America's ad hoc financial system is full of unintended consequences, such as the Fed's increasing liquidity by $1 trillion while trying to quell inflation. How can the stock market be soaring to repeated new highs when the Federal Reserve is trying to constrain the economy? In the last year, as it was trying to restrain inflation, the ...

Government grants and tax credits for favored groups would be economic junk food to an already obese state. Neoliberalism, a term that broadly describes market-friendly and small-government policies, has become a punching bag for both progressives on the left and national or common good conservatives on the right. The progressive ...

Too much debt. The Lehman Brothers and AIG failures are often considered causes of the stock-market crash and recession, but the week of those failures, the stock market actually rose. The benign market reaction at the time suggests they may be more accurately considered as markers of the real-estate crisis that, by September 2008, had ...

There doesn’t need to be a recession to tame inflation, but it looks as if there will be. Staggering under the weight of bloated government spending and deficits, the U.S. economy has steadily weakened during the Biden administration. As shown in the chart below, growth slid from 12.5 percent for the four quarters ending in June 2021 to just ...

The United States is now in deflation. Including current housing costs, rather than the lagging data from the CPI, shows that the U.S. is currently in deflation. That's not a misprint. It may sound incongruous to the experience of shoppers who have last year's, or pre-pandemic, prices as references, and to followers of year-on-year ...

Economic stagnation generates social decline. The U.S. economy has downshifted to sluggish growth, mirroring post-financial-crisis stagnation. Third-quarter GDP in 2022 was just 1.9 percent over the previous year. Whether or not 2023 contains a recession, there is little prospect of strong growth. For those focused on economics, it can be ...

But it probably can’t do so alone. A year and a half ago, in a piece I wrote for Capital Matters, I warned that unwinding the Federal Reserve's swollen balance sheet and thus removing the lid on suppressed interest rates would cause . . . turbulence: Even a mild downturn in the wake of bursting the stock market bubble would have grave ...

As the economic circumstances surrounding inflation change, keep an eye on the housing market. The inflation that has marked our emergence from the pandemic began with a plunging dollar, soaring government deficits, and surging goods consumption. Now, with a soaring dollar, plunging deficits, and surging services consumption, this ...

With all the wild events of the last few months, central-bank liquidity appears to have the most significant influence.The U.S. government is by far the world's largest financial entity. When it moves, global financial markets reverberate, even if that was never intended. From December until May, the U.S. government withdrew almost $1 trillion ...

It is undeniably true that the U.S. dollar’s role as the world’s reference currency has served as a transmission mechanism for exporting U.S. inflation to the world. Inflation-phobic Germany just hit 7.3 percent annually. The United Kingdom inflation’s rate is at 7.0 percent. Even Japan has reversed from deflation to inflation.
Some contend ...

It needs to exhibit the decisiveness and deftness of its original pandemic response. Headlines have blared. Seven percent inflation! Highest inflation in four decades! We have been told the Fed has “the tools” to bring inflation down. The chart below illustrates how PCE inflation has been reduced in the past. The Fed’s “tools” look ...

Biden's 'American Rescue Plan' came at just the wrong time. The Chinese year of the tiger commences in February 2022, but for those following U.S. inflation, a ferocious year began in 2021. Consumers, forecasters, policymakers, and politicians hoping to keep their jobs have been gobsmacked by this year's inflation burst. As recently as ...

Fiscal responses to recent recessions have shown Keynesian stimulus to be ineffective. Never in American economic history was so much owed by so many for so little. The de facto application by both political parties of Modern Monetary Theory, effectively unlimited borrowing and monetary stimulus, is ultimately disproving Keynesian ...

Monetary policy has caused this bubble, and only monetary policy will cure it. Home prices are increasing at the fastest rate that we've ever witnessed since we first began collecting data just over five decades ago. The chart below illustrates the annual rate of price increase for the Federal Housing Finance Administration's quarterly data ...

If the past five decades are any guide, the Senate infrastructure bill is unlikely to stimulate economic growth. In 1998, the average senator in today's Congress was 32 years old – a prime car-buying age and a likely target demographic for General Motors' Oldsmobile division – which attempted to appeal to younger car buyers with the ...

It's absurd to pump money into the economy with one hand while draining it with the other. The Federal Reserve injects $120 billion of Quantitative Easing into the financial markets monthly. At the same time, the Fed is withdrawing even more money from the markets through financial transactions called reverse repurchase agreements (RRPs), ...

Biden wants to make corporations pay their 'fair share' at the expense of economic growth. One of the central questions about the Biden administration's proposal to raise corporate-income taxes concerns who, between investors (presumably rich) and workers, will bear the cost. While fodder for divisive class warfare politics, this is entirely ...

Assessing the historical record on government investment and growth. Keynesian economics presents the promise that increases in government spending stimulate demand and thus investment, contributing to stronger economic growth. For the last 50 years, however, government spending has grown in most advanced economies, while investment and ...

The Fed's purchases of inflation-protected securities may misrepresent inflation expectations. Expectations for annual increases in the consumer-price index over the next decade—derived from the difference between nominal and inflation-protected Treasury yields—climbed above 2% this week for the first time since 2018. — Wall Street ...

The common presumption that the federal deficit doesn’t matter is entirely wrong. ‘Who the hell cares about the budget” — Donald Trump. “Debt is money we owe to ourselves.” — Paul Krugman. “Future generations will pay the price for runaway national debt.” — Heritage Foundation. The president may be right that no one cares about the budget, but ...

The central bank’s inability to attain its 2 percent inflation target remains a fundamental dilemma. On August 27, Federal Reserve chair Jerome Powell revealed results of a reappraisal of monetary-policy implementation that he initiated in 2018. The “framework” review dealt with long-term policy beyond the current crisis. In Powell’s words, “To ...