Tuesday, August 8, 2017

Kocherlakota is why we build sandbox

Consider the situation in late 2010. The Republican party won a huge victory in the midterm congressional elections, at least in part thanks to voters’ unease with the $800 billion fiscal stimulus package that the Obama administration adopted the previous year. The newly elected Republicans largely opposed additional stimulus as a way of addressing the protracted recession. 
 Yet one day after the election, with unemployment still close to 10 percent and inflation falling toward 1 percent, the Federal Reserve began a new round of bond-buying designed to provide added economic stimulus (a policy that I, as a Fed official at the time, supported). This was no isolated event. Throughout the recovery, the Fed systematically sought to boost growth and inflation even as Congress made choices -- such as the budget sequestration of 2013 -- that seemed deliberately intended to constrain them.

This  central   banker always assumes a single, monopoly magic walrus fiat currency.  That has never been the case.  There  has always been gold, black market for labor and goods, and global shell companies all creating alternative currencies, none of them in  the central banker model. 

At this point, it is friggen obvious that a multi-currency sandbox is being built.  Central bankers are stuck using an incorrect model that gets worse the long they deny it. The denialism by the magic walrus crew means we no longer explain it to them, we just move on.

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