March 4, 2018

Week Ending Friday March 2 This was a relatively rough week for markets. The S&P 500 fell 1.8%, Friday-to-Friday, most of this seemingly linked to statements by new Fed Chairman Jerome Powell, as well as a tariff announced by the Trump administration on steel and aluminum. Powell’s statements were less polished than Bernanke´s or Yellen’s, though equally platitude-laden and low-information. Powell says inflation will return to 2% in some unspecified but near timeframe, with no indication that a period of offsetting 2%+ inflation would be allowed for symmetry. In other words, the 2% PCE inflation ceiling remains in place. Powell…...

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Is the Truism, “Money Is Neutral in the Long Run,” Really True?

Surely, merely running a printing press disgorging fiat money cannot truly increase economic output.  It is a truism. But what about historic examples of central banks policies and real economic output? Milton Friedman blamed the Great Depression on tight money. More recently, the 2008 Great Recession, which by some measures still results in crimped output, was caused by tight money.  Japan’s 20-year deflationary slog has been caused by tight money. So, by historical example, many macroeconomists seem to agree bad monetary policy can crimp real output for decades at a time and can persist indefinitely, unless corrected, as may be… Read More