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How monetary policy entrenches secular stagnation https://creditwritedowns.com/2017/06/how-monetary-policy-entrenches-secular-stagnation.html This is a piece I wrote in 2017 in response to then NY Fed Prwsident Bill Dudley /1
“If we were not to withdraw accommodation, the risk would be that the economy would crash to a very, very low unemployment rate, and generate inflation,” Dudley said. “Then the risk would be that we would have to slam on the brakes and the next stop would be a recession.” /2
My point: Dudley is saying lower inflation is better than higher inflation. And he is also saying in no uncertain terms that he *prefers* some people be unemployed because their lack of employment will weaken wage-earners’ bargaining power and keep inflation lower. /3
That's perverse. It entrenches lowflation and low growth. It ALSO cuts the legs out from under ordinary wage earners' bargaining power. That lowers wage growth and INcreases income inequality. /4
But when Powell says he's going to let inflation run hot, I am not convinced that's the silver bullet policy prescription which changes this dynamic of the Fed promoting income inequality and secular stagnation. /5
For me, it's not about monetary policy. Dialing up or dialing back monetary policy to change economic growth rates, target inflation and unemployment just ends up in a trickle down from the financial economy to the real economy. /6
It's a world of robust share price increases and expanding equity price earnings multiples during an unprecedented period of 1 million+ weekly initial jobless gains.
That's exactly what we don't want. /end
That's exactly what we don't want. /end
