Two Kinds of Inflation
Inflation of consumer goods and asset values have fundamentally different causes.
Ugh, I know, not this again! But hopefully this is the last time we have to talk about this topic, and then we can move on.
I'm going to give my controversial take on this, which is this: there are two different kinds of inflation created by two fundamentally different causes.
The controversial part is that I'm going to go out on a limb and argue that inflation in the prices of consumer goods is always some sort of supply-chain issue. It’s always due to supply and demand getting out of whack in some way, which can happen for any number of different reasons. Therefore, it has nothing whatsoever to do with the money supply. That’s just a fairy-tale.
However, the inflation of asset prices is, indeed, a monetary phenomenon caused by central bank policies, especially "loose money" policies and the current bête noire: Quantitative Easing.
Let's unpack that a bit.
1. Money printing doesn't cause you to buy more
The inflation of prices is always and everywhere a supply-chain issue. Yeah, you heard me. Come at me, bro.
(Upon further reflection, I maybe overstated this point. There are times when inflation is caused by other factors, but these mainly have to do with political decisions. Countries that are subject to the whims of the international bond market and are less self-sufficient are especially vulnerable. But I do think that the "real world" is all too often downplayed in these discussions.)
The conventional wisdom is that, if there's more money in the world, then prices have to rise for some reason (which is never specified). But does that really make any sense?
Think about your own spending habits. Do the news reports that Fed is "printing money" cause you to run out and start throwing money around like a drunken sailor? Does it prompt you to buy a new big-screen TV or a second car? Does a reduction in the Fed overnight rate cause people to run out like Black Friday and strip the shelves bare? I doubt it. Does the amount of money cause your stomach to expand? If not, then why would you buy more food? And if you’re not buying more food, then why would the price of food go up?
People will only buy more stuff if they have more money to spend. That seems obvious to me. And they only have more money to spend if they earn more money. Does "money printing"—the vast majority of which goes directly into bank coffers (really bank spreadsheets)—necessarily mean that there is more cash in your wallet? If not, then why would the amount of money in existence affect people's buying and spending decisions?
So the amount of money "out there" is totally irrelevant unless it somehow ends up in people's pockets. And even then, it is unlikely that it’s going to automatically cause people to engage in wild spending sprees. Are you going to suddenly start buying 50 steaks, 100 eggs and 20 gallons of milk if your income goes up?
The same goes for producers. Do they think to themselves, "Hey, interest rates are lower, so let's hike our prices!" Why would they do that if demand for their goods is unchanged? It doesn't make any sense. Do they just assume that because there’s more money “out there” people will pay more for their goods, absent any evidence? And why would they all decide to do that at the same time? Wouldn’t the incentive be to keep prices lower to seize market share from your competition?
The fact that banks have more money on their balance sheets and more people are taking out loans doesn't affect incomes, so why would it cause producers to raise their prices? Why would it cause people's consumption habits to change? Admittedly, the checks sent out to people during the pandemic are an exception, but records seem to indicate that most of that money went to pay off debts.
So the only reason producers would raise their prices is either if: 1.) Demand increases; or 2.) The cost of their inputs (including energy and labor) increased. I defy you to find any business, anywhere, that decides to raise their prices solely because of "government money printing," or interest rate reductions absent any change in either of the two factors I listed above.
Recall the problem with the conventional wisdom from the last time we talked about this. There is a relationship between increased prices and the amount of money in the economy. It's a tautology. But there is no indication of causality. The increased prices could necessitate the creation of additional money in order to to pay the increased prices, and not vice-versa.
In addition, because the headline inflation rate is an average, an increase in the prices of just a few items—which could be caused by any number of real-world conditions— would cause the overall inflation rate to rise, even if relatively few things are affected. For example:
Gasoline (all types) 42.7% - Huge dip when the pandemic happened, now its back to pre-Covid prices.
“The surging price of oil is also thought to be partly down to growing optimism for a speedy global economic recovery from the coronavirus pandemic, which would increase demand for the fossil fuel. Concern about the attacks on the oil-rich state, twinned with expectations for a surge in demand, sent prices to their highest level since October 2014.” Oil prices hit seven-year high after attack (BBC)
Natural gas (piped) 21.1% - Same issue.
Used cars and trucks 31.9% - New cars are not being made because of a chip shortage.
