Keynesian economists are annoying enough when they are pitching inflated financial assets on Wall Street or the supposed curative powers of fiscal deficits on Capitol Hill. But they become positively dangerous when they populate the Eccles Building and usurp control of the nation’s capital and money markets lock, stock and barrel in the name of “monetary accommodation”.
Needless to say, the Fed is presently over-run with Keynesian money printers led by Janet Yellen and Stanley Fischer. Both of these famous PhDs are actually proponents of a primitive macroeconomic doctrine that should be called “bathtub economics”. In their wisdom, these doctors of economics have simply postulated that the nation’s economic output “should” be at aggregate levels which far exceed current production, and that the resulting shortfall from “potential” output, incomes and jobs is due to insufficient “aggregate demand”.
This purported “output gap” is conveniently self-serving. It has been interpreted to mean that the Fed has a plenary mission to fill-up the nation’s economic bathtub by generating sufficient incremental aggregate demand to off-set the shortfall. This demand plugging function, in turn, is to be accomplished by the constant intervention of the Fed’s open market desk into money and capital markets. So doing, it is empowered to manipulate, massage, twist, bend and pump any financial variable that in its wisdom is deemed to influence the transmission of its monetary policy (i.e.”aggregate demand” stimulus) into the real economy.
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