Permanent Magic Number Hypothesis On Inflation

Dollar, Money, Us-Dollar, Arrangement, Funds, Currency

Is there a charmed fiscal number that unlocks the inflationary promised land? Central bank Economists have spent more than a decade in the West, two in Japan, desperately seeking the magic number QE. Though their own research is substantial and conclusive that LSAP’s like QE don’t work, and never have, officials conclude instead that it always comes up short because it wasn’t ever enough (or left alone long enough).

This isn’t really about consumer prices one way or the other. Inflation, rather, is the signal that economic health has been established and done so in a way that reflects a strong likelihood of being sustained.

Shoved aside by COVID overreactions, though central banks weren’t out of the game (QE’s did get massively upsized), over the last year they have been and continue to be overshadowed by fiscal authorities. Particularly in the US and Europe, monetary policy is so last decade. The twenties, at least their first year, these belong to government treasuries. That’s what they’re saying, anyway (stimulus-euphoria).

But what did all that prior government aid, spending, stipends, grants, loans, and tax cuts accomplish? By the count of real GDP, as discussed yesterday, a whole lot of the familiar “jobs saved.” Maybe.

It’s hard to imagine, though, how it might have been worse. As of the end of 2020, the employment deficit remained greater than at any time since the Great Depression. Not just in terms of the 10 million jobs which disappeared and have yet to come back, but now another 1.6 million payrolls that would’ve happened if last year didn’t happen.

For fiscal authorities, that was the point of much, if not most, of the spent “stimulus.” If the private economy suffered so massively, then Uncle Sam would fill in the gap; fill in the trough – and risk going overboard. Thus, it has to be absolutely sickening to fiscal authorities doling out thirteen-digit numbers only to find how consumer spending continues to track private income regardless of any level of aid.

No magic number yet achieved.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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