Quantitative Easing, Inflation and Gold

Posted by PITHOCRATES - September 23rd, 2013

Economics 101

The FOMC makes Money out of Nothing to Buy the Bonds for their Quantitative Easing

The Federal Open Market Committee (FOMC) decided to keep their quantitative easing.  Their monthly $85 billion purchase of Treasury Securities and mortgage bonds.  To stimulate the economy.  Which hasn’t stimulated the economy.  But it has greatly expanded the money supply.

When people buy Treasury Securities and mortgage bonds they have to first work and save up the money.  Then when they buy these investments they no longer have that money.  It’s how we buy things.  We exchange money for things.  So we can have the money or the things.  But never both.

Unless you’re the federal government.  That has the power to print money.  When they make these monthly $85 million purchases of Treasury Securities and mortgage bonds they pay for them with an electronic transfer of money.  They add money to the account of the holders of the Treasury Securities and mortgage bonds.  And that’s it.  They subtract no money from their ledgers.  Because they ‘printed’ that money.  Just made it out of nothing.  Literally.

The Danger of a highly Inflated and Devalued Currency is that it loses its Purchasing Power and People lose Faith in It

The Secret Service protects our presidents.  Ironically, the president that created the Secret Service was assassinated.  Abraham Lincoln.  Who created it not to protect presidents.  But to combat a great threat to the country.  Counterfeiting.  The scourge of paper money.

During the American Revolutionary War the Continental Congress had no hard money (i.e., precious metals) to pay the Continental Army.  So they resorted to printing paper money.  Igniting massive inflation.  The more money they printed the greater the inflation.  And the greater they devalued the dollar.  Requiring more and more of them to buy what they once did.  Until no one would accept them in payment anymore.  Forcing the army to take what they needed from the people.  Leaving behind IOUs for the Congress to honor.  Once they figured out how to do that.

This is the danger of a highly inflated and devalued currency.  It loses its purchasing power.  Until it gets so weak that the people lose faith in it.  And refuse to accept it anymore.  Returning to the barter system instead.  Trading things that hold their value for other valuable things.  But the barter system has high search costs.  It takes a lot of time for people to find each other that can trade with each other.  Greatly reducing economic activity.  And crashing a nation’s economy.  Which is what Abraham Lincoln wanted to prevent.  And why a lot of America’s enemies have tried to flood the American economy with counterfeit bills.

The Hard-Money Prices remained Relatively Constant during the Inflationary Periods of the Revolutionary War

With the FOMC’s decision to continue their quantitative easing the stock market soared.  As investors were instead expecting a ‘tapering’.  A reduction in their purchases of Treasury Securities and mortgage bonds.  And if the government stopped creating this money out of nothing to buy bonds from these investors these investors could not continue to buy and sell in the market like they were doing.  Pocketing handsome profits in the process.  Which is why they were so happy to hear the FOMC would continue their currency devaluation to continue buying like they had been.

But this continued currency devaluation has a down side.  For it can’t go on forever.  There will come a point when it ignites inflation.  Causing prices to soar.  Requiring more and more dollars to buy what they once bought before.  So with this possibility on the horizon and with continued currency devaluation some people were taking steps to protect their assets.  Especially their cash.  For there is nothing worse than having a lot of cash when it’s losing its purchasing power at an alarming rate.  So they convert that cash into something that holds it value better.  Such as precious metals.  Which is why when the dollar tanked (after the FOMC decision) the price of gold surged.

So what’s the difference between gold and paper money?  Well, the government can’t print gold.  They can’t create gold out of nothing and add it to someone’s account.  So they can’t devalue gold.  And because of this gold will hold its value during inflationary periods.  Which was why during the Revolutionary War people sold things with two prices.  One was in paper Continental Dollars.  With these prices increasing sometimes daily.  And one in hard money (i.e., precious metals).  The hard money prices remained relatively constant.  Even during the inflationary periods of the Revolutionary War.

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Off-Budget Social Security Surplus

Posted by PITHOCRATES - February 18th, 2013

Economics 101

Because we have Limited Income we Prioritize our Expenses

We all want more than we can afford.  We may want to drive a brand new Lincoln MKT but can only afford a used Focus.  So we drive a used Focus.  We may want to live on the beach in Southern California but can only afford a 2-bedroom apartment in Pasadena.  So we live in a 2-bedroom apartment in Pasadena.  We may want to dine on filet mignon and champagne every night but can only afford Hamburger Helper and a store-brand soda.  So we dine on Hamburger Helper and store-brand soda.

