A paper co-authored by Leonardo Melosi of the Federal Reserve Bank of Chicago and Francesco Bianchi and published by the Kansas City Federal Reserve argues that central bank monetary policy alone can't control inflation.
"This increase in inflation could not have been averted by simply tightening monetary policy."
US government fiscal policy contributes to inflationary pressure and makes it impossible for the Fed to do its job.
Trend inflation is fully controlled by the monetary authority only when public debt can be successfully stabilized by credible future fiscal plans.
Government spending is a big problem for the Federal Reserve
Uncle Sam depends on the Fed buying bonds to facilitate its borrowing addiction
Without the Fed’s thumb on the bond market, Treasury prices will continue to sink as supply outstrips demand, and interest rates will rise
When fiscal imbalances are large and fiscal credibility wanes, it may become increasingly harder for the monetary authority to stabilize inflation around its desired target
Monetary tightening would actually spur higher inflation and would spark a pernicious fiscal stagflation
The only workable plan would be to monetize more debt by buying more Treasuries with more money created out of thin air
https://schiffgold.com/commentaries/fed-paper-admits-the-central-bank-cant-control-inflation-finger-points-at-federal-government/
No comments:
Post a Comment