We thought independent central banks would bring us financial stability, but they had no idea what they were doing.
The FED never really stood a chance.
They are trying to run the economy with an economics that doesn’t consider debt, neoclassical economics.
Greenspan and Bernanke can’t see the problems building before 2008.
No one can work out what caused 2008, and afterwards and they attribute it to a “black swan”.
Janet Yellen is not going to be looking at that debt overhang after 2008 and so she can’t work out why inflation isn’t coming back.
It’s called a balance sheet recession Janet, you know, like Japan since the 1990s.
QE can’t get into the real economy due to a lack of borrowers. Most people are deleveraging from that debt fuelled boom you had before 2008 and they won’t take on more debt no matter how low interest rates go.
Richard Koo shows the ridiculous levels of bank reserves built up by the FED, BoE, ECB and BoJ that can’t get into the real economy due to a lack of borrowers.
QE can get into stock and real estate markets inflating them.
Richard Koo tells us the worst thing you can do in a balance sheet recession is austerity.
The money supply ≈ public debt + private debt
If the private debt component is going down with deleveraging from a debt fuelled boom you need to increase Government borrowing to maintain the money supply. In curing a private debt problem, Japan created a public debt problem. It’s just money supply maths, unless you use Government created money, MMT.
Jerome Powell is not looking at the debt overhang after 2008 and so thinks the US economy is fixed and raises interest rates. Raising interest rates with all that debt in the economy will soon cause a downturn and there is no way he will get anywhere near normalising rates.
The FED don’t stand a chance until they start looking at private debt.