Bidenomics and Big Fiscal
The Federal Reserve wrote up a research paper on their analysis of what was really behind the disinflation of the Reagan years and as the article says "Class war > rate hikes." They figured Reagan busting up the unions probably had more to do with the fall in inflation than Volcker's shock.
So fast forward to today and we've got people who support the disinflationary monetary policies of the federal reserve during the 2022-2023 inflationary period and who attribute the fall in inflation to higher interest rates and not the supply side polices of IRA and just the fact that sellers inflation after the invasion of Ukraine was going to be somewhat transitory.
Inflation minus auto insurance and an adjusted homeowner measure that nobody actually pays has been at roughly two percent for the last two years. Why hasn't the fed seriously cut rates back yet? That's a great question!
Banks have a license to print money
I have my own theories about having the quasi-governmental private banking association determine the profitability of money lending to control inflation, because there's really no mechanism for why rate hikes can control inflation outside of unemployment. The mechanism of the Phillips curve is unemployment. So many confidently stated counterfactuals about why inflation fell. It's been driving me mad.
I've had people tell me, "But Thomas, Powell doesn't ascribe to the Phillips Curve" and my reply was that my mortgage payment can't really tell.
Interest rates have been high not because of inflation for the past two years, but because unemployment has been too low! The federal reserve has been trying to put people out of work with high interest rates for the past two fucking years out of a cursed need to see unemployment raise so they can take the victory lap on why inflation eventually fell.
Anyone who wants to disagree with me too loudly needs to read the fine print of any of the many, many articles talking about how Powell can't cut, Fed can't cut because of surprising jobs reports. They've been repeating the same god damned line for the past two fucking years about not being able to cut because of surprisingly good job reports and everyone is just like ho hrm oh well.
It. Makes. Me. Feel. Like. I'm. Taking. Crazy. Pills.
So they can't cut until they seen an economic downturn with higher unemployment because without that they didn't do a single fucking thing but make people expecting interest income way fucking richer.
Why? Because the authors of that fed paper were right. It was politics, not monetary policy that really caused the recession/disinflation.
They tried to Powell Shock the economy and it didn't work because Biden was in power doing Big Fiscal, doing Stalinesque economic development under the media regime of the white army so nobody notices.
Anyway I might add more to this post later I might not.
Be well.
