Anyone with considerable cache of economic acumen knows that the monetarist school of thought ignores interest rates. Paying attention to the monetary base line as well as a host of independent variable indices, commodities and short term trends, monetarists know that talk of interest rate ‘hikes‘ bespeaks a profound understatement that traders and other financial professionals wish to avoid, namely that the Federal Reserve is lost and cannot conjure nominal growth.
The Federal Reserve and its legions throughout media and academia are bereft to understand how they lost their mojo.
The answer isn’t just fiscal policy, nor is it the seriousness of the crash of 2008, the canard of secular stagnation is truly an affront to anyone possessing a modicum of Austrian macroeconomic thought. The Keynesians are exhausted and they will not endeavor to acknowledge failure if Chair Yellen wants to keep her job! Her political paymasters are willing to dupe themselves and everyone else, if only to sustain expectations; there was no executive engaged policy mix. There never was. . .
The dominant political class of contemporary Keynesians will do anything to preserve this system. And to sustain perverted institutional expectations, it will cajole, divert, even lie for the maintenance of effort in sustaining financial repression.
Want some numbers?
For the economy to keep up with population growth, it needs to add about 130,000 jobs a month. We’re currently doing about 145,000. That’s great news except that these jobs are part-time. The unemployment rate is about 5%, but that reflects those dropping out of the work force; how about the labor force participation rate? It remains 59.6%. People, these aren’t growth trends, and they aren’t sustainable.
So how is anyone to comprehend the Fed speak dominating the talking wires??
Its an institution that implicitly knows accommodative policy is over.