In life we have to make choices.  And live within our means.  So we budget our money. We list all our income.  And all of our expenses.  Breaking down the expenses in order of importance.  Rent is more important than cable television.  The electric bill is more important than stopping at Starbucks every morning for a Venti Caramel Macchiato.  The gas bill is more important than unlimited texting.  Because we have limited income we prioritize our expenses.  Those most important we budget to pay first.  Those less important we enjoy when we have some disposable income left over.  After paying everything that is more important first.

This is responsible living.  Which a lot of people do.  Live responsibly.  While some don’t.  And use credit cards to buy things they can’t afford.  Or they do a little work on the side ‘under the table’ for some extra spending cash.  Money they don’t report as income so they don’t have to pay income taxes on it.  Because like Billy Joel said you can pay Uncle Sam for the overtime.  Or not.  And a lot of people choose not.  Interestingly, a lot who do are die-hard Democrats who want to raise tax rates on the rich.  But when it comes to their hard-earned money they want to hide it from Uncle Sam.  But I digress.

Social Security Taxes are Dedicated for One Thing—Social Security Benefits

We can call money we earn on the side off-budget money.  We don’t add this money to our household budget.  It’s special money to spend on things we enjoy.  For if a husband does some plumbing work on the side his wife may want to use that money to pay down a credit card balance.  Or spend it on new window treatments.  While he may have other ideas for that money.  Maybe some new fishing equipment.  Or a new power tool.  Or maybe using it to go tailgating with the boys.  That money could buy a lot of food to barbecue.  And a lot of beer.  Things that are a lot of fun.  While paying down a credit card balance is not.  Just as window treatments are not.

So by keeping this money off-budget he can use it for what he originally intended it for.  Him having fun.  Keeping the money off the family budget prevents anyone from using those targeted funds for some other unintended purpose.  Preventing out of control spending growth on other less important things.  He is actually doing the family a favor by hiding this money.  Or so he rationalizes.  Because hiding it prevents his family from spending too much money.  For let’s face it if you have that additional money you’re going to budget it on something.  You may even commit to some long-term spending obligation.  Like buying a new Lincoln MKT.  Which will be a problem if the husband throws out his back doing all of those side jobs and goes on disability.

Another example of off-budget money is Social Security.  Specifically, the Social Security surplus.  Contrary to the government calling it a retirement investment it is not an investment.  The government collects Social Security tax revenue.  And pays Social Security benefits from that tax revenue.  What’s left over is the Social Security surplus.  (Until it becomes the Social Security deficit.)  And they put it into the Social Security Trust Fund.  Outside of the regular budget.  So they can’t spend it on other things.  And any budget negotiations won’t affect it.  For employers and employees pay into Social Security.  And this is the money we get back in benefits.  Those benefits are not budget items paid from all the other taxes the government collects.  That pay for things from defense spending to food stamps.  No.  Social Security taxes are dedicated for one thing.  Social Security benefits.  Which is why they moved it off-budget.

If the Deficit is Consistently Understated there will be no Money to Redeem the Securities in the Social Security Trust Fund

But that doesn’t stop the government from spending that money.  Just like so many unions have underfunded pension plans so, too, government can’t resist the allure of a great big pile of money.  Because it’s just sitting there.  Not being spent.  Something that just pains a politician to no end.  Unspent money.  But because it’s off-budget they just can’t spend it.  They have to borrow it first.  So the money goes into the Social Security Trust Fund.  They then remove the money from Social Security Trust Fund.  And leave behind an IOU.  Treasury securities.  Backed by the full faith and credit of the United States.

So even though that money is dedicated for Social Security benefits and is strictly hands-off for other spending the government spends it on other things.  And it works out pretty well for the government.  Not only do they get a little extra money to spend it helps conceal the extent of their other spending.  For this off-budget money decreases the budget deficit.  Caused by all of that on-budget spending.  That far exceeds their ability to pay for it.  To illustrate that see the following table.  This is a very simplified fictional federal budget.  We have tax receipts.  And federal outlays.  Broken down into two general categories.  Guns and butter.  That’s defense spending.  And everything else.  Note how if they leave the Social Security surplus alone (without) there is a deficit of 47%.  But if they borrow that money (with) it reduces the deficit to 10%.

