Under Trump, Expect No Change to the Monetary Status Quo

A guilty verdict by US voters in the previous November regarding inflation will not lead to changes in the current monetary system. The verdict was not communicated effectively, allowing those in favor of the existing monetary regime to shape the narrative to their benefit. The 2% inflation standard has resulted in a nearly 20% loss of the dollar's purchasing power since 2019, with asset inflation accompanying the general rise in prices. The Federal Reserve has been slow to implement meaningful monetary tightening, particularly in 2022 and beyond, despite signs of recovery in the economy.

The Fed’s role in asset inflation goes back beyond the pandemic, citing the period of monetary inflation between 2014 and 2016 as an example. This period saw the Fed maintaining low rates despite a lack of significant consumer price inflation due to falling global commodity prices. This situation has led to malinvestment in various sectors, which has distorted price signals and caused inefficient capital allocation in technology and other industries.

From 2007 to 2023, the growth in real GDP per capita in the US is substantially lower compared to previous periods, illustrating a stagnating economy. GDP per capita grew only 15% from 2007 to 2023, significantly less than the growth of 37. 5% during 1990-2007. Additionally, productivity has not increased as impressively during this time. Challenges such as rising costs in technology and healthcare complicate the growth figures, raising questions about the actual improvements in living standards.

Voter dissatisfaction related to the economy seems to have not connected with issues of monetary inflation, focusing instead on factors like the cost of living. There is a general sense of frustration with economic conditions; however, it has not led to a clear agenda that challenges the current monetary system. The Republican response to the dissatisfaction has largely blamed government overspending rather than addressing monetary policies that could resolve inflation.

Looking ahead, the lack of significant proposals for monetary reform suggests that the current monetary status quo will remain unchanged. Initiatives aimed at making government operations more efficient and deregulating the economy have been presented, but these do not address the underlying monetary issues. The nominated Treasury Secretary seems to favor policies that do not likely reflect a move towards sound money policies.

With the expectation that the Treasury and Fed will dismiss adverse inflation news as temporary, they are likely to resist tightening monetary policy even in the face of economic disruptions. Voter caution regarding promises of change may be warranted, especially if the appointed officials continue down paths that ignore necessary adjustments in the monetary realm. 

https://mises.org/mises-wire/under-trump-expect-no-change-monetary-status-quo