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One Year Later, Fed Formally Adopts Alexandria Ocasio-Cortez Approach To Employment
"I’ve been seeing lately that economists are increasingly worried that the idea of [the] Phillips curve that links unemployment and inflation is no longer describing what is happening in today’s economy, what are your thoughts on that?", Alexandria Ocasio-Cortez asked Jerome Powell, during a hearing on July 10, 2019.
She already knew the answer.
"The connection between slack in the economy — the level of unemployment and inflation — was very strong if you go back 50 years and it’s go
The demise of unions, the rise of technology & globalism in trade has rendered the Phillips meaningless. It sure took a long time for the Fed to recognize this.
“I’ve variously argued that it wouldn’t be a terrible idea to cut primary dealers out of the equation. Let’s face it, inserting banks as middlemen serves no purpose other than helping maintain the charade that central banks aren’t engaged in debt monetization. Their presence in the equation serves as an impediment to the transmission of monetary policy to the real economy.”
H – you’ve mentioned this theme several times, but I’m having trouble understanding how cutting out middlemen would transmit monetary policy to the real economy. I’m not arguing to keep the middlemen in place; I could care less if they stay or go. I just don’t get how the mechanism you suggest would help.
Thanks in advance for explaining.
It’s up the Congress now to get funds into the real economy. As the above reader suggests, it’s a charade that they are in the middle. As long as they continue to say it’s a “loan,” no one will panic. As soon as they say, it’s “not a loan,” watch out. I’m in the Lacy Hunt school on this. I still think they are not close to saying “it’s not a loan,” while the pressue continues to mount for outright debt monetization.
I have watched the RNC each night this week so far. No whispers even of, what’s the right word, “help,” for the economy. It’s all been about power and optics. Last night, the impending hurricanes in the Gulf didn’t raise evern a “we will be there for you” empty sloganeering, as best I was able to watch and listen.
I don’t see how the money is going to get into the economy, barring Senate and White House loses for Republicans. Meanwhile, we sink into an economic depression. This whole thing sucks and didn’t have to be this way.
If we’re going to cut out the middlemen of banks (which i support) in the issuance of notes why even bother with bonds at all?
Why not simply fire up the printing presses instead of selling IOU’s to the central bank for digitally created coin?
exactly. the US does not have to issue debt at all. the decision to issue interest-bearing USDs (which is all bills and bonds are) is entirely discretionary.
I understand that it’s discretionary. I’m implying that the “bug” of the widening wealth gap associated with fed backstops is actually a feature.
We accept the societal cost of a widening wealth gap with every fresh downturn while the fed pretends it has no choice (even denying the connection between its actions and said problem.)
All the while their emergency powers expand into new territory once thought the realm of fantasy.
The glorious vision of AOC would be a dystopia for me. That said, I very much appreciate the MMT crowd because they seem to be some of the only people these days who have an accurate understanding of reality! Even if their solution takes the opposite path from what seems best to me, we won’t get anywhere if no one can correctly diagnose the problem to begin with.
What are people’s thoughts on Congress getting this one right. Seems like they’re pretty deadlocked…
As H explains..”efforts to deliberately curtail the pace of job creation can only be explained by incompetence, cruelty, or an obstinate refusal to abandon economic orthodoxy in the face of real world outcomes “.
Punk, do you feel lucky ?
First, its not just AOC, but Trump finally has the low rate central banker he wants. He must be thrilled. It is nice to see that Trump owns Powell. Next, the Phillips curve is indeed a weak relationship to core PCE, but it is not completely dead. It meshes well with OER and Atlanta wage tracker. So this is going a bit to far to say its dead. And the reason it has failed in some eyes is down to goods prices and health care prices. On the first issue those good prices were constrained by globalization and impact that is now in reverse.