Monetary Stimulus And Inflation
Are we headed toward inflation and pension devastation.
Monetary stimulus and inflation. Risk of stimulus spending. Counter arguments say that if the output gap is high enough the risk of inflation is low or that in depressions inflation is too low but central banks are not able to achieve the required inflation rate without fiscal stimulus by the government. M2 gdp gives a current perspective whereby gold is discounting the future.
Record fiscal and monetary stimulus has renewed concerns that inflation could surge. But the unprecedented fiscal and monetary easing plus the effects of a continued retreat from globalization eventually could lift inflation past the 2 target that the federal reserveheretofore. So far we know only of biden s covid recovery spending.
Hence only monetary stimulus could work. More monetary inflation and the final outcome january 20 king world news alasdair macleod out of london. Most modern central banks target the rate of inflation in a country as their primary metric for monetary policy usually at a rate of 2 3 annual inflation.
These two factors may not have a close relationship for multi year periods. Stimulus to economic growth and green energy yet to be declared. The lesson from 2008 is that we had a fair amount of fiscal stimulus and monetary stimulus and people thought we were getting hyperinflation and that clearly didn t happen he says.
As inflation and interest rates rose economist milton friedman s thesis that inflation is always and everywhere a monetary phenomenon drove the federal reserve to target money supply growth in the 1980s bringing inflation down. Weak demand could continue to put downward pressure on prices despite some supply shocks. The connection between m2 gdp and gold price is that both measure inflation.
However as mentioned the m2 gdp ratio is an economic measure and the gold price is a market one. When oil prices sank to zero last may few investors thought of inflation.