Given Chair Powell Perpetuates Keynesian Myths

“This was the Fed just talking tough, again, hoping that it can talk difficult and not actually have to act tough. ”

Federal Arrange Chairman Jerome Powell spoke during the  Walls Street Journal’s   Future of Everything Festival on Tuesday and continued to talk tough about fighting pumpiing, all the while spinning Keynesian financial myths.

In his podcast, Philip broke down Powell’s comments and talked about what he believes the central bank will really end up doing.

Powell continues to operate on the pretense that it’s all hands on deck and that the Given is ready to fight inflation with all the current tools at its fingertips.

That increases an interesting question that the WSJ interviewer actually brought up. Why doesn’t it appear that this Fed is treating inflation as an emergency? Why not simply rip the bandaid off and push rates in order to 2 or 3% today. Powell didn’t really solution that question. But this individual did seem a little protective.

“ From the standards of central financial institution practices in recent years, we’ve transferred about as fast as we have in several decades, ” Powell said. “ Monetary policy works through expectations, ” this individual added. Powell also declared that “ financial conditions, overall, have tightened significantly. ” He went on to reiterate the central bank’s dedication to the inflation fight. Peter said this was just phrase games.

“ This was the Given just talking tough, once again, hoping that it can talk tough and not actually have to do something tough. ”

Powell was also asked why the particular Fed boxed itself along with a commitment to 50 base point rate hikes. Powell backed off of that fairly, saying the central financial institution will be data-dependant. In essence, this individual seemed to put 75 schedule points back on the table. He also left himself a few wiggle room to go much less if the economy really tanks.

Peter stated Powell has already shown their true colors. He’s scared of how a drastic move will certainly impact the markets.

“ He’s not really willing to do whatever it takes. Decades “ markets be darned, full speed ahead to the inflation fight. ” Because if that was the case, rates would already be much higher. ”

Naturally , Powell brought up the strength of the economy.

“ The underlying strength from the US economy is really great right now. The US economy is certainly strong, the labor market is extremely strong. It is nevertheless at very healthy ranges. Retail sales numbers, the particular economy is strong. Consumer balance sheets are healthful. Businesses are healthy. The banking institutions are well-capitalized. This is a solid economy. We think it is well-positioned to withstand less accommodative financial policy and tighter financial policy. Of course , we perform monitor global events, and global events have been vital that you our economy. The war in Ukraine is something that has upset the global commodity picture, while also harmful the global world more broadly. ”

Powell also said it is the Fed’s job to slow the economy down and tamp down demand to slow rising prices.

Peter said the economy really isn’t solid. And it’s not about slowing the economy.

“ This is the Keynesian myth that inflation comes from economic growth. It doesn’t. … Economic growth brings prices down. It can offset the consequences of inflation because a growing economic climate produces more stuff. Therefore , you never want to slow down genuine economic growth, not in case your goal is lower prices since real economic growth leads to lower prices. ”

When Powell says he wants to slow down economic growth, he actually means he wants to decelerate consumer spending.

“ That is the issue. It’s because people are consuming rather than producing. They’re spending with out working. And where could they be getting that money? They’re getting it from the government. They’re getting it from the Federal Book. But Powell can’t discuss slowing down the spending without having acknowledging the source of the cash. It’s coming from the government. It could coming from credit. It’s from the Fed’s printing press. That may be what needs to be slowed down. ”

Powell said the Fed would slow down its inflation fight when it sees clear plus convincing evidence that pumpiing has turned down. Peter stated Powell isn’t ever likely to see that.

“ I think what the Fed is going to see is clear plus convincing evidence that the economic climate has slowed down — it is either on the verge associated with recession or already within recession. And the Fed will then jump to the erroneous conclusion that that weakness in the economy is the evidence that pumpiing is going to come down. So , pumpiing is not going to actually come down, however the Fed will conclude based on the weakening of the economy that will weakening inflation is going to stick to, even though not only won’t pumpiing follow the economy down, the particular weakness in the economy is actually going to push inflation up based on what it’s going to do to the dollar and based on the effect it’s going to have on financial and fiscal policy that will result in more, not less inflation. ”

In this podcast, Peter also talked about retail product sales, Jeff Bezos calling out there Joe Biden, the fact that companies are absorbing costs not gouging customers, and Bernanke’s undertake bitcoin. Peter also warns to brace for an economic crash.

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