New Deal democrats Weekly Indicators September 1- 5
– by New Deal democrat
My latest “Weekly Indicators” post is up at Seeking Alpha.
The high frequency data continues to be buoyed by financial indicators as well as consumer spending, despite the weakness we saw in, among other things, Friday’s employment report.
As usual, clicking over and reading will bring you up to the virtual moment as to the economy, and reward me with a little pocket change for collecting and collating it all for you.
New Deal democrats Weekly Indicators August 25 – 29, Angry Bear by New Deal democrat
I would like to love to hear some economists react to Scott Bessent’s WSJ piece: The Fed’s ‘Gain of Function’ Monetary Policy – WSJ
Wolf Richter doesn’t pull any punches: Bessent Blasts the Fed for QE, its “Perverse Incentives” for Fiscal “Irresponsibility,” “Wealth Effect” Policies, “Class and Generational Disparities,” Failure on Inflation… Oh I So Agree | Wolf Street “There is nothing more toxic on society, as far as central-bank policies is concerned, than the pursuit of the Wealth Effect. And it’s bipartisan: Yellen was appointed by a Democrat and Bernanke by a Republican.”
I’ve been following
liberaleconomists’ opinion pieces for over a decade and have noticed their reluctance to talk about the wealth effect. Instead, they talk about how much ZIRP and QE would help working Americans. Of course, if you look at the historical data, the beneficiaries of Fed policy were first and foremost share prices on the stock market, which reached record highs within 5 years along with bank profits, which took even fewer. Meanwhile the supposed beneficiaries watched as the unemployment rate took a full decade to reach its pre-recession lows and real weekly earnings most of a decade.And so here we are today. Record wealth and inequality. Half of retail sales attributable to the top 10%, who pig out while keeping the economy going, while 70% struggle to make ends meet. 70% Of Americans Struggle To Make Ends Meet | Adecco Group
What say
liberaleconomists about the Fed’s wealth effect?@John,
I’m not an economist.
We have only two significant political parties in the US today. One is the Republican Party, which is a right-wing extremist personality cult. The other is the Democratic Party, which is a Conservative Party. There is no significant liberal party in the US. So I’m not surprised that the US economy is being run by and for the rich and powerful.
As for Bessent, he’s doing nothing to change that. This is just more attacks on the Fed by an oligarch in the Oligarchy Street Journal.
I agree, “As for Bessent, he’s doing nothing to change that.” In fact, he’ll make it worse, citing the bad policies of the other side.
That still does not justify economists’ refusal to criticize or even acknowledge the failures of the Fed’s policies…which became obvious more than a decade ago. Without constructive criticism, nothing will change.
The only liberal economist I know who seriously challenged Fed policies was Joseph Stiglitz. He wrote a whole book about what the Fed could do better. I don’t recall any prominent economist echoing his position.
@John,
Here’s what google AI says:
Notable liberal and left-leaning economists who have criticized or questioned quantitative easing (QE) include Radhika Desai, Robert Skidelsky, and Josh Bivens.
Radhika Desai
A professor of political studies, Desai argues that QE is ineffective during a liquidity trap, a situation where interest rates are already low and individuals and businesses are not spending.
She invokes a Keynesian idea, suggesting that central bank actions become like “pushing on a string” in a weak demand environment.
Desai claims that QE is ultimately a distraction from the more effective policy of vigorous, expansionary fiscal policy, such as massive state investment in the economy.
Robert Skidelsky
A renowned biographer of John Maynard Keynes, Skidelsky criticizes QE for fueling financial instability and enriching those with financial assets, rather than stimulating the productive “real” economy.
He draws on Keynes’s Treatise on Money to explain that during a downturn, money from QE tends to flow into financial speculation instead of industrial investment.
Skidelsky argues that this flow of money primarily circulates within the financial system, with only a small portion trickling down to the broader economy.
Josh Bivens
An economist at the labor-backed Economic Policy Institute, Bivens has offered a critique from the perspective of organized labor and the working class.
His 2010 criticism of an early round of QE was not that the policy was wrong in principle, but that it was “too small” to have a meaningful impact.
He and other liberal economists were concerned that the policy was designed primarily to help Wall Street rather than address the economic issues faced by average people.
“nothing more toxic?”
More toxic than passing a tax break impacting the upper income bracket more so than any other bracket? And futher more does not pay for itself as stated under reconciliation? And then reinstating it again in upcoming years and whack the lower income brackets to pay for it.
Typically? It is the wealthy who often own income-generating assets like bonds and stocks which would take them through high Fed Rates. The wealthy benefit from higher yields on savings and may not rely on borrowing or fixed-rate mortgages. Either way the wealthy society comes out much further ahead as opposed to the lower income society which would include the middle and lower incomes.
The 2017 tax break did not pay for itself. Increased debt with breaks going mostly to the upper 10% in income by ~$2 trillion (CBO). Add some more years to it and we will see another $2+ trillion in lost revenue and debt with little impact upon much of the population. Indeed to help balance the negative tax breaks, Trump and Bessent are whacking the middle class and definitely the lower income brackets with Herr “Rich”ter applauding in the background.
Would NC tolerate this drivel by you?
May I remind you that the JFK tax cut, officially known as the Revenue Act of 1964, was a significant reduction in federal income tax rates proposed by President John F. Kennedy and enacted by President Lyndon B. Johnson. It aimed to stimulate economic growth by lowering the top income tax rate from 91% to 70% and reducing corporate tax rates, ultimately boosting consumer demand and investment….primarily for the wealthy and corporate America.
And Obama extended the tax cuts of the Bush 43 administration, which also benefited the usual suspects.
It’s really hard to argue that Republicans have any kind of monopoly on bad policy…
@John,
May I remind you that JFK died in 1963 and we’re in 2025. It’s really hard to argue that the Democrats and Republicans in 1963 are the same parties today. Unless you’re just ignorant.
Please try to keep up.