What's wrong with: In the aggregate, spending equals income, so other than menu costs, etc., inflation is neutral for the population as a whole. However, it's not necessarily neutral for every individual and I worry that my purchasing power will decline. Therefore, inflation is something I fear.

I'd say the key was a few months ago when they changed from possibly increasing or decreasing asset purchases to possibly decreasing. With below target inflation and inflation expectations and below target employment and growth, combined with constantly revising its forecasts downwards, one might hope the Fed was thinking of increasing its efforts. In the penultimate paragraph, "I believe that the Fed has a bias against tapering" should be "I believe that the Fed has a bias towards tapering" or "I believe that the Fed has a bias against asset purchases."

This is obviously why we have to cut Social Security and Medicare

Trading permanent changes in Social Security and Medicare for some short-term spending is stupid, both as a matter of policy and politics. It's long been a mistake to sell your birthright for a mess of pottage.

The problem goes much deeper than tax rates - the real issue is that the best off have used government to rig the economy to balloon their income at the expense of everyone else. For example, trade policies which increase competition for ordinary workers, but insulate doctors, lawyers and other protected interests. For example, patent protection in which the govt lets drug companies charge way over market, transferring hundreds of billions from most of us to a few. For example, too big to fail policies which transfer hundreds of billions from most of us to a few incredibly prosperous bankers. This isn't the free market, it's deliberate policy choices. If the argument is over tax rates, the best off have already won - redistribution of their hard earned dollars is a much more difficult argument than how they earned them in the first place.

20 years is not enough time to establish much of anything, especially if you're planning for a long period of time, say 30 or 40 years. You wouldn't even have a single relevant data point.

I don't have such a rule, but there are investors who have long records of consistently beating the market. Of course, there's no way to tell if that's luck or skill. There can't be a published trading rule that systematically beats the market, for the same reason all children can't be above average (except in Lake Wobegone). Anyway, I don't believe a test that asks if I have such a rule is a very rigorous test. But if I had one, it wouldn't survive publication. All of which says, you haven't really specified a practicable test.

How exactly would you test "no free lunch"?

How would one test EMH? Originally, it seemed to mean market prices are correct, but they only way to test that would be to have a reliable method of determining correct prices. If we had such method, why wouldn't everyone use it? The idea of a reliable formula to check the accuracy of market prices seems silly. Now EMH seems to mean it's hard to beat the market. No fooling. Of course it's the case that only a small number can beat the market. Lake Wobegone anyone?

Where was this Larry Summers when Obama was saying families are tightening their belts, therefore so must government? Where was this Larry Summers when the administration pushed a much too small stimulus?

"After all, small businesses and families are tightening their belts. Their government should, too." Obama, November, 2010. Not exactly how I understand counter-cyclical spending is supposed to work.

I suppose the good news about a government shutdown would be that it would push the default date further into the future. Does the GOP have any tentacles grasping reality?

Dean Baker has done some very nice writing on the need to focus on pre-tax income rather than tax and transfer payments. Laws and policy heavily favor the best off, such as an intellectual property system that transfers hundreds of billions to pharma, media, etc., monetary policy that tilts towards capital rather than labor, too big to fail policies that transfer hundreds of billions to the finance sector, etc., etc. http://www.cepr.net/index.php/publications/books/the-end-of-loser-liberalism

As many have said, it would be great if we could get the author of Japanese Monetary Policy: A Case of Self-Induced Paralysis?, 1999, as Fed Chair. Since that person no longer exists, Yellen is the right choice from the shortlist.

Why should we focus on existing economic messes when we can focus on possible problems more than a decade out? It's good to know this country has a sense of priorities.

You are likely right regarding the Fed's actions, but I would have hoped that with unemployment an existing crisis, GDP growth too low, inflation currently running under a too low target and inflation expectations well under control (e.g., 2.1% 10 year nominal-TIPS spread), the Fed would be considering doing more, not doing less.

BTW, Tim Duy agrees with Brad that "if you are looking for a candidate of change, Yellen isn't that candidate" http://economistsview.typepad.com/timduy/2013/09/summers-out-yellen-in.html

>>Summers may have told Obama that if you pick me I will do historically powerful monetary stimulus, like has never been done before.>> What evidence is there that Obama would want historically powerful stimulus? From news reports and his actions, he seems more worried about inflation and debt and thinks his economic team has done a fabulous job. From Obama's statement on Summers: "it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today." Many of us view "the kind of progress we are seeing today" as terrible and something to be fixed, but that's obviously not Obama's view.

There have been two major strains of criticism of Summers, personality (including alleged sexism) and economics. The personality driven objections were not the real issue, although they received more attention from our gossip-driven, non-substantive media. You are right to point to his letter as evidence against that strain. The economics strain was a more serious issue, IMO. From the evidence available to the public, it appeared he would not be sufficiently aggressive in the fight for higher employment, higher growth and better regulation of financial institutions. His letter obviously does not address those issues.

Look at the market reaction to Summers' withdrawal - forex, debt and equity markets are all reacting as if his withdrawal signals more aggressive monetary policy than if he had been confirmed. You could be right - that he would have done more to increase employment and growth than the current regime - but yours is a distinctly minority view.

The Fed cares a lot about the remote possibility that inflation could increase. The Fed does not really care about the present crisis in employment and slow growth, at least not to the point that they'll take adequate action. This behavior seems generally true of central banks. Of course they should be more expansionary. Why would you expect Larry S to improve the situation?

It's amazing how many claims made by the GOP or its fellow travelers depend on the listener not being able to remember the not too distant past.

Remember the era of the bond vigilantes? Look at what bond prices have done as it appears more likely Obama will appoint Summers.

The monetarists are arguing that Krugman is applying a double standard. Stimulus was tried, then failed to do enough. PK says it's because the stimulus was not big enough. Monetarism was tried and is failing to do enough. The market monetarists are saying it's because the Fed is not doing enough. They are most likely wrong about the efficacy of fiscal policy, and we certainly need to do more on that front, but the argument that Keynesians are applying a double standard is not without some force.

Causation and correlation. Check. Adequate sample size. Check.