{"id":14352,"date":"2015-11-13T07:10:27","date_gmt":"2015-11-13T12:10:27","guid":{"rendered":"http:\/\/olduvai.ca\/?p=14352"},"modified":"2015-11-13T07:10:52","modified_gmt":"2015-11-13T12:10:52","slug":"the-bubble-finance-cycle-what-our-keynesian-school-marm-doesnt-get","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=14352","title":{"rendered":"The Bubble Finance Cycle\u2014\u2014What Our Keynesian School Marm Doesn\u2019t Get"},"content":{"rendered":"
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The Bubble Finance Cycle\u2014\u2014What Our Keynesian School Marm Doesn\u2019t Get<\/a><\/h3>\n

The world of\u00a0Bubble Finance economies\u00a0created by the Fed and other central banks is fundamentally different than that prevailing\u00a0under\u00a0the\u00a0\u201cLite Touch\u201d monetary policies which preceded the Greenspan era.<\/p>\n<\/header>\n

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Those essentially reactive and minimally invasive central bank\u00a0intrusions into the money and capital markets\u00a0prevailed from the\u00a0time of the Fed\u2019s 1951\u00a0liberation from the US\u00a0Treasury by the great\u00a0William McChesney Martin\u00a0through September\u00a01985. That\u2019s\u00a0when the\u00a0US Treasury\/White House once again seized control\u00a0of the Fed\u2019s\u00a0printing presses and ordered Volcker to\u00a0trash the\u00a0dollar via the Plaza Accord. In due course, the White House trashed him, too.<\/p>\n

The problem today is that the PhDs running the Fed have an economic model which is a relic of the Lite Touch era.\u00a0It\u00a0is not only utterly irrelevant in today\u2019s casino driven system, but is\u00a0actually tantamount to a blindfold.\u00a0It causes them to look at a dashboard full of lagging indicators, while ignoring the explosive leading indicators starring them in the face.<\/p>\n

The clueless inhabitants of the Eccles Building do not recognize that they have created a world in which Wall Street\u00a0supersedes main street; and in\u00a0which\u00a0the monetary\u00a0inflation\u00a0that eventually brings the business cycle to a halt is soaring financial\u00a0asset prices, not wage rates and new car prices.<\/p>\n

During the Light Touch era recessions were\u00a0triggered by sharp monetary tightening that caused interest rates to surge. This\u00a0soon garroted business and household borrowing because credit became too expensive. And this interruption in the credit expansion cycle, in turn, caused spending on business fixed assets and household durables to tumble (e.g. auto and appliances), setting in motion a cascade of recessionary adjustments.<\/p>\n

But always and everywhere the pre-recession inflection point was marked by a so-called wage and price spiral resulting from an overheated main street economy.\u00a0Yellen\u2019s Keynesian professors in the 1960s called this \u201cexcess demand\u201d, and they should have known.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Bubble Finance Cycle\u2014\u2014What Our Keynesian School Marm Doesn\u2019t Get The world of\u00a0Bubble Finance economies\u00a0created by the Fed and other central banks is fundamentally different than that prevailing\u00a0under\u00a0the\u00a0\u201cLite Touch\u201d monetary policies which preceded the Greenspan era. Those essentially reactive and minimally invasive central bank\u00a0intrusions into the money and capital markets\u00a0prevailed from the\u00a0time of the Fed\u2019s […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[10586,1799,5979,2120,303,305,467,538,2202,877,10587],"class_list":["post-14352","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bubble-finance","tag-bubbles","tag-contracorner","tag-david-stockman","tag-fed","tag-federal-reserve","tag-keynesian-economics","tag-money-printing","tag-us-treasury","tag-white-house","tag-william-mcchesney-martin"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14352","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14352"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14352\/revisions"}],"predecessor-version":[{"id":14354,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14352\/revisions\/14354"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14352"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14352"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14352"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}