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.
Try shipping a next day letter via fed ex. Looks like a 300 % increase over that time frame.
Also smart money is taking US cash and depositing it over seas. No one sees any long term future in the US. That is why the extra dollars are not being seen here.
And the US economy has collapsed so all that new debt was wasted.
Since Laffer’s day the goobermint has bastardized how statistics are calculated. Just since Obama gasoline is up 100% food at least 30% electricity is up huge amounts but not shown because of massive taxpayer subsidies. Who even knows what real unemployment is when the feds just make up the numbers to fluff Obama.
If Laffer was wrong he was only wrong in suggesting that the inflationary repercussions would always manifest as GENERAL inflation.
What we did have in the early 2000s was massive inflation that mostly landed in the housing sector (but somewhat in commodities as well), due to a combination of factors that came together at that time.
IF those conditions had not been manifest there is no way of telling how Greenspan’s easy money would have otherwise affected the economy, in general or in what sector or sectors.
The inflation was there in the form of a prevention of a significant fall in wage rates and prices which normally would occur during a recession. A significant fall in wage rates and prices would have cut costs, which would have enabled businesses to start hiring more people sooner and would have sped up the recovery from high unemployment.
When I first became interested in economics, I gravitated to the Supply-Siders because of their supposed free-market orientation. But I've learned [and this post just confirms it], that they are clueless about how the Fed's inflation policies distort the economy.
Government should not control our money supply any more than it controls our corn supply. And we all know how well that's worked out.
We’re simply pushing our inflation on to the rest of the world because of reserve currency status. It won’t go on forever.
Hmmm. Who got to Art? Wonder if the Texas Public Policy Foundation will have to *remove* ‘ol Art as one of their Experts, now.
It’s all smoke & mirrors since the marriage of the Fed, Wall St. and the electronics age. No one prevented “the worse recession since the great depression”, they merely prevented massive uprisings of the public by pacifying them with give-a-ways and so-called entitlements(all paid for with monopoly money)...and all done just to keep the illusion going....while the global elites continue to rape and plunder America of it’s REAL assets.
Actually, he was right. We just don’t compute inflation the way we did when he first penned the Curve.
Bump for later read.
When you offshore your manufacturing base and put 11% of your workers on a FedGov™ stipend it is tough to induce inflation. The way they do easing the money ends up in stocks and NEVER makes it to the”common” man. Why is a 30 yr mort at 3.5% still? In this climate a 30 yr note should only be 2% or less.
My professors taught that inflation leads to higher interest rates because savers demand a premium to make up for the devalued dollars they will receive at the end of the loan. But this assumes that savers have an alternative market for their money. The current situation shows that this is not always the case. How many investors do we hear complain that there is no place to put their money in today's market.
Interesting.