Two things are in play here, surprised Laffer doesn’t see it:
1) Deflation, and
2) Inflation.
Deflation is strong, as the economy writhes on the floor, unable to stand.
Inflation is strong, as the Fed pumps trillions into the ecconomy.
The net effect of these two simultaneous sicknesses is the APPEARANCE of normalcy. However, our economy actually has TWO dread diseases.
Here’s what I see...
The Fed can’t control the velocity of money (i.e., the average frequency with which a unit of money is spent on new goods and services produced domestically in a specific period of time). And that means the Fed can’t create rising aggregate demand. In short, Ben and eventually Janet, are shooting blanks.
For the past several years, most of the borrowing and lending activities have related to daily consumptive needs, including borrowing by the federal government as well as much of the recent upturn in consumer lending.
Borrowing to finance consumption does not generate a productive income stream nor does it create the resources to repay the borrowed funds. Consequently, velocity has collapsed and now stands at a six decade low.
Inflation cannot ignite in such an environment. Incomes will languish and growth in aggregate demand, as measured by nominal GDP, will slow except for brief, intermittent periods.