Unlimited Quantitative Easing

Market monetarism is Keynesianism in Monetarist drag. It is based on inflating the currency, on Quantitative Easing. And the Federal Reserve is hoping you won't notice.

Ben Bernanke just held a press conference and declared a market monetarist stance, namely growth and inflation targets. Economist Tyler Cowen called today Scott Sumner Day. Sumner is the blogger at The Money Illusion. Basically, this is Sumner's idea. (Paul Krugman is also a fan.)

So what is his idea? Nothing but endless Quantitative Easing:
Today the Fed adopted one of those three recommendations; open ended QE.

Whats changed since June? That’s pretty easy to answer; Woodford’s paper was obviously very influential, and that changed the politics on level targeting. So Woodford also deserves a lot of credit. It’s not as specific as Woodford or I would like, but it’s something. More specifically it’s a dog whistle that Bernanke hopes the markets will hear, but which he also hopes will be missed by the Tea Party.
Sumner spells it out some more:
Bernanke emphasized that monetary stimulus is not like fiscal stimulus, it actually reduces the budget deficit. That’s right.
Remember: the problem is not inflating or deflating the money supply. The dreaded Keynesian bugaboo is the awful, nasty rabbit from Monty Python's Holy Grail: the "Liquidity Trap." This is the idea that money earning no interest and being slowly eaten by inflation will never be pulled out and invested. This is, of course, completely ridiculous.

The real problem is public confidence in economic growth. As Ludwig von Mises noted in The Theory of Money and Credit, this is a monetary solution to fiscal and policy problems. Quit telling investors you hate them, quit confiscating their money, and wealth, real wealth goods and services will flow. Till then, Bernanke is not only whistling past the graveyard, he's decked out in garlic and wolfsbane.

p.s. Market monetarism from Wikipedia: "In contrast to traditional monetarists, market monetarists do not believe monetary aggregates or commodity prices such as gold are the optimal guide to intervention. Market monetarists also reject the New Keynesian focus on interest rates as the primary instrument of monetary policy."