Bernanke drained legal reserves for 29 contiguous months, turning asset prices upside down or underwater. Then the lag in short-term money flows hit in the last half of 2008.
The problem with Bernanke et. al., is that there is no fool in the shower. Monetary lags are mathematical constants. Because Volcker didn't know that he created two back-to-back recessions.
re: "If the Fed tries to offset the fall in growth, it will enhance the effect on inflation."
What you do is unleash frozen savings. You gradually drive the banks out of the savings' business. Paradoxically, an increase in velocity is noninflationary. Whereas lending/investing by the Central and member banks is inflationary.
Bernanke drained legal reserves for 29 contiguous months, turning asset prices upside down or underwater. Then the lag in short-term money flows hit in the last half of 2008.
The problem with Bernanke et. al., is that there is no fool in the shower. Monetary lags are mathematical constants. Because Volcker didn't know that he created two back-to-back recessions.
Great analysis.
re: "If the Fed tries to offset the fall in growth, it will enhance the effect on inflation."
What you do is unleash frozen savings. You gradually drive the banks out of the savings' business. Paradoxically, an increase in velocity is noninflationary. Whereas lending/investing by the Central and member banks is inflationary.