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I think it’s less short term thing vs being plain reactive. The policy response to 2008 has shown that next to nothing is going to happen on the fiscal side (t
by wbsss4412 5y ago
I think it’s less short term thing vs being plain reactive.
The policy response to 2008 has shown that next to nothing is going to happen on the fiscal side (though this did change in response to COVID, hopefully this is a positive sign), so the fed has been backed into a corner without a whole lot of room to run.
When a major swing happens, if they do nothing, then it’s “the fed let a recession happen!!!”
- adam_arthur 5y agoNot that they should have done nothing, but clearly they could have addressed the acute crisis, and then normalized when that passed. Instead they addressed the acute crisis, and continued the same policy for 2 years with no change. What they should have done was 6 months or so after peak covid panic, start to normalize interest rates and QE. They also didn't consider at all the velocity of the economy and just looked at point in time employment numbers to drive their policy thinking. It was clear the job market was already overheated at 5% unemployment, for example, due to the historical number of job openings and increasing pace of those job openings, plus record high quits rate. Plus retail sales/inflation.