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MONETARY MYSTERY: WHY TRUMP AND POWELL CAN’T SEE THE FOREST FOR THE TREES!

Central Bank Battleground: Is Interest Rate Obsession Misleading Us All?

In an electrifying showdown that’s got everyone buzzing, President Trump and Fed Chairman Jerome Powell are locked in a fierce feud, sparking conversations about… interest rates?! We’re talking about a titanic struggle that reveals a shocking truth about the world of monetary policy!

Interest Rates: The Holy Grail or Just a Distraction?

Hold on to your wallets, folks! While our leaders squabble over the all-important Fed funds rate, the battle rages on: are they missing the BIG picture? Central bankers everywhere have put interest rates at the forefront of monetary policy, shaping decisions and markets alike. But here’s the kicker: it might all be smoke and mirrors!

Three Decades of Tunnel Vision: Are Economists Just Plain Wrong?

What’s fueling this obsession? Turns out, the last 30 years of macroeconomic models, drenched in neo-Keynesian extensions, have trained economists to believe that interest rates dictate everything! But could they be dead wrong? Monetarists argue otherwise, claiming it’s all about the quantity of money—that’s right, folks—money matters MORE than interest rates!

Japan’s Monetary Misfire: The Truth Behind 23 YEARS of Stagnation!

Let’s look at Japan. From 1996 to 2019, the Bank of Japan kept interest rates at a jaw-dropping 0.125%. Economists screamed “Easy money!” But monetarists weren’t buying it. They pointed to Japan’s sluggish money supply growth, and you guessed it, they were RIGHT! With inflation barely scraping 0.2% annually, the real story was buried deep under the surface—where all the action was in the money supply!

The U.S. Dilemma: Interest Rates or Money Supply?

Swivel your attention to the U.S. from 2010 to 2019. The Fed was lounging at a cozy 0.25% interest rate, declaring “Money’s easy!” But hang on; money growth stagnated at just 5.8% per year, keeping inflation at a mere 1.8%! This is a classic case of looking through the wrong end of the telescope!

Pandemic Panic: How COVID Threw the Economic Playbook Out the Window!

Now let’s throw COVID into the mix! Interest rates hit rock bottom at 0.25%, and the Fed unleashed a wave of quantitative easing. The experts expected inflation to remain low. But then, BOOM! Broad money growth skyrocketed to an astounding 17.3% from March 2020 to March 2022. Economists blinded by interest rate patterns failed to see the impending inflation rocket! The CPI rocketed to a staggering 9.1%!

Monetarists Are Right Again! Are Keynesians in Denial?

The shocking reality is that the monetarists have been on the money while the Keynesians have fumbled the ball repeatedly. Why? Because interest rates are a lagging indicator! They reflect past money moves, NOT future activity! If central banks could only strip away their obsession with policy rates, they might realize that it’s the money supply that drives spending and inflation!

Wake Up Call: The Future of Monetary Policy?

The time has come for a revolution in how we think about monetary policy! Are central bankers really in control, or are they merely reacting to the storm created by previous money decisions? If they had read the signs right, they could have avoided the inflation mess we see today!

Bottom Line: It’s Time for a Rethink on Monetary Policy!

It’s high time we focus on the REAL drivers of the economy: MONEY—not just interest rates. If central bankers continue to chase shadows, we could find ourselves in a rollercoaster of economic uncertainty! The question remains: will they wake up and change their ways, or are we doomed to repeat the past? Stay tuned, because the drama is far from over!

photo credit: fortune.com

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