In his speech, Mr Carney said it might make more sense in today's circumstances to target not the growth of prices (inflation) but the growth in the cash value of economic output: nominal GDP.

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In his paper he recommended that the Fed commit to keeping policy easy until the economy reaches a particular target, such as nominal GDP (ie, output unadjusted for inflation) returning to its pre-recession path.

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Likewise, many bad investments made during prosperous times will be bailed out by inflation since the value of their output can now show nominal profits.

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Nominal income in turn is the product of real output and prices.

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To start with probably the least important aspect of all this, I am surprised by how little emotion has been sparked by Mr Carney's remarks, that there might be a case for replacing narrow inflation as a target with nominal GDP target, or the cash value of annual economic output.

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Given a constant money supply, nominal wage rates fall, but real wage rates rise because total output has gone up.

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By increasing the size of the monetary base (which the Fed controls to the penny), the Fed can increase NGDP, although it cannot control how much of the nominal growth occurs as inflation, and how much shows up as real output.

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