Recently in the economics blogosphere, the monetary paradigm of nominal GDP level targeting (NGDPLT) has been gaining steam. NGDP targeting takes a departure from the classic regime of inflation targeting by the growth rate in NGDP, allowing for balance between employment and inflation. This then leads to a wide variety of benefits, as the new regime is robust to supply shocks, can craft stable expectations of overall future growth, and can reduce fears of any specific industry going through a crisis. It's particularly attractive for financial crises, as if NGDP growth is stable, previously sustainable levels of debt are less likely to become unsustainable. If the economy's productive capacity is constant, there's no reason for it to be less able to service its debt.
However, this view seems almost too simplistic. Even though the US economy was incredibly stable during the over the 20 year Great Moderation, it all came down to a screeching halt with the 2008 financial crisis. Similarly, even though Britain managed to stay out of a major recession for 16 years, NGDP fell by about 4.7% during the crisis. Given that there had been such a long legacy of stability, how did expectations suddenly become unanchored? Even if the US Federal Reserve made a bad policy decision at that point to focus on oil prices and other supply shocks to the detriment of nominal stability, why did the expectations of prudent policy in the future not "solve back" the concerns? In the end, the crisis culminated into the worst disruption since the Great Depression: hardly a desired result for a responsible regime.
The unhappy ending in 2008 seems to suggest that responsible policy can break down into chaos given a large enough of an exogenous shock. This problem is very close to what Nicolas Nassim Taleb discusses in The Black Swan: in exchange for low volatility, the economy goes along with high fragility, such that one large shock can cause non-linear, disproportionate harm. So in the end, the question is about credibility. How is it established? How is it maintained? If decades of prudent monetary policy were not enough to anchor expectations, why should we expect the Federal Reserve to be considered "credible" when the next large financial bubble appears? If shadow banking markets start to grow shadows and systemic risk goes through the roof, why should we expect the Federal Reserve to be considered "credible"? Especially if non-monetary factors as posited by Bernanke play a key role in recessions, why would nominal stability be enough? And when everything crashes down, how will we deal with the mess of debt and contracts that were only sustainable under the old regime? NGDP targeting seems to play on circular logic. Boost aggregate demand to hold the expectation; with the expectation there's no need to boost aggregate demand.
So when a policy maker messes up, and lets a NGDP crisis unfold, the crisis emerges. This is where the black swan hides, cloaked by the rhetoric of stable expectations and the "perfect" monetary policy.