In 2012, then Vice Chair of the Fed gave a talk, Speech by Vice Chair Yellen on revolution and evolution in central bank communications - Federal Reserve Board.
The former Vice Chair, then Chair of the Fed and now our current Treasury Secretary made numerous interesting comments in this speech.
She stated that it was accepted doctrine that inflation is as Milton Friedman asserted, a monetary phenomena.
And that Central Banks had no long term influence on labor markets.
That is likely a false statement to the extent that she acknowledges long-term inflation is a consequence of monetary policy controlled by the Fed so for inflation to have no consequence upon labor markets you would need to assume inflation is a neutral phenomena and imposes no real economic cost which means there is absolutely nothing wrong with inflation because it has no real consequences.
If that is the case, why even have inflation targets then or why would it matter what the inflation target was as long as it was credible?
Yellen also made reference to the possible of the Taylor Rule. Simply stated the Taylor Rule articulates the level the Fed should set as its Fed funds rate target depending upon output and inflation gaps.
How confused are we with respect to nominal versus real rates of economic activity? Is it this confusion that creates an arbitrage opportunity for the Fed to impact the economy? In real terms? In nominal terms? And for how long?
And what do we mean by tightening Fed policy? Is it defined exclusively by the change in nominal rates? Or real rates?
If you believe the measure of inflation that the Fed uses or that is supplied to us by our government (who, of course, would never lie to us) then was the Fed easier when the Fed funds rate 0 and inflation was running below its stated target of 2%? Or is the Fed tighter now with inflation running about 8% and the current Fed funds rate of 1% with threats of it rising over the next year to about 2.5%?
The purpose of my brief essay is not to provide answers but to provoke thought and to point out how inane is the current economic debate and discussion. Obviously fact-checkers are economically illiterate or they would be labeling almost everything you watch on CNBC or read in the financial section of newspapers or read on whatever anti-social media platform of your choice. Reading that garbage, IMO, opinion is hazardous to your financial health and well-being and that is the label they should use of their true goal was to prevent the circulation of misinformation and disinformation.
Fischer Black in his Presidential Address to the American Finance Association stated that: “The effects of noise on the world, and on our views of the world, are profound. Noise in the sense of a large number of small events is often a causal factor much more powerful than a small number of large events can be. Noise makes trading in financial markets possible, and thus allows us to observe prices for financial assets. Noise causes markets to be somewhat inefficient, but often prevents us from taking advantage of inefficiencies. Noise in the form of uncertainty about future tastes and technology by sector causes business cycles, and makes them highly resistant to improvement through government intervention. Noise in the form of expectations that need not follow rational rules causes inflation to be what it is, at least in the absence of a gold standard or fixed exchange rates. Noise in the form of uncertainty about what relative prices would be with other exchange rates makes us think incorrectly that changes in exchange rates or inflation rates cause changes in trade or investment flows or economic activity. Most generally, noise makes it very difficult to test either practical or academic theories about the way that financial or economic markets work. We are forced to act largely in the dark.”
What you are watching, reading and listening to is noise. To keep us in the dark while appearing to do the opposite. So we rely upon “experts” rather than ourselves. To promote serfdom, not freedom.
Fischer Black also stated that: “If we have a gold standard, where the price of gold is adjusted over time to make the general price level follow a desired path, and where the government stands ready to buy or sell gold at the temporarily fixed price without allowing its inventory to fluctuate much, then inflation will be controlled rather than random." But it seems unlikely that we will adopt a gold standard of this kind or of any other kind anytime soon.”
His speech was in 1986 so predated bitcoin. The government along with the Fed and banks and Wall Street are in the noise production business to keep us in the dark. Confused. Misinformed. Disinformed. They abhor freedom. They profit from our fears. They want us as serfs working on their behalf.
A bitcoin standard is their greatest fear. It is nothing they can control. It cannot be debased or transformed or manipulated. Nor counterfeited. It is immutable. The ledger never lies. There is no privileged access to the ledger. It is egalitarian. And while being egalitarian promotes freedom. Money does not buy influence. It is incorruptible.
Fedspeak is Noise. Washingtonspeak is noise. Wall Street. Noise. Banksterspeak. Noise. Financial media. Noise. A multitude of words to keep you in the dark on reliant upon those who produce the noise to keep you misinformed, disinformed and confused. In fear. And anti-social media is one of the most important communication channels in the production, circulation and distribution of noise.
Caveat emptor!