Social Security Surplus Off-Budget

When they talk about the budget deficit it includes the Social Security surplus.  That money is dedicated for one thing.  Social Security benefits.  They’re not suppose to use it for anything else.  So they shouldn’t count this revenue in the budget that pays for everything else.  When they do they understate the true budget deficit.  Worse, the money in the Social Security Trust Fund does not earn a return on investment.  Like with a 401(k).  Yes, there are Treasury securities in the trust fund.  But a government that is consistently understating their true deficit will never have the money to redeem those securities.  So they will do the only thing they can.  Print money.  Which is what they mean by the full faith and credit of the United States.  Print money.  Causing inflation.  And raising prices.  Making that meager Social Security benefit buy less.  Not to mention that Social Security itself will soon be insolvent.  Thanks to the growth in all of that other spending.  That is growing so great that they continually need to raid the Social Security Trust Fund to pay for it.

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A Debt Default and ‘no Social Security Checks’ only Scare Tactics in the Budget Debate to Raise the Debt Limit

Posted by PITHOCRATES - July 25th, 2011

A Summary of the Budget Debate to Raise the Debt Limit

One day making tracks in the prairie of Prax came a tax-raising Zax.  A tax-raising Zax.  And a spending-cuts Zax.  A tax-raising Zax.  And a spending-cuts Zax.  And it happened that both of them came to a place where they… *boom*  There they stood foot to foot.  Face to face.

“Look here, now,” the tax-raising Zax said.  “I say, you are blocking my path.  You are right in my way.  I’m a tax-raising Zax and I always raise taxes.  Get out of my way, now, and let me raise taxes.”

“Who’s in whose way?” snapped the spending-cuts Zax.  “I always cut spending making spending-cuts tracks.  So you’re in my way and I ask you to move and let me cut spending in my spending-cuts groove.”

Then the tax-raising Zax said with tax-raising pride, “I never have taken a step to one side.  And I’ll prove to you that I won’t change my ways if I have to keep standing here 59 days.”

“And I’ll prove to you,” yelled the spending-cuts Zax.  “That I can stand here in the prairie of Prax for 59 years.  For I live by a rule that I learned as a boy back in spending-cuts school.  Never budge that’s my rule, never budge in the least.  Not an inch to the west, not an inch to the east.  I’ll stay here not budging, I can and I will.  If it makes you and me and the whole world stand still.”

(The Zax, from The Sneetches and Other Stories by Dr. Seuss, slightly modified)

Spending worries most Americans

If neither Zax is moving, at least there’s no spending.  And it appears that it is the spending that worries most Americans.  Based on the polling.  Which shows the spending-cuts Zax gaining support (see GOP has 10-point edge on Democrats in public trust on economic issues in latest Rasmussen Reports national survey by Mark Tapscott posted 7/24/2011 The Washington Examiner).

Republicans have gained a 10 point lead over Democrats in Rasmussen Reports latest national survey on who the public most trusts to deal effectively with economic issues.

The 10 point lead is the widest margin held by either party in months and has opened up in recent weeks as President Obama and House Speaker John Boehner have become the central players in the debate over how to deal with the approaching debt-ceiling crisis.

It seems pretty clear.  The people want the tax-raising Zax to take a step to the spending-cuts side.

You can’t Fool the Bond Market

And while one Zax stands foot to foot with the other Zax, not budging, the bond market is not all that worried.  Which is kind of odd being that they hold the debt that Obama, Geithner, Pelosi, Reid, etc., warn they may default on (see U.S. bond market: Watching and waiting by Ben Rooney posted 7/25/2011 on CNN Money).

As policymakers in Washington continue to butt heads over the debt ceiling, the response in the bond market Monday was relatively subdued…

…many bond market watchers suggested that stocks are more vulnerable to the ongoing debt ceiling drama. By contrast, some say Treasuries could actually benefit from a flight to safety if the debt ceiling isn’t raised.

This seems counterintuitive.  Especially with all of the dire predictions coming out of Washington.  But it turns out that you can’t fool the bond market.

Another reason why Treasuries have held their ground is that a default would not necessarily result in huge losses for holders of U.S. debt. Treasury would probably have to furlough workers and make other adjustments if the debt ceiling is not raised, but analysts do not expect it to immediately miss interest payments on the federal debt.

