You can bet the 12 purported geniuses on the FOMC have never looked at the graph below.
It shows that for all their wild-ass money printing in recent years, the US index of manufacturing output stands at 101.39, which is nearly 5% below the level reached on the eve of the financial crisis in December 2007.
That’s right. The US manufacturing economy has been shrinking in real physical terms for the past 18 years, notwithstanding the fact that during that interval the Fed has printed nearly $6 trillion in brand, spanking new money that it snatched from thin air.
So something big and bad happened after the Fed went all in on money-printing in response to the stock market meltdown in the fall of 2008. After all, during the 28 years between 1972 and 2000 the very opposite occurred. Manufacturing output in the US rose by nearly 150%, which translates to a 3.3% growth rate per annum.
Yet there is no mystery as to why manufacturing output abruptly went flatter than a board after the Financial Crisis. To wit, the mad money-printers in the Eccles Building simply inflated the bejesus out of the US economy at a time when what was urgently needed was a stern deflation of an already inflation-bloated industrial sector.....
Of course, this sheer monetary insanity is justified by the Fed on the grounds that inflation is good for prosperity, at least to the extent of 2.00% annually, year in and year out.
Except there is not a shred of historical evidence or sound economic logic to justify the Fed’s sacred 2.00% target. It’s just a handy excuse for running the printing presses at rates which please the gamblers on Wall Street and the Spenders in Washington.
Industrial production is the heart of the modern economy and the main source of sustainable gains in real output and living standards. Even a half-assed assessment of the world in 1990 would have told any honest and capable monetary central planner that wringing out some of the 250% increase in the domestic cost and price level that had accumulated since Camp David was imperative if the US was to remain competitive in global markets.
Alas, the Keynesian fools who took over the nation’s central bank under Greenspan’s leadership cooked up a closed bathtub style model of the US economy, and conferred upon themselves the Keynesian mission of keeping “aggregate demand” full to the brim via low interest rates and massive injections of fiat credits into the nation’s financial markets.
That was a drastic error from the get-go, but the money-printing gospel is of such convenience to both ends of the Acela Corridor that this cardinal pro-inflation error rolls forward unquestioned by both wings of the UniParty.
Accordingly, with inflation stalled at more than 3.0%, when it should be zero or negative, the Fed has again sung the Einstein Chorus. That is to say, these “insane” apparatchiks seem to believe that doing the same thing over and over again—even after 700% inflation—will finally generate a positive outcome.
