The Fed: SET INFLATION FIELDS TO MAXIMUM

[Boris Johnson]

[JDHURF]

It's like giving someone whose legs were blown off some morphine. It will help ease the pain while leaving the open wounds untreated.

[Kane]

Disinflation appears to be settling in on a global scale. The political systems of both blocks of the Western Industrialized world aren't prepared to enact effective fiscal policies. Depends on where you sit on a couple of things. If you've been following the spot price of iron ore you've seen a pretty radical fluctuation recently. Some argue that demand has decreased and some argue that due to Chinese policy supply exploded (The Chinese tell the plants to keep producing despite the circumstances that would otherwise impact producing at a private enterprise). It's all up to you and how good you think your data is.

I'd worry if the velocity of money or CPI-U/PPI exploded but various things hold that back as evidenced by stagnant growth in wages and the stagnant/negative trend in wealth within the aggregate lower quintiles that typically fuel economic recoveries due to lower savings rates and higher consumptive patterns. This is reinforced by the huge amounts of cash on hand by numerous corporations and the increasing savings rates of US consumers. Everybody is deleveraging. This means that on top of banks worldwide engaging in a flight to quality to both meet new Basel standards and maintain any semblance of previous profitability you've got people stuffing bank accounts with cash. This creates another problem.

The Fed is trying to push that cash out to riskier investments to get growth going. Is it perfect? No. Would I do more QE? Probably.

Fiscal policies competently initiated would be far more effective but Central Banks lack that power. Given this reality, I find it hard to argue against further QE given that its mandate includes price stability and employment. It doesn't say "price stability and employment when politicians are smart", it's independent for a reason. Should a given Central Bank ignore its dual mandate (Given that it has one in the first place) it'd no sooner be criticized for doing too little and ignoring economic indicators that are entirely apolitical. That's actually been occurring now for some time.

Frankly, it's better than nothing.

If we want to argue credibility we have two options:

The Fed does nothing and the economy possibly enter disinflation or outright deflation again.
The Fed does something and the economy grows, inflation grows, and the Federal Reserve starts to sell those MBS to bring down velocity/money supply/etc.

In one situation the Federal Reserve presides over a contraction after nothing is done on their part, severely affecting public perception of their efficacy either way. In another we get inflation and a growing economy.

Honestly, there should be much more intense ire directed at politicians that elect to dismiss concerns regarding employment. The Fed probably sees what these continued levels of unemployment will have on potential output. A structural employment problem means a permanently depressed economy (From its potential - not in terms of growth). It becomes its own drag on an economy.

[Revenant]

[The Comrade]

rev watches adventure time. lol

[Revenant]

[Kane]

[Kane]

[Kane]