the real, inflation-adjusted interest rate — the cost of borrowing minus the rate of inflation — deep into negative territory, even though the nominal rate would still be zero. Also in 2009 he wrote a New York Times op-ed that was even more explicit that unemployment is worse than the risks of higher inflation: Having the central bank embrace inflation would shock economists and Fed watchers who view price stability as the foremost goal of monetary policy. But there are worse things than inflation. And guess what? We have them today. A little more inflation might be preferable to rising unemployment or a series of fiscal measures that pile on debt bequeathed to future generations. He continued to be an inflation dove into 2011, arguing that the Fed was “on the right track worrying more about the weak economy than about inflationary threats”. However, he recognized that a higher inflation target was “a political nonstarter” but still advocated for price level targeting that would allow for catch-up inflation. …read more
Source: FULL ARTICLE at Forbes Latest