E Saving The Economy: NGDP Targeting For The People

Of course, the Fed has been slow as a snail in reducing that balance sheet. What are they thinking? They need to get ready for a rainy day. We may need a helicopter drop next time. And no, it will not be clawed back by taxes later on. It is base money.

Jeffrey Snider says nothing is as it appears. Long bond investors don't fear inflation, full employment or anything else that the Fed throws at the problem:

 

Forget that falling yields have been consistent with actual economic growth, the absence of it, this time Economists have got it right? What changed? Central bankers started out downplaying any economic risks, and then the Great “Recession” happened; after it, they played up the recovery story at every opportunity, and it never came. Now they are, out of nowhere, economic experts despite being utterly wrong from Day 1? That’s a lot of days (3,770 since August 9, 2007) to just set aside in order to start believing this time, this time, they have to be right.

He has come to the conclusion that there is not a business cycle in the classic sense. No big bust on the horizon because no boom now. Just a slow decline of middle America is our fate, if I read him correctly. 

We have extended below trend growth, if you could call it that, mostly from credit for car buying. One could say we are like Japan. Almost 4,000 days of meager growth. Nations start electing weirdos to lead them when that happens. Political instability is always a threat when populist anger takes hold. 

If the bond market is right, we need a lot more stimulus for Main Street and we need more bonds. The Trump administration wants a little more stimulus, likely not enough, but also will produce more bonds with the deficit.

That will likely not be enough. We don't need easy money mortgages, or the Fed buying mortgage bonds. We need money put directly into the hands of the people to spend. There is no other reasonable solution. Consumer spending is what is at stake here, since that is so crucial to the functioning of our economy.

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Disclaimer: I have no financial interest in any companies or industries mentioned. I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice. The ...

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Norman Mogil 3 years ago Contributor's comment

I bet if Milton Friedman were here today, he would advocate a squad of helicopters fly over the world dropping money of every kind in every country. The issue is whether this would lead to greater spending or greater savings.?

Gary Anderson 3 years ago Author's comment

Well, it would be money dropped to those who would likely spend it, prof. If people saved that would impact the money supply differently so Beckworth's plan could provide an ongoing remedy.