The Wokenomics Approach To Monetary Policy

Dollars, Currency, Money, Us Dollars, Franklin

In a thousand years’ time, when the economic history of our era is examined by forensic historians, Senator Lamar Alexander (R.-TN) will receive special notice as the tiny catalyst for economic collapse. His rejection of Judy Shelton for the Fed Board of Governors, on the grounds that she is too close to an administration that is presumably leaving office in 37 days, will ensure that there is no voice of sanity in U.S. monetary policy – and that the final implosion of the U.S. economy is thereby rendered unavoidable. For the Fed’s current management, as for Antifa, even small voices of dissent must be silenced.

Shelton is an intellectually active economist, who has in the past expressed admiration for the Gold Standard. During the Trump years, however, she appeared to fall in with that real-estate-baron President’s view that ever-lower interest rates were what was needed. One can accuse her of putting ambition ahead of principle, but at least she appears to have some principles, and ideas that can be modified to reflect the changes in monetary circumstances. As such she would fill a very useful role on the Fed’s Board of Governors, where the current occupants are drone Keynesians, ever following the grail of monetary “stimulus” regardless of how much damage it does in the real economy.

Make no mistake about it, Shelton’s capability for original thought will come in useful next year. M2 money supply increased by 25.7% in the year to November 23, 2020, and almost all that increase has come since February. Put another way, the Fed’s balance sheet has expanded in the last year from $4.0 trillion to $7.2 trillion, an expansion of 80%, or $3.2 trillion, about 16% of U.S. GDP in the balance sheet of one institution.

We are now getting vaccinated, or at least the British are. That means that over the next six months or so, the current “lockdown” restrictions on the U.S. economy will be lifted, doubtless with Governor Gretchen Whitmer of Michigan dragging her feet to the last. Thereafter, all that excess money will feed through into prices and inflation will take off like a rocket.

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(The Bear's Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of "sell" recommendations put ...

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