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Federal Reserve Chairman Jerome Powell admitted last week at the “virtual” Jackson Hole symposium that the Fed has undershot its 2% annual inflation target consistently for the last several years.
The Fed is tacitly admitting that its deflationary monetary policy has restrained growth and held down wages.
Now the Fed is promising to aim higher in order to get more dollar liquidity into the economy.
Powell’s 3,000-word address could have been summarized in just one sentence: “President Trump was right; we were wrong.”
Powell has been exalted of late as a sage and some have even suggested that he should be Time Magazine’s Man of the Year.
But for the last several years Trump is the one who has sounded the alarm that the Fed has been too tight, as evidenced by falling commodity prices and long term interest rates (market rates) signaling that expected inflation rates are at half the Fed’s target.
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