by As [MMT] economists Yeva Nersisyan and L. Randall Wray of the nonpartisan Levy Economics Institute of Bard College conclude in a paper published this month ahead of the GDP report: “Most of the government’s income support has already disappeared, so going forward it is not an important contributor to demand in the economy.”The faucet has been turned off. Without all the extra money from Uncle Sam, U.S. households will have to live within their means once again. Demand will slow, and so too will inflation, according to the ironclad economic laws of supply and demand....If consumer demand—fueled by free money from Washington—has overheated the economy, then our inflation problem is solved even before the Fed really gets going. “There is no excess income left to drive the economy beyond
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As [MMT] economists Yeva Nersisyan and L. Randall Wray of the nonpartisan Levy Economics Institute of Bard College conclude in a paper published this month ahead of the GDP report: “Most of the government’s income support has already disappeared, so going forward it is not an important contributor to demand in the economy.”The faucet has been turned off. Without all the extra money from Uncle Sam, U.S. households will have to live within their means once again. Demand will slow, and so too will inflation, according to the ironclad economic laws of supply and demand....
If consumer demand—fueled by free money from Washington—has overheated the economy, then our inflation problem is solved even before the Fed really gets going. “There is no excess income left to drive the economy beyond capacity,” say Nersisyan and Wray...What's the problem, then? Supply contraction for a variety of reason. Thus, the solution is to address supply issues in this situation rather than supposed excess demand.
The prospect for stagflation—low growth with high inflation—is real. “The appropriate solution to inflation would be to work to alleviate supply-side constraints,” say Nersisyan and Wray. To do that, unfortunately, “we need more domestic investment, not less.”These are only the MMT-related snippets. The whole article is worth reading. Some analysts are showing more sophistication than knee-jerk monetarism.
Market Watch
Opinion: There’s a big hole in the Fed’s theory of inflation—incomes are falling at a record 10.9% rate
Rex Nutting
https://www.marketwatch.com/story/theres-a-big-hole-in-the-feds-theory-of-inflationincomes-are-falling-at-a-record-10-9-rate-11651165705?mod=home-page