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On May 14, the U.S. Bureau of Labor Statistics released the most current producer price index (PPI) report, which showed an increase of 0.5% month-over-month in April. After the report’s release, U.S. Federal Reserve chairman Jerome “Jay” Powell said that while he believes the current policy rate is restrictive by many measures, the Fed needs more time to evaluate whether it is sufficiently restrictive.
Watch the above video as Straight Arrow News contributor Larry Lindsey argues that current monetary policy actually isn’t restrictive at all and contends that we’re in a financial “bubble of all bubbles.”
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The following is an excerpt of the above video:
Federal Reserve Chairman Jay Powell is constantly saying that monetary policy is being restrictive. The question I would ask is, “What’s being restricted?” He, himself, in his press conference, pointed out that rather than look at GDP, to look at demand you really want to look at final demand by domestic purchasers. It’s a technical term, but it says how much money are people spending in the U.S. and that might include businesses.
Well, in the first quarter of this year, real final demand by domestic purchases went up 3.1%. That was up from the 2.8% in the previous four quarters. Nominal, which includes inflation, was up 5.9 versus 5.3 in the previous four quarters.
Now, two little problems for the Fed in the math in that. First, both nominal and real final demand have been accelerating. They’re growing faster in the first quarter, which was supposedly weak, than they have been. If things are being restricted, that’s not going to happen.
And second of all, the inflation implied by those numbers — 2.8% In the first quarter, versus 2.5 [sic] on [the] previous four — suggests inflation is accelerating. That’s exactly the opposite of what the Fed wants.