“Toyota Motor Corp said on Monday it would suspend production at five domestic factories in January due to supply chain issues, chip shortages and the COVID-19 pandemic. Japan’s top automaker said that the stoppage at the factories will affect about 20,000 vehicles, but won’t impact their annual target to manufacture nine million vehicles. Last week, Toyota said it was projecting a bigger reduction in vehicle production in North America in January to 50,000 units due to supply chain issues.”
Meats, poultry, fish, and eggs 8.0% - a labor problem because its hard to get that many people to work in spaces like that and not get sick. Also a shortage of farm workers and truckers.
“Employers in the U.S. are struggling to fill roughly 11 million open jobs. The pandemic gets most of the blame, but there's a related factor that gets less attention. Fewer immigrants are coming to fill those jobs — particularly in some key industries that keep the economy moving.”
Food - rising cost of fertilizer has raised the cost of farming all over the world (which is related to natural gas costs)
“From South America’s avocado, corn and coffee farms to Southeast Asia’s plantations of coconuts and oil palms, high fertilizer prices are weighing on farmers across the developing world, making it much costlier to cultivate and forcing many to cut back on production. That means grocery bills could go up even more in 2022, following a year in which global food prices rose to decade highs. An uptick would exacerbate hunger—already acute in some parts of the world because of pandemic-linked job losses—and thwart efforts by politicians and central bankers to subdue inflation.”
In a world where the global economy was effectively shut down overnight and reignited like an aging car engine for the first time ever, we might expect the inflation rate to be even higher than it currently is. But it has nothing whatsoever to do with “government money printing” or the national debt. Inflation is a global problem. As we also noted last time, you can’t force money into the economy if there's no intrinsic demand for it. The mechanism by which new money is added to the economy via the banking system requires borrowers, so it would not affect the price of consumer goods which are not purchased on credit.
…the actual mechanisms available [to increase the money supply] are Fed purchases of government debt from the public, Fed loans to banks through the discount window, or Fed adjustment of reserve requirements so that the banks can make more loans from the same volume of deposits. All of these can raise [the money supply], but, not a single solitary one of them can occur without the conscious and voluntary cooperation of a private sector agent. You cannot force anyone to sell a Treasury Bill in exchange for new cash; you cannot force a private bank to accept a loan from the Fed; and private banks cannot force their customers to accept loans. Supplying money is like supplying haircuts: you can’t do it unless a corresponding demand exists.
Money Growth Does Not Cause Inflation! (Real Progressives)
2. What happened during the 1970s
The high inflation of the 1970s that ended the New Deal Keynesianism and ushered in globalized, financialized neoliberalism was thought to be caused by a wage-price spiral, as Mark Blyth explains:
[06:40] "The lesson learned form the First World War is that if you just allow labor to be treated as another price in the market, and that price keeps going down, eventually they turn Fascist or Communist, and that's really bad if you own property, right? So, then, the lesson learned after World War Two is, ‘let's not do that again.’ Lets make sure people have jobs. Let's make sure there's this thing called the welfare state."
"And the problem with that is, if you run it for thirty years, the software-hardware incompatibility is called inflation. Because what it means is that labor has tremendous pricing power in labor markets, and the only way firms can cope is by pushing up prices. So you get that kind of wage-price spiral, and that leads to the seventies..."
[15:00] "I mean, the seventies get exaggerated as if it were like Zimbabwe or something. It wasn't. But what it did mean is that year-on year prices were rising in some cases for a five year period about 6-10 percent. And that's difficult because what that means is; let's say prices go up 10 percent in a year. That means that they wage you get paid—your real wage—once you take that 10 percent increase into account, is now worth 90 percent of what it was."
"So if you have strong unions, what are they going to do? They’re going to say, ‘we need 11 percent just to stand still!’ Well, if you do that, then the firm that's got to pay that has got to find that from somewhere, and their profit margin starts to go down in order to pay that, so they push it on in prices. And that's how you stoke that whole inflationary process."
#181 ANGRYNOMICS - MARK BLYTH | Being Human (YouTube)
I normally agree with Mark on most things but here I think he's off the mark (ha!). What he can't explain is how this wage-price spiral got started in the first place. In his view, rising prices caused employees to demand more money, but more money in the hands of employees in turn caused the rising prices. Which came first, the chicken or the egg? And why did this only happen thirty years after the war ended, not before? He has no explanation for those things. In fact, in another part of the interview [35:25] he admits that the price of money—the interest rate—has been falling for 700 years! The only exception to this 700-year long trend, he tells us, was the "weird period" of the late 70s and early 80s. It cries out for an explanation other than the one he gives above.
