The economy continues to grow and expand in recovery from the economic covid shocks inflicted on employment and production last year. Following a flat first quarter, the market has resumed an upward but volatile trend. Some recent inflation is sending warning signals across the economy, however, this inflation does not necessarily derive not from excess cash in the economy, but significantly from insufficiently restored production and supply chains, and from other distribution bottlenecks. The Federal Reserve is convinced the inflation is transitory and insists its expansionary policies will not change until at least 2023 or until the economy reaches full employment together with signs of overheating. This means, importantly, that going forward Fed policy in response to inflation will be more reactive vs predictive.
Continue reading 2nd Quarter Update Summary – Inflation, Fiscal Stimulus, Covid
Do Deficits or National Debt Really Matter? No, But Yes Only in Rare Circumstances.
Anytime a given economy has excess unused labor or plant capacity, deficits and federal spending are essentially mandatory to revive and expand the economy. The greater the excess capacity, the greater federal spending (deficit) is required to employ that excess. The is especially crucial in times of economic stress where private money creation (bank lending) is either dormant or in collapse. In addition, the only constraint on money creation ought to be, and must be, inflation. And inflation, in monetarily sovereign economies generally is not evident in economies with excess labor, plant and resources.
Here’s some background to help you understand a little better:
During the Great Depression, a small recovery had begun in 1936. Unemployment had dropped from Continue reading Do Deficits or National Debt Really Matter? No, But Yes Only in Rare Circumstances.
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