Fed can't keep the rates low

[Red Lion]

1 hour ago, rogermunibond said:

he House budget framework is still proposing Federal deficits of $2T per year (about 6% of GDP) going out the next ten years, which is $1T more per year than advisable.  And most of the Federal spending is coming from tax cuts.

 

The flip side to that is that the administration is trying to drop spending by around $1 trillion with the DOGE cuts, and they are hoping that tax receipts increase with greater GDP growth. 

 

I'm not saying I agree that either of these are going to materialize, but I hope they do, and think it's possible that the administration makes progress on both fronts. 

[TwoCitiesCapital]

4 hours ago, rogermunibond said:

Reviving this thread because in some respects MMT has proven itself over the last 3 years.

 

Did they? We did direct payments and then got inflation. 

 

We stopped the direct payments and inflation started to moderate. 

 

Did I miss something? Some of it was supply chain related, absolutely! Buts it's not like prices reverted afterwards. No, they kept going up - just at a slower rate. That's demonstration of a persistent loss of purchasing power and not a one time supply shock that was later fixed. #DirectMonetaryDebasement

 

4 hours ago, rogermunibond said:

Inflation was largely not monetary in the current episode and has come down as real resource scarcity was allayed through production/supply chain disruptions.  Coordinate monetary policy with the Fed has brought down inflation, despite large fiscal deficits.

 

I dunno - have you seen the costs of homes? Or gold? Or Bitcoin? Or stocks relative to earnings that were nominally higher in 2021 ?!?!

Or what bonds are yielding despite the "expected" forward inflation? Seems like we've definitely had inflation and plenty of people  are expecting more based on the prices I see in these traditional 'hedges'. 

 

4 hours ago, rogermunibond said:

The current administration is concerned about reversing tradeable vs nontradeable economic sector growth and reversing public sector versus private sector economic growth but have they put their money where it matters most? 

 

It seems pretty clear to me that the current administration is trying to manufacture a recession now so they can be credited with a recovery when we have elections in 4-years after they spend trillions more than project to bring the economy back out of it. 

 

Trump will cut $2 trillion from the budget just like Trump got Mexico to pay for the wall or China to pay for his tarriffs. 

 

4 hours ago, rogermunibond said:

The House budget framework is still proposing Federal deficits of $2T per year (about 6% of GDP) going out the next ten years, which is $1T more per year than advisable.  And most of the Federal spending is coming from tax cuts.

 

It's $2T+ per year more than is advisable...and you're kidding yourself if you don't think we're gonna blow that out of the water. 

 

4 hours ago, rogermunibond said:

 

We've yet to see what the administration is going to do to 1) build more infrastructure; 2) build substantially more housing of all types in all regions; 3) keep inflation and prices in check other than oil.

 

Which is why you'd expect inflation to continue.