A very dangerous fallacy has taken the world of economics by storm over the last several years: the idea that there is very little inflation in the U.S. economy, therefore interest rates should remain at unusually low levels for an even longer period of time. As I will prove in this piece, the people who believe in the “low inflation” myth are being fooled by the fact that inflation in this unusual, central bank-driven economic cycle is concentrated in asset prices rather than in consumer prices. By holding interest rates too low for too long, a massive asset bubble has inflated and is poised to inflate even further as long as economists and central banks like the Fed continue to be fooled by the “low inflation” myth. Unfortunately, the ultimate bursting of this unprecedented asset bubble is going to throw the U.S. and global economy into another depression.
“Well I personally think the Fed should drop rates,” Mr. Trump said. “I think they really slowed us down. There’s no inflation. I would say in terms of quantitative tightening, it should actually now be quantitative easing. Very little if any inflation. And I think they should drop rates, and they should get rid of quantitative tightening. You would see a rocket ship. Despite that, we’re doing very well.”
Trump - Inflation - Belief - Tweet - Yesterday
Trump reiterated his “no inflation” belief in a tweet yesterday:
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, recently summarized the Fed’s position that inflation is still low and even believes that the Fed should let inflation run above its target for a few years:
Journalists - Commentators - Friend - Pedro - Da
Many prominent financial journalists and commentators including my friend Pedro da Costa believe that the Fed has been hiking interest rates too aggressively:
The well-known investing pundit and host of CNBC’s “Mad Money” TV show Jim Cramer is a vocal Fed...
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