"Is it possible that the consensus around what caused the 2008 Great Recession is almost entirely wrong? It’s happened before. Just as Milton Friedman and Anna Schwartz led the economics community in the 1960s to reevaluate its view of what caused the Great Depression, the same may be happening now to our understanding of the first economic crisis of this century. Foregoing the usual relitigating of the problems of housing markets and banking crises, renowned monetary economist Scott Sumner argues that the Great Recession came down to one thing: nominal GDP, the sum of all nominal spending in the economy, which the Federal Reserve erred in allowing to plummet. The Money Illusion is an end-to-end case for this school of thought, known as market monetarism, written by its leading voice in economics. Based almost entirely on standard macroeconomic concepts, this highly accessible text lays a groundwork for a simple yet fundamentally radical understanding of how monetary policy can work best: providing a stable environment for a market economy to flourish"--Provided by publisher.

Includes bibliographical references and index.

Introduction : the real problem was nominal -- Part I. The value of money. Cognitive illusions in economics -- The value of money and money illusion -- What determines the value of money? -- The quantity theory of money and the Great Inflation -- Money at the extremes : hyperinflation and deflation -- It's (almost) all about expectations -- Part II. The dance of the dollar. The Great Depression and the AS-AD model -- One derivative beyond Hume -- Rational expectations and efficient markets -- Part III. Never reason from a price change -- The musical-chairs model -- What is monetary policy? -- Nominal and real exchange rates -- Part IV. How to think about macroeconomics. The path to market monetarism -- I see dead patterns -- Good economists don't forecast, they infer market forecasts -- The secret history of monetary policy -- Part V. The Great Recession. Fed policy in 2008 : a case of self-induced paralysis? -- A confession of contradictory effect -- Schadenfreude on the Titanic -- Alternative explanations of the Great Recession -- Part VI. What does it all mean? Policy implications of market monetarism -- Why should you believe in market monetarism?.