The money is there.  Some money.  Tax revenue is still making it to Washington.  Almost $200 billion each month.  The bond market knows this.  They’ll get their interest payment.  Still, there could be some fallout from a downgrading of U.S. debt. 

…many institutional investors, including money market funds and pensions, are required to hold only AAA-rated securities. If the U.S. government is downgraded, those funds may be forced to dump billions worth of U.S. paper.

This could wreak a little havoc.  But probably no more than a downgrade due to the lack of resolve to restrain out of control spending which is the root cause of all these budget problems.  One way or another, we have to cut spending to ultimately calm the bond rating agencies.

Businesses are more Worried about the Tax Code

And they aren’t that worried in corporate America either (see Analysis: CEOs count on cash to cushion default risk by Scott Malone posted 7/25/2011 on Reuters).

Bankruptcy attorney Martin Bienenstock, of Dewey & LeBoeuf LLP, said it seemed like most business people were dismissing the likelihood of a default

“People still don’t think there is going to be an actual default,” Bienenstock said. “There doesn’t seem to be any domino effect brewing yet with the concept of ‘rates will rise and companies on the brink will fail and things like that.'”

If the U.S. runs out of money it is more likely that there will be a partial government shutdown.  Not a default.  And, to be frank, there isn’t a lot these businesses need from government.  Other than a simplified tax code.

While businesses would balk at paying higher taxes, CEOs have said that what they want right now is to have the tax debate settled so they know what they will be paying in taxes.

A government unable to pay its bills won’t affect them.  But not knowing what their taxes will be will.  Because the government shakes them down for a lot of money.  And they have to plan accordingly.  Like having a forklift and other heavy-lifting equipment available to lift those vast sums of cash.

Social Security Checks will go out Regardless

It would appear that most aren’t falling for the scare tactics of Obama and the Democrats.  But what about the seniors?  Will they get their Social Security checks?  Team Obama has been playing this card every chance someone places a microphone in front of them.  So what about Social Security?  Should seniors worry about not getting their checks?  As it turns out, no (see Contrary to the President, Social Security Checks Are Not At Risk by Michael McConnell posted 7/23/2011 on Advancing a Free Society).

The Social Security trust fund holds about $2.4 trillion in U.S. Treasury bonds, which its trustees are legally entitled to redeem whenever Social Security is running a current account deficit. Thus, if we reach the debt ceiling…, this is what will happen. The Social Security trust fund will go to Treasury and cash in some of its securities, using the proceeds to send checks to recipients. Each dollar of debt that is redeemed will lower the outstanding public debt by a dollar. That enables the Treasury to borrow another dollar, without violating the debt ceiling. The debt ceiling is not a prohibition on borrowing new money; it is a prohibition on increasing the total level of public indebtedness. If Social Security cashes in some of its bonds, the Treasury can borrow that same amount of money from someone else…

President Obama is therefore wrong when he says that failure to raise the debt ceiling might result in not sending out Social Security checks. Many bad things might happen, but not that.

Interesting.  So Social Security checks will go out.  Automatically.  Even if the current account is in deficit.  Because of that glorious trust fund stuffed with treasury securities.  In fact, the only way checks won’t go out is if Obama prevents this automatic mechanism to score some political points by falsely blaming Republicans.  Which will be risky.  Because people will eventually learn the truth.  If they don’t know it already.

The Tax-Raising Zax needs to Step to the Spending-Cuts Side

The tax-raising Zax had better learn to swallow his tax-raising pride and however reluctantly he should now take that first step to the spending-cuts side. 

For the people and the bond market and businesses agree.  The problem is spending.  Much too much spending as you must by now plainly see.

And leave our seniors alone and frighten them not with horrors of checks that won’t come their way.  For the trust fund is brimming with securities aplenty that can be cashed to pay all promises made without delay.

Unless Social Security has been a big Ponzi scheme all along.

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LESSONS LEARNED #27: “Yes, it’s the economy, but the economy is not JUST monetary policy, stupid.” -Old Pithy

Posted by PITHOCRATES - August 19th, 2010

WHAT GAVE BIRTH to the Federal Reserve System and our current monetary policy?  The Panic of 1907.  Without going into the details, there was a liquidity crisis.  The Knickerbocker Trust tried to corner the market in copper.  But someone else dumped copper on the market which dropped the price.  The trust failed.  Because of the money involved, a lot of banks, too, failed.  Depositors, scared, created bank runs.  As banks failed, the money supply contracted.  Businesses failed.  The stock market crashed (losing 50% of its value).  And all of this happened during an economic recession.

