https://www.msn.com/en-us/money/markets/confounding-us-economic-inflation-data-muddy-feds-rate-path/ar-AA1nDIM3This was written apparently before GDP came in WAY below estimates.
They think the question is, what to do when we have solid growth with persistent inflation.
But estimates of growth were 50% above actual growth! We're talking about rear view mirror estimates, estimates made after the activity already took place, or in this case, after it didn't.
For one thing, how can they be that wrong?
Now the question is changed to what to do about Jimmy Carter style Stagflation.
Those who were not adult or paying attention in 1980 and throughout the 1980s should buy the book "The Seven Fat Years and how to do it again" by former WSJ Editor Robert Bartley. It's all in there.
The Fed is clueless because there is no 'Fed-alone policy that fixes this. We tried that and the results were catastrophic. But now we are trying it again.
The Keynesians are clueless too with their outdated Phillips Curve. The idea that economic growth causes inflation is as dead as Keynes.
When the growth was slow, they lowered interest rates. When inflation was high they raised them.
I wouldn't want to go sailing with these people, adjusting their sails for high wind after the wind goes by.
What if interest rates weren't the problem then and interest rates aren't the solution now? If you have three flat tires, is more gasoline the solution?
Written nowhere else apparently, we spend 40% more than we take in. (There's your problem.) The Fed's job is to accommodate that and anything else our Congress and government throw at it. What if they can't?
Interest rate adjustments and loosening and tightening of money doesn't address the problem and therefore isn't going to be the solution.
Recent Posts