Summary:
Although neoclassical macroeconomic theory does its utmost to obfuscate matters, monetary policy in practice is straightforward: central bankers react with a lag to economic data, and if they are panicked about inflation, they hike rates until something breaks. Although that description is more flippant than how conventional economists would describe the situation, it probably represents a consensus view. However, there is a hidden complexity: do things “break” because of rate hikes, or do they break on their own?Bond EconomicsHike Until Something BreaksBrian Romanchukhttp://www.bondeconomics.com/2022/06/hike-until-something-breaks.html
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Although neoclassical macroeconomic theory does its utmost to obfuscate matters, monetary policy in practice is straightforward: central bankers react with a lag to economic data, and if they are panicked about inflation, they hike rates until something breaks. Although that description is more flippant than how conventional economists would describe the situation, it probably represents a consensus view. However, there is a hidden complexity: do things “break” because of rate hikes, or do they break on their own?Bond EconomicsHike Until Something BreaksBrian Romanchukhttp://www.bondeconomics.com/2022/06/hike-until-something-breaks.html
Topics:
Mike Norman considers the following as important:
This could be interesting, too:
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Although neoclassical macroeconomic theory does its utmost to obfuscate matters, monetary policy in practice is straightforward: central bankers react with a lag to economic data, and if they are panicked about inflation, they hike rates until something breaks. Although that description is more flippant than how conventional economists would describe the situation, it probably represents a consensus view. However, there is a hidden complexity: do things “break” because of rate hikes, or do they break on their own?Bond Economics
Hike Until Something Breaks
Brian Romanchuk
http://www.bondeconomics.com/2022/06/hike-until-something-breaks.html