Dangerous Monetary Manipulations and Fiscal Follies
“What is clear is that the types of monetary, fiscal and regulatory policies being implemented and projected by the Biden Administration, the Democrat-controlled Congress and the Federal Reserve are all leading America down a dangerous and destabilizing road, any recovery from which will not be easy or cheap.” ~ Richard M. Ebeling
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Understanding The Rise In Inflation Expectations
“Bond markets are currently pricing in a little more than two percent inflation on average over the next ten years, which suggests inflation will pick up. So far, Fed officials seem willing to permit inflation to run a bit high over the next decade. Whether they will remain so permissive when the inflation numbers start rolling in––or, ratchet up IOR to bring inflation down to two percent––remains to be seen.” ~ Nicolás Cachanosky
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Rising Interest Rates and Inflation
“A 5 to 10 percent jump in inflation expectations could be enough to set off a fiscal crisis for the federal government. And a fiscal crisis could be enough to generate a crisis of confidence in the dollar. There are numerous traps to avoid on the road ahead. Yet, monetary and fiscal policy both continue on expansionary paths with the greatest boldness that we have seen since the chairmanship of Arthur Burns.” ~ James L. Caton
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Lots of New Money, But Still-Low Inflation. What Gives?
“Just because a reckless central bank foists tons of fake money on banks, businesses, and households does not mean any of them must spend it. Fiscal-monetary recklessness itself can signal private-sector actors not to part with safe, liquid assets. Eventually, of course, they may choose to flee the money and the debt, bringing higher inflation rates and higher interest rates. Meantime, the prudent observer must never neglect to consult the demand side of money.” ~ Richard M. Salsman
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Inflationary Inflection Point or Temporary Blip?
“If bond yields cannot rise, the stock market will remain supported unless stagflation sets in. Should that transpire, the Fed will need to decide whether to ignore inflation and increase monetary stimulus, including the purchase of ETFs and common stock, in order to maintain full employment, or ‘hold’ and witness a politically unpalatable clearing of both the stock and bond market.” ~ Colin Lloyd
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Where New Zealand Goes, the World Goes
“In the 1990s New Zealand pioneered inflation targeting, an approach that every major country followed for the next three decades. In a few years we might look back at this fleeting Kiwi attempt at incorporating asset markets into monetary policy with the same admiring eyes that we now see their move to inflation targeting. Where New Zealand goes, the world tends to follow.” ~ Joakim Book
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Signs of Inflation so Far
“The increases in money held by the public are a new experiment to test a widely verified proposition: substantial increases in the quantity of money held by the public are associated with substantial inflation. Inflation is quite likely to be higher in coming years than it has been in the recent past. Whether the increase is muted – an increase of one percentage point per year or so – or noticeably larger remains to be seen.” ~ Gerald P. Dwyer
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MMT’s Inflation Battle Will End In A Draw
“Maybe this time is different, and perhaps this is the turning point – for MMT or for inflation. More likely, the fears and the ebullient promises will converge in a middle-of-the-way third option similar to what we saw after 2008: Politicians, pundits, economists, and central bankers talk, yet nothing much happens.” ~ Joakim Book
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Inflation Outlook: Likely Worse Than Expected
“The Fed has painted itself into a box, because if inflation/velocity does heat up beyond what the Fed or markets can tolerate, given that they have been comfortable with somewhat higher long-term rates, the Fed’s only weapon to slow inflation down would be to slow down the economy. Its strongest weapon would be to threaten to push up the short-term rate and invert the yield curve.” ~ Gregory van Kipnis
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Central Banking and the Heavy Hand of the State
“The ‘need’ for a central bank is due to economists inaccurately projecting onto historical banking systems their contemporary monetary-macroeconomic paradigms, not any fatal flaw in these systems. Neither theory nor history show we need a central bank to guarantee optimal economic performance.” ~ Alexander W. Salter
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Monetary Policy in a Pandemic
“The Fed’s new lending programs were not very helpful, and they come at a potentially high cost. Insofar as they were designed to allocate credit, as opposed to merely providing liquidity, they amount to an expansion of the Fed’s mandate. And, although the extent of the Fed’s credit allocation was limited this time, it has set a dangerous precedent, which risks subjecting the Fed to even more political influence going forward.” ~ William J. Luther
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Will the Fed’s “Feelgood” Medicine Cause an Economic Collapse?
“The promise of cheap money leading to perpetual asset price sunshine may seem like a reality today. Tomorrow the consequences will be like Dr. Feelgood’s needles. To avoid the worst, markets—not politicians or bureaucrats, must be free to uncover the real cost of borrowing money.” ~ Barry Brownstein
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