Another Post On Our Post-Modern Monetary Theory

Is the “Fed Put” back? Might the Fed’s assurances that interest rates will be brought down this year (as long as inflation behaves as expected) fuel irrational exuberance among investors? And what if interest rates really don’t need to come down, because the notion that they do rests on a faulty premise—the “long and variable lag” thesis? Our Post-Modern Monetary Theory suggests that monetary tightening doesn’t cause recessions because of a lagged demand-choking response of the economy. Tightening usually causes recessions when it triggers financial crises that turn into credit crunches that bring on recessions. That sequence of events is unlikely now that the Fed knows how to play Whac-A-Mole in the financial markets. … Also: Dr. Ed reviews “Masters of the Air” (+ + +).