US Fiscal Stimulus at odds with Monetary Tightening
rogerboyd.substack.com
As the US Federal Reserve has raised its interest rates over the past year the US economy has remained strangely robust. This is partly due to the time it takes for the effects of interest rate rises to flow through to all of the economy, a policy lag effect that can be as much as a year. In addition, the post-COVID worker shortages may have made corporations more reticent about layoffs, especially when profit margins have been expanded under the cover of higher inflation. On top of that there has been an exuberant stock market counter-trend rally that has kept the dreaded “wealth effect” impact on higher income consumption at bay. A major cause of the ongoing robustness of the US economy is that the US government is “fighting the Fed”, by increasing fiscal stimulus and by keeping oil prices lower than they would otherwise be through an ongoing draining of the US Strategic Petroleum Reserve (SPR). It is also important to understand that much of the aid given to Ukraine actually ends up getting spent with the US Military Industrial Complex in the US.
US Fiscal Stimulus at odds with Monetary Tightening
US Fiscal Stimulus at odds with Monetary…
US Fiscal Stimulus at odds with Monetary Tightening
As the US Federal Reserve has raised its interest rates over the past year the US economy has remained strangely robust. This is partly due to the time it takes for the effects of interest rate rises to flow through to all of the economy, a policy lag effect that can be as much as a year. In addition, the post-COVID worker shortages may have made corporations more reticent about layoffs, especially when profit margins have been expanded under the cover of higher inflation. On top of that there has been an exuberant stock market counter-trend rally that has kept the dreaded “wealth effect” impact on higher income consumption at bay. A major cause of the ongoing robustness of the US economy is that the US government is “fighting the Fed”, by increasing fiscal stimulus and by keeping oil prices lower than they would otherwise be through an ongoing draining of the US Strategic Petroleum Reserve (SPR). It is also important to understand that much of the aid given to Ukraine actually ends up getting spent with the US Military Industrial Complex in the US.