<textbook economics>

Regarding monetary policy, there are a lot of conduits through which expansionary policy increases GDP growth. Others include…

Increased Ms -> inflation -> depreciation -> increased net exports -> increased GDP

Increased MB -> more lending -> more financial activity -> increased GDP

Increased Ms -> inflation -> lower real interest rate -> cheaper borrowing -> more financial activity -> increased GDP

So there's more going on than just inflation expectations. Inflation expectations usually lag behind inflation, so I wouldn't count on that channel as much as others.

</textbook economics>

You make a very good point about IRER decreasing the amount of lending.

My favorite monetary economists are Scott Sumner at UC Berkley and George Selgin at UGA. The former makes the point you made quite frequently. He write an interesting blog @ http://www.themoneyillusion.com.

He would argue that changing the expected path of NGDP growth is a disruptive action with real consequences.

He would definitely disagree with:

My point is that even if this entire chain were to happen and the nominal end result, GDP growth, were to be achieved, the resulting prosperity would not be long lasting because it is not one that is based on a sustainable pattern of production and trade.

If the expansionary monetary policy is designed to counteract an unexpected drop in NGDP growth, then it is a good thing. If the Fed is going to pay IRER and increase ER by over a trillion dollars in late 2008, then it had better be more expansionary or risk a destructive change in NGDP's path that will move us away from sustainable patterns of production and trade.

More mainstream economists would disagree with your quote for other reasons that I'm less familiar with.

All of this is just picking nits and has nothing to do with the core message of your post.