It’s an interview with Prof Meltzer from Carnegie Mellon who has done extensive research on the federal reserve system.
Cliff notes:
- As a result of the 2008 crisis the fed expanded the money supply to a degree never seen before
- Rather than drive inflation, the “new money’s” effect was muted due to skittish banks who would decide to just take the funds and hold as cash/treasuries (maintaining strong reserves) until more positive economic indicators emerged (this process could be paused if economic sentiment turned negative)
- Once economic forecasts turn more optimistic, the money will be deployed (through lending) into investments and assets leading to inflation in those prices
- Eventually the excess supply will spill over into consumer spending in the classic indicators of inflation like CPI
- However the fed will be under immense political pressure to not drive the “fragile” economy into a recession so any tightening will be far too late and inflation will overshoot targets by a large degree.
- Similar to the 70’s, until strong monetary contraction is brought in, inflation will run very hot despite other efforts to control it
It was recorded in 2009.
https://www.econtalk.org/meltzer-on-inflation/
It’s an interview with Prof Meltzer from Carnegie Mellon who has done extensive research on the federal reserve system.
Cliff notes:
- As a result of the 2008 crisis the fed expanded the money supply to a degree never seen before
- Rather than drive inflation, the “new money’s” effect was muted due to skittish banks who would decide to just take the funds and hold as cash/treasuries (maintaining strong reserves) until more positive economic indicators emerged (this process could be paused if economic sentiment turned negative)
- Once economic forecasts turn more optimistic, the money will be deployed (through lending) into investments and assets leading to inflation in those prices
- Eventually the excess supply will spill over into consumer spending in the classic indicators of inflation like CPI
- However the fed will be under immense political pressure to not drive the “fragile” economy into a recession so any tightening will be far too late and inflation will overshoot targets by a large degree.
- Similar to the 70’s, until strong monetary contraction is brought in, inflation will run very hot despite other efforts to control it
Pretty accurate so far.