re: "With the Volcker Adjustment complete, we enter the era that became known as the “Great Moderation” that extends for the next 20 years."
The "Great Moderation" was due the impoundment and ensconcing of monetary savings, income not spent. As the absolute volume and percentage of bank-held savings grew, velocity fell (as predicted). The error here is that banks are not financial intermediaries serving to join savers and borrowers. Every time a DFI makes a loan to, or buys securities from, the non-bank public, it creates new money - demand deposits, somewhere in the system. I.e., all deposits are the result of lending and not the other way around.
The reason people talk about inflation is because it’s what the Fed targets, and that matters. They went to great lengths to design and roll out FAIT- they should stick to it. What kind of insane central bank would devise a target and almost immediately abandon it?
You might prefer a NGDP target but before they could commit to that they need credibility. To have credibility they need to not immediately lie to us.
re: "With the Volcker Adjustment complete, we enter the era that became known as the “Great Moderation” that extends for the next 20 years."
The "Great Moderation" was due the impoundment and ensconcing of monetary savings, income not spent. As the absolute volume and percentage of bank-held savings grew, velocity fell (as predicted). The error here is that banks are not financial intermediaries serving to join savers and borrowers. Every time a DFI makes a loan to, or buys securities from, the non-bank public, it creates new money - demand deposits, somewhere in the system. I.e., all deposits are the result of lending and not the other way around.
The reason people talk about inflation is because it’s what the Fed targets, and that matters. They went to great lengths to design and roll out FAIT- they should stick to it. What kind of insane central bank would devise a target and almost immediately abandon it?
You might prefer a NGDP target but before they could commit to that they need credibility. To have credibility they need to not immediately lie to us.