But it turns out that there is another explanation for this "weird period" besides the wage-price spiral that makes a lot more sense. The most obvious one is that the price of oil basically tripled overnight during the 1970s:
Long-term oil prices, 1861–2015 (top line adjusted for inflation) (Wikimedia)
Oh, and did I also mention U.S. domestic oil production also peaked in the 1970s?
So you’re importing more oil and the oil costs a lot more than before. This led to a massive outflow of U.S. dollars. The increased cost of energy forced everything in the economy to become more expensive through the domino effect. Everything in the economy is downstream from energy prices. Rather than creating the necessary dollars in order to pay for those higher prices, the Fed instead constricted the money supply—falsely believing that it was the cause of inflation. This led to stagnation on top of inflation:
...in 1974 the price of crude went up by an average of 170%, year on year. At that time energy costs accounted for 10% of the US economy. A rough-and-ready calculation shows that a crude oil price increase of 170% would translate into inflation of 17%. The higher cost of imports and, by transmission, the higher prices of goods and services would call for a greater amount of money to effect exchanges.
If the central bank allowed money supply to grow by 17% then we would have inflation of 17% (assuming a one-to-one relationship between money supply growth and inflation) but no reduction in growth. If the Fed instead curtailed money growth to less than 17%, then we would have both inflation and a contraction of GDP (and hence higher unemployment).
This is what happened after global oil prices began to shoot up. In 1974 the average rate of growth rate of M1 was cut to an average of 5% during the year from 9.1% at the start of 1973. The average inflation in 1974 was 11%, less than our calculated 17%, but the cost was a severe recession.
Inflation in 1974 was caused by higher prices of oil imports. The contraction in growth occurred because the Fed, under the mistaken view that inflation was caused by too large increases in money supply, curtailed money supply growth instead of allowing it to expand by the amount required by imported inflation. The rise in unemployment was caused not by too much money but by too little money.
What caused the stagflation of the 1970s? Answer: Monetarism (Real World Economics Review)
Through 1974 the price of crude rose by an average of 170% year-on-year, because OPEC raised oil prices. If an oil importer in the US had been importing 1 million barrels of oil at a price of $5 and the price went up to $10 then it would need twice the amount of money it did earlier if it wished to import the same quantity of crude as it had previously. Down the line, those to whom it sold refined oil products would need a greater amount of money to buy the same amount of gasoline, etc that they used to.
If money in the economy was not expanded to the required extent, then less crude would be imported from abroad and less gasoline consumed down the line. The result would be a contraction in overall output, or what we would call a recession. This is indeed what happened when the Fed tried to constrict money supply growth.
How could the 1970s stagflation have been avoided? (Real World Economics Review)
The second is the economic "stimulus" of the Vietnam War which happened without raising taxes on anyone (in fact, cutting them). A tragic image helps bring this home. Here is a depiction of bombs dropped on Vietnam and Laos from 1965 to 1975. Every bomb is represented by a black dot. But more importantly, someone stateside was getting paid money to make all those bombs that were shipped to the other side of the world and dropped on unsuspecting farmers. All that government money had to go somewhere, and it went primarily into the domestic economy:
Vietnam War and Landscape Dynamics: Objective Identification by Iconographic Data in Thua Thien Hue Province (ResearchGate)
Finally, women starting entering the workforce en masse and naturally wanted to spend some of the money they were earning, causing demand to increase. When demand suddenly increases, prices go up. That had nothing to do with the money supply.
Here's a photo of Mary Wallace, the first female bus driver for the Chicago Transit Authority. The important thing about this photo isn't about how fly she looks (although she does look fly!), it's the fact the first female bus driver was in 1974! And she wasn’t alone—a large number of women starting earning incomes at this time in areas where they were formerly excluded.
I remember reading a local newspaper from the year I was born (1973—yes, I'm old). In the "Letters to the Editor" page, one incensed writer was apoplectic about the fact that the employment section would no longer have separate listings for men's and women's jobs. Where—this incredulous writer wanted to know—would these mythical jobs that could hypothetically be done by anyone come from? For him, the very idea was simply absurd! Women's lib had clearly run amok in his opinion ("political correctness" and "wokeness" had not yet become a part of the vocabulary).
