These "open market operation"s (OMOs) would automatically tighten or loosen the money supply and raise or lower interest rates.
"[9] Bill Woolsey offers several alternatives for the structure of such a futures market, suggesting an approach in which the Fed maintains a fixed price for the futures contract, hedging any resulting short or long position by conducting OMOs to match its net position and using other traditional techniques such as changing reserve requirements.
He further recommends that private parties collateralize their positions using only securities such as treasury bills to prevent perverse effects from adjustments to margin accounts as the market moves.
This approach leaves interest rates to be decided by the market, while addressing inflation concerns as nominal GDP is also not allowed to grow faster than the level specified.
Market monetarists believe that by explicitly following a nominal income target, monetary policy would be extremely effective in addressing aggregate demand shocks; summarizing this view, The Economist stated: "If people expect the central bank to return spending to a 5% growth path, their beliefs will help get it there.
The Economist describes the market monetarist approach as potentially including "'heroic' purchases of assets, on a bigger scale than anything yet tried by the Fed or the Bank of England."
Scott Sumner, a Bentley University economist and one of the most vocal advocates of a nominal income target, adopted the label of market monetarist in September 2011.
[17] In addition to Scott Sumner, Lars Christensen attributes economists Nick Rowe, David Beckworth, Joshua Hendrickson, Bill Woolsey and Robert Hetzel to be "instrumental in forming the views of Market Monetarism".
"[17] Evans-Pritchard traces the idea of nominal income targeting to Irving Fisher's Depression-era proposal of a "compensated dollar plan.
[13] By 2011, market monetarism's recommendation of nominal income targeting was becoming accepted in mainstream institutions, such as Goldman Sachs[22] and Northern Trust.
[25] In late October 2011, former Chairwoman of the Council of Economic Advisors, Christina D. Romer, wrote a widely read editorial or "public letter" in The New York Times in which she called on Federal Reserve chair Ben Bernanke to target nominal GDP, a market monetarist tenet.
[18] In November 2011, Bernanke held a press conference stating that the Federal Reserve board of governors had discussed the idea of NGDP targeting, and were considering adding nominal GDP to their list of important economic indicators.
This would also have the advantage that during bad times people could trust on the interest rates staying low long enough, even though the inflation would exceed the old target.
This history-dependence is most advantageous during times of low interest rates by making monetary policy more credible and easier to understand.