ad1) Right, if you take Sumner's post in isolation, you can easily get the impression that he refers to a zero growth path. Indeed, Sumner writes "Nominal GDP is well below the levels of early 2008", but given the history of his blog you should read "NGDP is even below the 2008 levels, but it should be much higher, namely NGDP_10Q4=NGDP_08Q1*(1+x/4)^12, with x=0,05" (1€ in 08Q1 should compound to app. 1,16€ in 10Q4; this didn't happen. So policy is tight).
ad2) you write that "the interesting question to me is to ask why he choses the 2008Q1 date as the benchmark/initial value?" Actually, Sumner says "Look at the path of nominal income before the crisis (blue line); that’s the income trajectory that people and governments were expecting when they contracted their nominal debts." The entire blue line (the level of nominal income in 1995 and its growth rate ever since; see my initial post) is the benchmark and 2008Q1 is just a local maximum (which it shouldn't be). Thus, 2008Q1 is the point of departure, given the long-run trajectory, and this is why Sumner takes NGDP at this date as initial value for his reference path. It is the last date, at which actual and optimal values coincide.
So do you agree that monetary policy is too tight for Germany?