So all the evidence indicates that rising prices were caused by real-world economic conditions and not by an increase in the money supply. In fact, the Fed's refusal to create the extra dollars necessary to cope with these conditions meant that recession and stagnation were guaranteed alongside higher prices.
Inflation went back to its 700-year trend when women were fully integrated into the workforce, the war in Vietnam finally ended, and—perhaps most importantly—the price of crude oil fell drastically during the 1980s. But ever since, folk wisdom has credited the Fed with constricting the money supply and causing a painful recession, rather than blaming them for the economic stagnation in the first place. Warren Mosler, one of the founders of MMT, agrees:
Yes, the labor situation was different then – strong unions due to strong businesses with imperfect competition, umbrella pricing power and the like.
But it was my take then that inflation was due to energy prices, and not wage pressures. Inflation went up with oil leading throughout the 1970’s and the rate of inflation came down only when oil broke in the early 1980’s, due to a sufficiently large supply response. It was cost push all the way, and even the -2% growth of 1980 didn’t do the trick. Nor did 20%+ interest rates.
Inflation came down only after Saudi Arabia, acting then as now as swing producer, watched its output fall to levels where it couldn’t cut production any more without capping wells, and was forced to hit bids in the crude spot market. Prices fell from a high of maybe $40 per barrel to the $10-15 range for the next two decades, and inflation followed oil down. And when demand for Saudi production recovered a few years ago they quickly re-assumed the role of swing producer and quietly began moving prices higher even as they denied and continue to deny they are acting as ‘price setter’ with inflation again following.
And both then and now everything is ultimately ‘made out of food and energy’ and hikes in those costs work through to everything else over time.
Now versus the 1970s (Mosler Economics)
This tragedy ushered in Reagan, Thatcher, and Neoliberalism, which—like toothpaste—has proven impossible to put back in the tube even as society falls apart around us.
3. Failing the test
If an expansion in the money supply caused inflation it should be pretty easy to detect. All we would have to is look at periods where the money supply expanded rapidly and see if inflation necessarily followed. Or, we could look at inflationary periods and see if they were immediately preceded by an expansion of the money supply.
A guy called Richard Vague actually did this and found that there was no relation between those things:
Monetarist theory, which came to dominate economic thinking in the 1980s and the decades that followed, holds that rapid money supply growth is the cause of inflation. The theory, however, fails an actual test of the available evidence. In our review of 47 countries, generally from 1960 forward, we found that more often than not high inflation does not follow rapid money supply growth, and in contrast to this, high inflation has occurred frequently when it has not been preceded by rapid money supply growth.
Here's the article: Rapid Money Supply Growth Does Not Cause Inflation (Evonomics)
Of course, all of this is totally ignored. In economics, you can't let ugly facts interfere with a good theory, especially a theory that is so convenient for anti-government libertarians.
4. Missing inflation
You may be surprised to hear this, but the Fed has been deliberately trying to create inflation for the past decade.
Why would they do that? In order to prevent deflation—a period of falling prices—which leads to economic depression and stagnation such as the Great Depression of the 1930s.
And so, armed with (false) monetarist ideas, they pulled all the levers to increase the money supply after the 2008 crash and—absolutely nothing happened! Prices remained resolutely flat for the next decade. The Fed missed their desired inflation targets on the low end time and time again. This alone should have invalidated the claim that increasing the money supply leads to inflation.
However, they did succeed in creating another kind of inflation—just not the inflation in consumer prices that they wanted. What they created instead was inflation in asset values. Assets are the kinds of things which increase in value over time and are owned mostly by a small minority of rich people in any society. This comment to the Evonomics article above is instructive:
New money flows into places where ever there is an arbitrage opportunity. No bank gives anyone interest free loans. Anyone who borrows from banks does so to make a profit. Borrow at a lower rate and use it to earn a higher rate of return by investing the borrowed money. The profit is the difference between interest charged by the bank and the return earned on the investments.
In most developed countries, there is a very vast paper economy which provides higher returns than the real economy. So, smart people borrow the money and invest in the paper economy consisting stocks, land, gold, and contracts, and similar assets…There is no inflation because the new money never enters the real economy.
We noted above that the Fed creates money primarily through lending, and lending requires borrowers. What to people borrow money to buy? Certainly not ground beef and eggs. They borrow money to buy assets. And the people who do this are financiers, not normal people like you and me. But that wouldn’t cause prices to go up across the board, certainly not for consumer goods and services that are consumed rather than saved.
