Powell keeps referring to the 1970s when talking about inflation, when really he should be referring to the 1940s.
As long as they keep trying to fight 1940s-style inflation with 1970s-style monetary policy, they're going to have a bad time. Can't tighten policy this quickly when debts are this high and not break a lot of things.
They are quite honest about wanting to break things (lower employment)
Causing higher unemployment is different than breaking things.
They don't particularly want bank runs, or for hundreds of small banks to go away quickly.
Sure they do as this expedites CBDC via JP morgan chase coin
And none of your fancy charts reflect that fact
You are just wrong
Be humble and admit failure
they literally seized signature, which appeared solvent and didn't have as high an unrealized loss to debt ratio (and other liquidity issues) as other babks
they are doing away with small banks the way they did away with small retail during covid lockdowns
Breaking things is perhaps transitory
I think the regional banking network is a nuisance for central planners and that a collapse that leads to consolidation into the big 5-6 "systemic" megabanks is a welcome outcome for them.
Lower employment, growth below potential levels, as well as financial risks such as those demonstrated in SVB crisis
I’m afraid he knows exactly what he’s doing.
Even the way they tightened was of high time preference
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Since they already started giving credits to banks again isn’t that thighting go out of the window? Their thightining cause trouble for banks and banks got low interest rate credits. This feels like a really bad cycle but maybe I’m missing out something.
Seems to like there is no good course of action for fed. They need to control inflation and drive it down otherwise people won't be happy and if they tighten fast then system breaks...?
How was the inflation fought in 40s? And was it optimal strategy?
I recommend reading Lyn's articles to get more insight. She's been writing and talking about the 1940s (as a closest analog to the macro setup we find ourselfs in) for a long time.
Basically debt gets inflated away and govt closes all the exits for you to hide.
*the govt closes all the exits for you to escape.
(no edit button sucks sometimes)
Is some of that the audience? He seems to talk about tightening until inflation is under control because he knows the people listening are going to either get more or less leverage and issues more or less credit based on what he's saying (most of the time)
When talking to Congress he pointed out that he is only part of the problem and without addressing fiscal spending inflation will be sticky.
He seems to be stuck with a problem he didn't create and he really can't complete solve but is expected to.
Pretty likely that the Fed is going to have a bad time no matter what.
Zapped. Thank you for being an educational voice in this space, Lyn.
are you predicting the outbreak of a third world war to recover the economy like in the 40's?
We shouldn’t be giving too much credit to these academician turned lawmakers.
It's weird that monetary base as a percent of GDP stayed flat during the 1970s despite the high inflation during that decade.
But 1940’s inflation is a debt jubilee basically, so it is kind of hard to admit?