So, in 1913, Congress passed the Federal Reserve Act, creating the Federal Reserve System (the Fed).  This was, basically, a central bank.  It was to be a bank to the banks.  A lender of last resort.  It would inject liquidity into the economy during a liquidity crisis.  Thus ending forever panics like that in 1907.  And making the business cycle (the boom – bust economic cycles) a thing of the past.

The Fed has three basic monetary tools.  How they use these either increases or decreases the money supply.  And increases or decreases interest rates.

They can change reserve requirements for banks.  The more reserves banks must hold the less they can lend.  The less they need to hold the more they can lend.  When they lend more, they increase the money supply.  When they lend less, they decrease the money supply.  The more they lend the easier it is to get a loan.  This decreases interest rates (i.e., lowers the ‘price’ of money).  The less they lend the harder it is to get a loan.  This increases interest rates (i.e., raises the ‘price’ of money). 

The Fed ‘manages’ the money supply and the interest rates in two other ways.  They buy and sell U.S. Treasury securities.  And they adjust the discount rate they charge member banks to borrow from them.  Each of these actions either increases or decreases the money supply and/or raises or lowers interest rates.  The idea is to make money easier to borrow when the economy is slow.  This is supposed to make it easier for businesses to expand production and hire people.  If the economy is overheating and there is a risk of inflation, they take the opposite action.  They make it more difficult to borrow money.  Which increases the cost of doing business.  Which slows the economy.  Lays people off.  Which avoids inflation.

The problem with this is the invisible hand that Adam Smith talked about.  In a laissez-faire economy, no one person or one group controls anything.  Instead, millions upon millions of people interact with each other.  They make millions upon millions of decisions.  These are informed decisions in a free market.  At the heart of each decision is a buyer and a seller.  And they mutually agree in this decision making process.  The buyer pays at least as much as the seller wants.  The seller sells for at least as little as the buyer wants.  If they didn’t, they would not conclude their sales transaction.  When we multiply this basic transaction by the millions upon millions of people in the market place, we arrive at that invisible hand.  Everyone looking out for their own self-interest guides the economy as a whole.  The bad decisions of a few have no affect on the economy as a whole.

Now replace the invisible hand with government and what do you get?  A managed economy.  And that’s what the Fed does.  It manages the economy.  It takes the power of those millions upon millions of decisions and places them into the hands of a very few.  And, there, a few bad decisions can have a devastating impact upon the economy.

TO PAY FOR World War I, Woodrow Wilson and his Progressives heavily taxed the American people.  The war left America with a huge debt.  And in a recession.  During the 1920 election, the Democrats ran on a platform of continued high taxation to pay down the debt.  Andrew Mellon, though, had done a study of the rich in relation to those high taxes.  He found the higher the tax, the more the rich invested outside the country.  Instead of building factories and employing people, they took their money to places less punishing to capital.

Warren G. Harding won the 1920 election.  And he appointed Andrew Mellon his Treasury secretary.  Never since Alexander Hamilton had a Treasury secretary understood capitalism as well.  The Harding administration cut tax rates and the amount of tax money paid by the ‘rich’ more than doubled.  Economic activity flourished.  Businesses expanded and added jobs.  The nation modernized with the latest technologies (electric power and appliances, radio, cars, aviation, etc.).  One of the best economies ever.  Until the Fed got involved.

The Fed looked at this economic activity and saw speculation.  So they contracted the money supply.  This made it hard for business to expand to meet the growing demand.  When money is less readily available, you begin to stockpile what you have.  You add to that pile by selling liquid securities to build a bigger cash cushion to get you through tight monetary times.

Of course, the economy is NOT just monetary policy.  Those businesses were looking at other things the government was doing.  The Smoot-Hartley tariff was in committee.  Across the board tariff increases and import restrictions create uncertainty.  Business does not like uncertainty.  So they increase their liquidity.  To prepare for the worse.  Then the stock market crashed.  Then it got worse. 

It is at this time that the liquidity crisis became critical.  Depositors lost faith.  Bank runs followed.  But there just was not enough money available.  Banks began to fail.  Time for the Fed to step in and take action.  Per the Federal Reserve Act of 1913.  But they did nothing.  For a long while.  Then they took action.  And made matters worse.  They raised interest rates.  In response to England going off the gold standard (to prop up the dollar).  Exactly the wrong thing to do in a deflationary spiral.  This took a bad recession to the Great Depression.  The 1930s would become a lost decade.