As inflation in consumer prices remained stubbornly flat, asset values soared into the stratosphere, fueled by ultralow interest rates and ballooning Fed balance sheets. Assets are normally purchased with debt, or leverage in the financial jargon. And the people feeding directly at the debt trough are the banks and speculators on Wall Street, not consumers. After all, that’s effectively what QE is—buying debt from the private sector in exchange for cash, no questions asked.
That's the conclusion of financial journalist Christopher Leonard in his new book, The Lords of Easy Money: How the Federal Reserve Broke the American Economy. I encourage you to listen to this podcast interview of him by Krystal Ball and Kyle Kulinsky:
What's refreshing about Leonard's book is that, up to now, criticism of the Federal Reserve has mostly come from internet cranks like Bitcoin-obsessed libertarians and goldbugs peddling wild—and demonstrably false—conspiracy theories. These people want to eliminate the central bank entirely, go back to gold-backed currencies, and rewind to the days when there were over 4,000 currencies operating in the United States. In other words, absolute insanity.
This has unfortunately meant that a lot of ordinary people have fallen for wacky ideas promulgated by this radical fringe. The sheer lunacy of many of their critics has shielded the Fed from having to engage with them in any serious way. But Leonard's book avoids that and explains how the Fed’s actions have contributed to both growing inequality and increasing economic volatility.
According to Leonard, the Federal Reserve deliberately decided to stimulate the economy by increasing asset prices. This “easy money” policy led to an era of hyperfinancialization, overheated speculation, and a massive increase in public and private debt that has wildly inflated asset prices while doing very little for the average American. And these intentions were clearly stated during the meetings of the Fed bankers themselves, the transcripts of which are only released to the public years later.
The Fed has since become deeply committed to easy money policies that prop up financial markets, which is far beyond what the institution was originally intended to do which was to prudently manage the nation's money supply (something necessary for any modern capitalist economy). Here is an excerpt from the interview:
“The historical record is absolutely clear that when Ben Bernanke and the FOMC [Federal Open Markets Committee] passed quantitative easing, and did multiple rounds where trillions of dollars of quantitative easing...First of all they knew that it was risk—that is was a gamble that it would only indirectly create jobs. That the only it could create jobs was by stoking up the prices of assets on Wall Street. And when we talk about assets, we're talking about the stock market. Ben Bernanke, in black and white, is saying, 'we're going to pump up the stock market through this program.”
And then the other type of asset would be corporate debt, leveraged loans, the private equity industry that packages private loans, gets supercharged by a program like Quantitative Easing.
So the Fed knew that it was that is going to try to affect economic growth by wildly inflating asset prices and pumping up asset prices first. And it’s just inarguable that one percent of Americans own roughly 40 percent of all the assets in the country, and the bottom half of Americans own 7 percent of the assets. So when you're pursuing a policy that tries to stimulate growth by pumping up asset prices, you are by definition increasing the very wide gap between the very rich and everyone else.
[...]
"...McKinsey did a study in 2012 that showed that Quantitative Easing has directly subsidized the corporate debt markets to the tune of about 300 billion dollars. At the same time, Quantitative Easing had simultaneously punished households that were trying to save money to the tune of $360 billion."
"For folks trying to get by on a pension or savings account or life insurance where money is essentially saved, they face a huge punishment because there is simply no upside in saving anymore, [whereas] the debt merchants on Wall Street and the debt engineers of private equity firms get an enormous subsidy form this. It sounds like a cliché, but all the numbers say this. If you're making a living these days through a paycheck rather than owning assets, you're falling behind, particularly with inflation running so high."
"And then we have another financial bubble that could potentially collapse in almost an identical fashion to what was starting to happen in 2020; to what did happen in 2008; [and] to what [happened] in 1999 with the Dot Com Bubble. The fallout from these financial crashes—which are stoked by the Fed—is tremendous for working people. It's not just the taxpayer money that has to be funneled in to bail out the banking system time and time again; it's...the debt overhang. After a financial bubble collapses you have years of weak growth as debt is paid down and you emerge from the debt-driven crisis."
The reason the Fed’s policies hurt ordinary people is because: 1.) Low interest rates mean that money saved earns hardly any interest. This makes it counterproductive to save, forcing people to put their money into increasingly risky gambles—hence the era of wild speculation in everything from meme stocks like GameStop to Dogecoin to NFTs; and, 2.) Housing prices went into the stratosphere. Yes, we've finally come to the thing that has gotten torches and pitchforks out all over the country from coast to coast.
