Where There’s Mania

For the mainstream, her January 2013 stuff was perfectly standard for that time. Again, the binary: either Bernanke had hit the magical sweet spot, fourth time the charm, or in short order we’d all see how he’d done too much. The inflation genie released surely by 2014.

On the contrary, neither of those proved to be true in exactly the same way they’d fallen apart in 2011 just two years earlier. The issue came back again in 2017 and 2018, of course, only to be settled all over and in the same wrong direction during 2019. Rinse. Repeat. The inflation puzzle actually applies to both the Fed’s mainstream critics as well as those who operate the monetary policy puppet show.

For monetary policy’s real opponents, there never was any puzzle (deflation, interest rate fallacy).

Judy Shelton returned to the mainstream press last week, this time writing for the Wall Street Journal how it is unfortunate the Federal Reserve’s board, denied her spot on it, is engaged in “groupthink” just as, as if we were back in 2013, you know the rest. She says the i-word still isn’t being considered strongly enough despite its thirteen-year absence (and counting).

Policymakers need more diverse voices so that, as Shelton would have it, the current QE-works clique can be opened up to include a few belonging to the QE-works-too-well faction.

While it might seem reassuring when members of an institution concur, the Fed’s tendency toward groupthink carries the risk of missing other important perspectives. Forging a consensus can mean trimming the edges of troubling concerns over future developments…Echoing this commitment to easy-money policies stretching well ahead, Fed Gov. Lael Brainard’s speech in March to the National Association for Business Economics was titled “Remaining Patient as the Outlook Brightens.”

Yes, the “trimming the edges of troubling concerns over future developments”, might those include at least a small nudge in the direction of maybe-QE-doesn’t-work-at-all? After all these many years, we’re still in the “easy-money policies” for both the Fed and its detractors who, ironically, are actually engaged in its very same groupthink.

This is how we end up with Goldman Sachs and Bill Gross’ former employer PIMCO actually talking sense (I’d write making sense, but that’s supposed to be our thing).

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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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