“No one knows what causes inflation. Nor does anyone know if interest rate hikes combat it.”
That sounds like the Modern Monetary Theory idea that the Biden gang were pushing. Didn’t we just get a real world test of it?
Nixon blamed monetary tightening for his 1960 loss. So after he won in 1968 he appointed Arthur Burns and pressured the Fed to keep increasing the money supply. Add to that closing the gold window and price controls on oil and inflation was off to the races.
Bond vigilantes began driving up interest rates even before Volcker was appointed. They would kill bond prices whenever the money supply numbers revealed increases. When Volcker took office he moved in the same direction as the vigilantes, choking off credit creation. Reagan took office and deregulated oil and installed a pro growth tax policy. By 1982 inflation had collapsed, the Fed relaxed their tight money policy in August and the American economy roared ahead without the inflation that had plagued the 1970s.
That’s not what happened.
If you examine the historical Fed Funds rate you will see that it was rising before Volker took office. Sharply. Inflation didn’t care.
There are only a few issues to address, and they can’t be. All other historical gobbledygook is statistics with sample size < 10.
There is no Modern Monetary Theory. There can’t be any theories at all about a substance created whimsically from nothingness. So that’s issue number 1.
Issue number 2 is address very strictly 2010-2020 and the absence of inflation, in the presence of enormous QE. You can’t. No one can. This is all finance industry BS enshrouding meaninglessness with opaque terminology like yield curve inversion and hell, Quantitative Ease itself.
Sometime have a look at the QE wiki. Then look up “monetizing debt”. You will find the only difference between the two is words. When QE happens for reasons quoted, then it is QE. When monetizing doesn’t use those reasons, then it is monetizing.
It is a substance from nothingness. How could it possibly have meaning? It’s not Maxwellian electromagnetics or Newtonian gravity. It’s babble.
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