I’ve always been Keynesian, but it faces the same problem as everything else, you need to be able to predict the future to do it well.
This article gives details on $5 trillion in government stimulus.
https://www.nytimes.com/interactive/2022/03/11/us/how-covid-...
To put those numbers in perspective, the market cap of the entire S&P 500 is about $40 trillion.
I hear what you’re saying about supply-side inflation but you don’t think flooding the economy with so much unearned money might be driving up demand a bit?
A beach town near me, I paid $4,000 for a week to stay there two years ago. This year, an equivalent house is $15,000 per week. So now I’m driving six hours away to get a house for $10,000 per week.
When people make $20,000 per month in stock market/cryptocurrency gains, it starts driving up demand for everything dramatically.
And that I’m not so sure anymore if federal banks are net positive.
No different today. Massively expand the money supply and you (eventually) get inflation. Add in a few supply issues and you amplify the problem. But I agree with you that without the massive monetary expansion, the supply issues would be minor blips.
By the time inflation starts to heat up (it doesn't happen right away), there will be immense pressure to delay any monetary contraction for fear of dampening economic growth. Then Covid hit and the economy was goosed with another massive injection while everyone worried about a recession.
Then once inflation starts it's too damn late to put the genie back in the bottle so you just spend the next 5-10 years trying to get it under control while not entirely tanking the economy.
First two years of Trump were economically pretty good. Low unemployment - particularly for minorities. The Fed was raising rates!
The economy was good, unemployment was low, rates were rising.
USA was still spending it's treasure protecting Afghanistan poppy fields.
The issue is that we lowered taxes significantly in the middle of good times. It's like feeding ice cream to kids already on a sugar high.
There is no room to lower taxes anymore as we are already running a significant deficit, and there is a recession coming where we are going to need to juice the economy.
Decades of deficit spending demonstrate the feds can print adequate amounts of fiat currency, and issue debt, to continue to bail out the banksters, bail out foreign cruise line owners, and attempt to police the world and police outer space. USA could drop the federal personal income tax and continue on with the charade.
There is inflation which is bad for the poor people. But people have work and are getting paid. That increases demand which causes inflation. Would it be better if people did not have money to buy anything, which would cause prices to go down?
If supply-side could flex then inflation would not happen, but it can not because of pandemic which is still closing up China and Russia whose oil is out of the market for many would be buyers, and Ukraine whose wheat is not reaching world markets.
Trying to blame Biden and Fed for the inflation is Monday-morning-quarter-backing. For anybody who blames them I would like to say: Are you seriously asking us to believe that if you had been elected president of USA, or of Fed, things would be so much better now?
> theory is that in good times you put on the brakes so there is something in the tank you can spend during bad times
The government is not a squirrel with acorns. It can spend during both good and bad times, as the past 30+ years have shown. The only backpressure is inflation. Nobody seems to actually care about debt, despite the hand wringing.
> There is no room to lower taxes anymore as we are already running a significant deficit, and there is a recession coming where we are going to need to juice the economy.
Yes there is, they just adjust the tax rates down further. There is no floor other than zero.
1. Even the most spend willing economists agree there is some limit to debt that is sustainable. It’s just way higher than what most are comfortable with.
2. There is also political/popular will. If this is not there it doesn’t matter what makes economical sense. In the U.S. we are firmly against that.
3. About that inflation …
Good times happened recently, and they've happened in the past. But no POTUS ever wants rates to go up and money to be tightened under their watch, no matter what the situation is.
We're doomed to a bust/boom cycle, because it's all we can tolerate. We can't tolerate minor pain or minor corrections if they're preventative. We can only tolerate unavoidable catastrophe.
Just want to mention that we shouldn’t forget that the fed’s balance sheet ballooning started with the 2008 crisis. If I recall correctly, they had _just_ started to lightly unload all the things they gobbled up like fiends during that period before COVID smacked. Of course they hard turned 180 degrees and got on the throttle again, going in to stabilize the usual markets along with new additions people never would have anticipated they’d touch, ever.
I guess my point is this has been very very long running and is another data point that says (to me) it’s not just a supply side issue that’s driving what we’re seeing.
It's not the Feds fault, it's the pandemic.
And even if it did, was it ethical, fair and is it a reasonable price to damage the economy and life prospects of hundreds of millions of young people who weren’t at statistical risk?
Its important because it means the current and future mess is down to bad science and politics and not an act of god.
Not really. I agree with the thrust of your post but there is definitely no considerable debate being had on this topic, because Near-Zero COVID is the only acceptable policy, and saving lives at any cost along with it.
I'm not willing to ruin my life on the chance some 90 years old may catch the flu and die. If they're worried about COVID they can isolate.
Can you be specific in the change you want or which debate isn’t allowed?
British Columbia and New Zealand have about the same population, both are rich jurisdictions. BC was relatively open (compared to other Canadian provinces) while NZ was more locked down. BC has dramatically more deaths than NZ.
And then if you compare BC, which was more locked down than various US states, BC had less deaths than them.
It seems pretty clear to me that the "lock downs" worked.
(putting "lockdowns" in scare quotes here because really the only thing BCians were prevented from doing was going to restaurants and bars. You could still go to the grocery store and home depot etc with a mask on)
If you have some other metric well I dunno, but I don't think there's any better metric than deaths avoided.
Also not just restaurants and bars, gyms, the border, etc. were all closed.
Even with the pandemic going on it would have been better to suffer during the pandemic than cause a recession. The same people who were hit by lockdowns would be hit 10 times worse by a recession.
Employment numbers in my jurisdiction are back to normal and thanks to the sort of government intervention we're talking about very few companies went out of business. Where I live everything is pretty much "back to normal."
The government successfully shut down big parts of the economy, kept people alive, and avoided companies going out of business. They did it.
If there is any recession, and it remains to be seen if there will be, it won't be because of local factors, but rather because goings on in China and supply issues stemming from our over-reliance on their manufacturing.
And every major economic union is duplicating what the fed does
Even if the second part wasn’t true, the first part would cause inflation in those economic unions
It buys bonds from ANY bondholder indiscriminantly. It didn’t matter where they are, they get new dollars, and dilute the value of their area.