When FDR took office, he tried to fix things with some Keynesian spending.  But nothing worked.  High taxes along with high government spending sucked life out of the private sector.  This unprecedented growth in government filled business with uncertainty.  They had no idea what was coming next.  So they hunkered down.  And prepared to weather more bad times.  It took a world war to end the Great Depression.  And only because the government abandoned much of its controls and let business do what they do best.  Pure, unfettered capitalism.  American industry came to life.  It built the war material to first win World War II.  Then it rebuilt the war torn countries after the war.

DURING THE 1980s, in Japan, government was partnering with business.  It was mercantilism at its best.  Japan Inc.  The economy boomed.  And blew great big bubbles.  The Keynesians in America held up the Japanese model as the new direction for America.  An American presidential candidate said we must partner government with business, too.  For only a fool could not see the success of the Japanese example.  Japan was growing rich.  And buying up American landmarks (including Rockefeller Center in New York).  National Lampoon magazine welcomed us to the 90s with a picture of a Japanese CEO at his desk.  He was the CEO of the United States of America, a wholly owned subsidiary of the Honda Motor Company.  The Japanese were taking over the world.  And we were stupid not to follow their lead.

But there was no invisible hand in Japan.  It was the hand of Japan Inc.  It was Japan Inc. that pursued economic policies that it thought best.  Not the millions upon millions of ordinary Japanese citizens.  Well, Japan Inc. thought wrong. 

There was collusion between Japanese businesses.  And collusion between Japanese businesses and government.  And corruption.  This greatly inflated the Japanese stock market.  And those great big bubbles finally burst.  The powerful Japan Inc. of the 1980s that caused fear and trembling was gone.  Replaced by a Japan in a deflationary spiral in the 1990s.  Or, as the Japanese call it, their lost decade.  This once great Asian Tiger was now an older tiger with a bit of a limp.   And the economy limped along for a decade or two.  It was still number 3 in the world, but it wasn’t what it used to be.  You don’t see magazine covers talking about it owning other nations any more.  (In 2010, China took over that #3 spot.  But China is a managed economy.   Will it suffer Japan’s fate?  Time will tell.)

The Japanese monetary authorities tried to fix the economy.  Interest rates were zero for about a decade.  In other words, if you wanted to borrow, it was easy.  And free.  But it didn’t help.  That huge economic expansion wasn’t real.  Business and government, in collusion, inflated and propped it up.  It gave them inflated capacity.  And prices.  And you don’t solve that problem by making it easier for businesses to borrow money to expand capacity and create jobs.  That’s the last thing they need.  What they need to do is to get out of the business of managing business.  Create a business-friendly climate.  Based on free-market principles.  Not mercantilism.  And let that invisible hand work its wonders.

MONETARY POLICY CAN do a lot of things.  Most of them bad.  Because it concentrates far too much power in too few hands.  The consequences of the mistakes of those making policy can be devastating.  And too tempting to those who want to use those powers for political reasons.  As we can see by Keynesian ‘stimulus’ spending that ends up as pork barrel spending.  The empirical data for that spending has shown that it stimulates only those who are in good standing with the powers that be.  Never the economy.

Sound money is important.  The money supply needs to keep pace with economic expansion.  If it doesn’t, a tight money supply will slow or halt economic activity.  But we have to use monetary policy for that purpose only.  We cannot use it to offset bad fiscal policy that is anti-business.  For if the government creates an anti-business environment, no amount of cheap money will encourage risk takers to take risks in a highly risky and uncertain environment.  Decades were lost trying.

No, you don’t stimulate with monetary policy.  You stimulate with fiscal policy.  There is empirical evidence that this works.  The Mellon tax cuts of the Harding administration created nearly a decade of strong economic growth.  The tax cuts of JFK were on pace to create similar growth until his assassination.  LBJ’s policies were in the opposite direction, thus ending the economic recovery of the JFK administration.  Ronald Reagan’s tax cuts produced economic growth through two decades. 

THE EVIDENCE IS there.  If you look at it.  Of course, a good Keynesian won’t.  Because it’s about political power for them.  Always has been.  Always will be.  And we should never forget this.

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