Over at Free Banking, Larry offers an alternative to the "it's all nominal" interpretation of the slow recovery associated with Scott Sumner and the Market Monetarists. In so doing, he also argues why their cure (further monetary expansion) is both not needed and positively harmful. Larry's conclusion:
the weak recovery today has more to do with difficulties of real adjustment. The nominal-problems-only diagnosis ignores real malinvestments during the housing boom that have permanently lowered our potential real GDP path. It also ignores the possibility that the “natural” rate of unemployment has been hiked by the extension of unemployment benefits. And it ignores the depressing effect of increased regime uncertainty.
To prefer 5% to the current 4% nominal GDP growth going forward, and a fortiori to ask for a burst of money creation to get us back to the previous 5% bubble path, is to ask for chronically higher monetary expansion and inflation that will do more harm than good.