Maybe I’m missing something but Johns Hopkins economists John Greenwood and Steve H. Hanke’s op-ed in the Wall Street Journal, whose kernel is in this passage:
If the Fed wants a soft landing, its focus must be on the rate of growth in the money supply, broadly measured. The ratio of broad money to nominal spending, the inverse of income velocity, typically has a stable trend. Therefore, the amount of new money created gives a reasonable estimate of new purchasing power injected into the economy. The growth in the money supply is the “altimeter†that any central bank pilot needs on the dashboard to ensure a soft landing.
really seems to me like a long-winded way of rephrasing Milton Friedman’s famous dictum that “inflation is always and everywhere a monetary phenomenon”. Have the members of the Fed Open Markets Committee forgotten that or do they just no like the implications?
Basically, if you increase the quantity of money without increasing production, you’ll get inflation. That’s why I keep emphasizing production. Also if you want to consume more you’ve got to produce more. Conversely, if you’re determined to reduce production, you’ll also need to reduce consumption. All of those seem pretty basic to me.
We used to make things, now we make believe and more and more we can’t tell the difference.
I’m not sure why they even wrote their piece. Velocity has NOT been stable. Just because you invert the fraction doesn’t make it stable. The Fed has purchased $9T in mortgage backeds and Treasuries. Meanwhile, we shut down production while lavishing money around
Maybe good politics……..for a while. Sorry Joey. It ain’t transient. And tomorrow’s report is likely to be ugly. The Fed has almost no chance of a soft landing.
It’s like a water landing of a plane. No such thing exists.