After following hyper-Keynesian policies for more than two decades, the Fed is about to create the conditions that Keynesians claimed were impossible: an inflationary recession.
The standard line is that the Federal Reserve System has two mandates, keep unemployment low and create price stability. Mark Thornton notes that the real agenda is found elsewhere.
The standard Keynesian play is to increase government spending in order to reduce unemployment and increase economic growth. Here's why it consistently fails.
Everything from huge Keynesian "stimulus" policies to the war in Ukraine is dovetailing in a bout of stagflation: the simultaneous growth of inflation and unemployment.
In a recent speech, President Joe Biden blamed inflation on businesses raising prices and told them that they needed to lower their business costs -- but boost wages. You do the math.
While the Fed governors claim "all is well" and that inflation is "transitory," the bad news continues to pile up. Inflation will be with us for a long time.
It is only through the increase in capital goods, i.e., through the enhancement and the expansion of the infrastructure, that labor can become more productive and earn a higher hourly wage.
