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This inflation is not created by a lack of supply (not anymore at least), or by an excess of demand... it's an inflation created by excess of profits. and the fed decided to fight it by fighting workers. it makes no sense, really.
I don't really understand this view (and certainly wouldn't attribute this sort of intent to the Fed). What did the Fed do? What should they have done?
To your question: what it comes down to is that the fed is charged with managing inflation and unemployment. Regardless of the effectiveness of their tools, they are required to do what they are able to do. With that in mind, it’s possible that there is a better course of action.
Personally I find the arguments of MMT to be strong. This forum has charactered the theory as an excuse for profligate spending, however, the actual proponents simply state that budget deficit are ok so long as inflation is under control. Therefore, the theory would posit that the actual resolution to this would be to shrink the deficit spend in order to properly tame inflation.
Take that for what you will.
I am just going to take a minute to point out that 18 months ago I said the inflation wasn't transitory, it was long term, and everyone told me I was crazy when I said the government was lying about it being transitory.
Who called you crazy?
The supply problems were a lot worse 1-2 years ago.
Internationally aging populations are a systemic source of inflation in the cost of producing goods. I recommend Manoj Pradhan & Charles Goodhart’s, “The Great Demographic Reversal” (2019) for more on the topic. Covid occurring since then has exacerbated the international debt issues, as well as plucked more of the valuable remaining years away from our labor force’s working years. See the number of early retirements…
Earlier quoted context omitted.
I don’t think the Fed anticipated the war in Ukraine.
Blaming the current situation on the Ukraine War reminds me of the crash in 2001. Things were going downhill already long before but when 9/11 happened, suddenly everybody blamed the crash on 9/11. I am pretty sure the current situation would have happened without the Ukraine war. Maybe a little different but the writing was on the wall long before.
Inflation in Germany stayed So it's not clear what you have been referring to.
Keep in mind that this forum is very competent when it comes to software discussions, while tending to overstate its economic knowledge. To your question: what it comes down to is that the fed is charged with managing inflation and unemployment. Regardless of the effectiveness of their tools, they are required to do what they are able to do. With that in mind, it’s possible that there is a better course of action. Pe…
If our governments ever ran true Keynesianism, they didn't do it for long before they started spending more when Keynesianism said they should spend more and spending more when Keynesianism said they should spend less, and whatever the academic merits of MMT it has in practice simply removed whatever faint limits the old theories imposed on our politicians because it has been translated to them as "MMT says the government can spend whatever it likes forever, especially if it has the reserve currency, and nothing bad is even possible, let alone going to happen".
In a sane world economists would recognize that explaining new theories to politicians is just handing a lit match to a toddler, but, well, you live in the world you live in, you know, not the world you wish you lived in.
Earlier quoted context omitted.
I don’t think the Fed anticipated the war in Ukraine.
Blaming the current situation on the Ukraine War reminds me of the crash in 2001. Things were going downhill already long before but when 9/11 happened, suddenly everybody blamed the crash on 9/11. I am pretty sure the current situation would have happened without the Ukraine war. Maybe a little different but the writing was on the wall long before.
If a different 9/11 had happened - say the perpetrators were Russian - I would agree that a similarly large change in society would have occurred. We probably would have done the same crap with the TSA. However, it’s less likely that the US would have invaded Afghanistan, and possibly Iraq (because every hypothetical is less likely than the 100% probability we have now).
Just because something else would have happened doesn’t mean the response would be anywhere near similar.
The long answer is that today's inflation doesn't seem to be monetary in cause, because nearly every country is experiencing inflation simultaneously. If the Fed had printed too much money and that was why the US was inflated, that dynamic shouldn't really affect, say, Germany, or Brazil. (Caveats abound, of course). Despite that, we're seeing nearly every major country have similar and sustained rates of inflation across monetary policy regimes.
So, we know there's been something that affected everyone globally, and that's obviously supply chain disruptions along with gas and oil price changes due to Ukraine. Fed policy didn't cause the inflation, something bigger than the Fed did.
The question then is can the Fed fix it. The answer here is maybe. The Fed has tools to fix inflation - when the inflation is caused by monetary policy reasons - and those tools should, all else held equal, reduce inflation eventually.
The real question is whether or not the Fed is the best entity suited to tackling today's inflation. Politically, it's very easy to just delegate all that stuff to the Fed so that it becomes some technocratic thing that's essentially beyond the scope of normal politics. This is what Reagan did in the early 80s. But in terms of actually fixing the underlying problems, I don't know how much impact the Fed can have.
Raising rates won't make supply chains readjust to today's geopolitical environment, or hire more truckers to move long-stored inventory. It will fix the monetary part of the inflation, but to get back to your question, nobody really knows what the monetary part is. It's less than we'd normally think, but we don't know precisely.
Earlier quoted context omitted.
I don’t think the Fed anticipated the war in Ukraine.
Blaming the current situation on the Ukraine War reminds me of the crash in 2001. Things were going downhill already long before but when 9/11 happened, suddenly everybody blamed the crash on 9/11. I am pretty sure the current situation would have happened without the Ukraine war. Maybe a little different but the writing was on the wall long before.