June 10, 2022

🤦‍♀️ Why are Economic Policy Makers so Irresponsible?

🤦‍♀️ Why are Economic Policy Makers so Irresponsible?

Paul had cited Matthew 15: 1, as the best description of President Biden meeting with Treasury Secretary Yellen and Fed Chair Powell – 

“Let them alone: they be blind leaders of the blind. And if the blind lead the blind, both shall fall into the ditch.”

However, the White House meeting wasn’t just about Biden channelling his inner Reagan[1]; it was about being seen to be doing something about inflation and about playing the blame game, or as Paul said 

“This was really badly scripted, badly directed, badly produced Kabuki theatre with three really terrible actors in the lead roles, telling us, in turn how each is so concerned about inflation but how it’s the others’ fault Biden is ‘laser-focused’ on inflation but won’t interfere, because it’s the Fed’s job (and therefore the Fed’s responsibility i.e., fault). 

Yet, the notes of the last Fed meeting were very clear: 

This is supply shock inflation.

Monetary policy can’t do anything about supply.

It can reduce aggregate demand, which would cause a slowdown 

Therefore, rate hikes a️nd Quantitative Tightening [2] are a really bad idea 

Yet they tightened anyway & they’re going to keep tightening.


[1] Then Fed-head, Paul Volcker was summoned to the White House in 1984 to ensure that spiralling inflation didn’t prevent another disastrous 4 years of the self-styled ‘Gipper’ driving the economy into ditch (as opposed to letting Walter Mondale do it. As a terrible actor before becoming a terrible President, Reagan been so taken with playing the role of American football hero George Gipp, that he liked to be referred to as the Gipper thereafter)

[2] QT (or Quantitative Tightening) refers to the Federal Reserve selling assets from its balance sheet and removing the proceeds from circulation, reducing the volume of liquidity in circulation, primarily in capital markets.


[1] https://www.amazon.com/New-Economics-Manifesto-Steve-Keen/dp/150954528X

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About the Author:

Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.


Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG Group cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Group. Views and opinions expressed herein may change with market conditions and should not be used in isolation.


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