Washington, DC – September 18: Federal Reserve President Jerome Powell speaks during news … more
Credit is produced. Repeat the previous truth over and over again, and after the internalization of the simple truth we lend money for what it can exchange.
That we lend dollars to get things to waste the popular concept within the various economic religions that an “easy” supply is an inflationary power supply. No, this is not how it works. Markets are wise. The Fed cannot order credit easy or tight, and they cannot because there is no credit with a decree in the first place. Credit is again produced in the form of market goods and labor. The Fed does not produce a single comment that Fed’s ability to affect economic activity is excessive.
Still, for fun let’s imagine a la Journal Wall Street Fed-Watcher Nick Timiraos that the Fed is able to relax or tighten credit conditions with the percentage of Fed Funds. Timiraos suggests that Fed’s powers have put Fed Jerome Powell’s president in a “non -profit scenario”. In his words, the Fed could “reduce rates abruptly, as Trump wants and is in danger of fueling inflation that destroys its credibility with markets or could maintain the current stance of waiting and seeing and dealing with the intimidation that will weake It should not worry. ” Timiraos’s description of Fed’s alleged difficult choices entails a false definition of inflation. In his defense, it is the false definition of the Fed.
In particular, economic growth does not cause inflation as Timira implies. If he did, Iran, Lebanon and Zimbabwe would be some of the highest growth areas on Earth. More realistically, inflation is devaluation. Nothing else. That is exactly why Riam, Lebanese pound and Zimbabwe dollar are not circulating much in the countries mentioned. No producer would be so stupid that he exchanges work and buying goods for “money” that has no confidence in the market.
From there, it should be said that economic growth from its own description is a sign of price falls as it is. This is due to the fact that economic growth is just another condition for increasing productivity and the latter is a result of investments that increases production increasingly in the manner of market goods at prices that continue to fall.
Still, let’s imagine inflation as Timiraos does, which is just the Newspaper The journalist correctly states what he considers the inflation of the Fed. For its central bankers, the lower interest rates are the same as “easy credit” (the last weakness, but let’s go with it) that allegedly causing the growth of the economy and raising prices. Okay, but if so, the supposedly higher inflation born of the Fed’s convenience would reasonably lead to higher market lending rates. Geti this? If Fed Fiddling is inflationary, credit sources willing not to lend in return for reduced returns will reasonably offset their own lending.
Assuming the reverse with which the Fed maintains its “wait-and-hee” approach, the reverse applies. Assuming that the Fed is the source of credit that economists imagine (not, but suppose), what is needed through so -called “narrowness” will be done by credit providers outside the Fed and see the opportunity to lend profitably.
It’s just a comment on what is true, that the only “closed economy” is the world economy. Assuming that the definition of Fed inflation is real (not) and assuming that the Fed is a credit provider (not), the scenario that Timiraos has not won in Powell is anything else. Markets are strong and to say that they can overcome the depreciation of central plans.
