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Los Angeles, California, United States
The blog 'Breaking Bread' is for a civil general discussion, like you might have at the dinner table with guests. The posts 'Economics Without the B.S.' are intended for a general audience that wouldn't have to know the difference between a Phillips Curve, a Laffer Curve, or a Cole Hamels Curve. Vic Volpe was formally educated at Penn State and the University of Scranton, with major studies in History, Economics and Finance, and Business; and, is self-educated since by way of books and on-line university courses. His practical education came from sixty years of work experience in the blue-collar trades as well as a white-collar professional career -- a white-collar professional career in production and R&D. In his professional career and as a long-haul trucker, he has traveled throughout the lower forty-eight. From his professional career alone he has visited many manufacturing plants in the United States, Europe and China. He has lived in major metropolitan areas and very small towns in various parts of the United States. He served three years with the U.S. Army as an enlisted man, much of that time in Germany.

Thursday, October 12, 2017

The Monetary Policy Quagmire

The Monetary Policy Quagmire


Economics Without The B.S.**: 

[**  Double entendre intended.]

The Monetary Policy quagmire: right now the Fed is pondering how to revive our economy from its real GDP growth of 2%.  Monetary Policy is a blunt instrument whereas Fiscal Policy can be a surgical knife.  Our $20 trillion economy is big and diverse; and, right now uneven in performance among productive sectors and geographically. 

The economy needed restructuring (put emphasis on design, R&D, innovation) after 2008; instead Obama/Democrats patched up the old economy.  And Republicans, with their Laissez Faire ideology, have never understood how to get good growth out of our economy.  Their "starve the beast" ideology, running up the Federal Government debt so that no further fiscal spending can be accomplished, has put our economy in a stagnant growth cycle of real GDP growth between 2% to 3% instead of 4% to 5%.

Fiscal Policy can be directed at specific sectors of the economy and specific geographical areas of the country. Monetary Policy cannot.  It is difficult for Monetary Policy to work in an uneven economy because Monetary Policy involves broad applications, not specific fixes.  Today Fiscal Policy advocates have weak policies and applications -- e.g., infrastructure funding, tax reform. incentives that are too general. 

Conservatives with their Laissez Faire policies is like an 8-cylinder car running on 6-cylinders. That's why we have economic growth at a real GDP of 2% to 3% instead of 4% to 5%. The 1960s was over 5%; almost three times more than what we have been since 2000.  An economy like ours, $20 trillion, can still grow without Federal Government intervention, but it is growing on inertia instead of being driven by a dynamo.

Republicans cannot advocate for Fiscal Policy because Government would be an interventionist in the economy and Republicans are for limiting Government not enhancing it.  Democrats/Progressives fail to make an argument for good economic growth. Their other issues (environment, anti-gentrification, etc.) get in the way.  Our democratic process needs/thrives on a vibrant economy, not economic stability. Full employment is when all can realize their skill potential.


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