This Powell plan does not flat earth

 Powell says there’s no strict mathematical formula; but it’s pretty obvious to me that the markets and pundits are going to hold the Fed accountable. People think in terms of decades, and this policy was announced in 2020. Thus markets will naturally see this a commitment for inflation to average 2% over the 2020s. Since the PCE price level was 110.917 in January of this year, it needs to be close to 135 in January 2030. A slight miss would not be a problem, but a big miss (say average inflation outside the 1.8% to 2.2% range) would be seen as a policy failure. The Fed would lose credibility.

Scott Summner. 

Scott is dead wring that markets can hold the Fed to this fire.  

This is a partitioned system, the Fed takes excess reserves from the regulated banks and loans to government,  It is not a mixing system, it will not be ergodic and Scott is out of boundary condition if he claims otherwise.  Powell has further complications in that the regulated banks have become tax collectors.

Powell is really  threatening to Congress, begin the default process otherwise it is deflation all the way.

Partitioned economies and ergodic

er·god·ic

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1. relating to or denoting systems or processes with the property that, given sufficient time, they include or impinge on all points in a given space and can be represented statistically by a reasonably large selection of points.

Sufficient time means all the partitioned sectors of the economy have gone through the diminishing returns. Sufficient time is a generation given the entitlements issue.  So if one wants to NGDP target, then one has to do it over a generation. 

So we are right back to the monetary cycle, and that is what we want to shorten. 

Shortening the monetary cycle.

This is what we want, we want to target a sustainable monetary cycle as short needed to match the entitlement updates.  The idea being that young kids do not suddenly discover they were ripped off and have to wait another 30 years.  In other words, default before the kids become antificants and before the old folks can run another scam.