Rising house prices attracted investors because low interest rates meant that saved money earned next to nothing, while at the same time cheap loans made it easy to borrow money for mortgage loans. Shelter—a basic human need—was turned into an asset for people to gamble with, and ordinary people now had to compete with giant pools of money enabled by cheap debt. Since a huge portion of housing costs are paying back interest over time, low interest rates allowed the prices of houses to inflate, especially in the few big cities where prosperity is disproportionately concentrated. Cheap debt also enabled the rise of the private equity industry—essentially a debt laundering operation—and stock buybacks: companies repurchasing their own shares with debt in order to boost the stock price.
While it could be argued that the actions of the Fed were necessary in 2008-2009 in order to recapitalize the banks and avoid a financial meltdown, the problem is that they continued pursue these easy money policies in order to stimulate the economy long after the crisis was averted. Leonard notes that low inflation and sluggish growth in the real economy since 2008 has allowed these easy money polices to persist even as the speculative economy boomed:
"Interestingly, the Fed has been wrong about inflation for a decade on the downside. The Fed has consistently thought we were going to have higher inflation than we saw. But we never had significant price inflation for the last decade, which was a huge economic mystery. And it was important because price inflation was sort of the one brake on the Fed's easy money policies. Everyone agreed that if price inflation reared its head, the Fed would have to pull back. That never happened. So the Fed felt leeway to keep pumping new money in. So the Fed had no idea why inflation never rose..."
"I think one of the best explanations is that the Fed was printing money at the very moment that the sort of global supply chain, global system, was implementing a lot of deflationary forces: cheap labor, cheap products, [were] holding the prices down as the Fed was pumping money into Wall Street. And the reason that seems like a key reason is now that the supply chain is disrupted we're seeing prices shoot through the roof.”
It's the thesis of this post that it's no mystery at all—the idea that expanding the money supply causes prices to rise is a myth with no basis in fact. But funneling money to banks and speculators on Wall Street does indeed create asset bubbles, which have unfolded simultaneously alongside relatively flat prices in consumer goods and services. Until now, that is, when the ultimate Black Swan event of a global pandemic came along at a time when global supply chains have been stretched to their limits, over-optimized for efficiency, and have no slack or redundancy in them whatsoever (ironically, many of these changes were made to boost the profits of private equity firms and Wall Street financiers).
That explanation makes a lot more sense to me than "Fed money printing" just deciding to suddenly explode after thirteen years of doing absolutely nothing, coincidentally at the exact same time as the global supply chain was effectively shut down (including China, the world's largest producer of stuff), and energy prices spiked for geopolitical reasons.
Understanding that there are different kinds of inflation with fundamentally different causes is critical to understanding the economic mess we’re in right now. But how do we fix it?
6 What is to be done?
Unfortunately, there are no good solutions to this problem. The benefits and drawbacks are asymmetrical. While a buoyant economy helps primarily Wall Street and the already rich, a stagnant economy hurts everyone, rich and poor alike. It's effectively a hostage situation, where if the Fed ends its easy money policies and raises interest rates, the average American will bear the brunt of the pain even though he or she saw none of the benefits. Deflation and falling house prices destroy massive amounts of wealth, and while the wealth never manages to trickle down to the masses, the pain of the fallout absolutely will.
This means, of course, that there's no incentive for any politician to commit political suicide by ordering the Fed to wind down it's current operations, which would lead to a recession. Every time this has been threatened the Fed has been forced to back off (such as the so-called “Taper Tantrum” of 2013):
"...there is absolutely no positive argument to made for lancing this bubble. If interest rates rise and QE is withdrawn and the markets downwardly adjust, it will be bad a thing. It is not something that people should be eager to see or be joyful about...Households can't withstand another five years of weak growth. So there's no joy to be taken in the devastating impact of a correction if it happens..."
"I'm not one to advocate simply throwing away the Federal Reserve because it's hard to operate a complex capitalist modern society without having a central bank to create and manage currency. The fundamental pathology of the last decade is that our democratic institutions are dysfunctional and paralyzed and countries around the world have been relying on the central banks to print money to boost growth. Which would be great if it worked, but history shows time and again that you can't boost growth that way."
It seems impossible to really envision an alternative unless the entire neoliberal economic paradigm that has run the world for four decades is torn out root-and-branch and replaced with something else. But, as the saying goes, it's easier to imagine the end of the world than trying to imagine that happening.