What Thomas Hoenig (KC Fed) new and when did he know it...
Politico story and a May 2020 article of his views...
This one was highlighted a couple days back and I’ve finally found some time to read it and I’ve got to say … agree or NOT with conclusions, it’s a GREAT READ.
Hats off TO POLITICO for this one,
The Fed’s Doomsday Prophet Has a Dire Warning About Where We’re Headed
Thomas Hoenig knew what quantitative easing and record-low interest rates would bring.
… In May of 2020, Hoenig published a paper that spelled out his grim verdict on the age of easy money, from 2010 until now. He compared two periods of economic growth: The period between 1992 and 2000 and the one between 2010 and 2018. These periods were comparable because they were both long periods of economic stability after a recession, he argued. The biggest difference was the Federal Reserve’s extraordinary experiments in money printing during the latter period, during which time productivity, earnings and growth were weak. During the 1990s, labor productivity increased at an annual average rate of 2.3 percent, about twice as much as during the age of easy money. Real median weekly earnings for wage and salary employees rose by 0.7 percent on average annually during the 1990s, compared to only 0.26 percent during the 2010s. Average real gross domestic product growth — a measure of the overall economy — rose an average of 3.8 percent annually during the 1990s, but by only 2.3 percent during the recent decade …
I picked this particular excerpt because it refers back TO a HOENIG PAPER which I ALSO missed and will be reading soon if not sooner. Originally published in DISCOURSE on May 21, 2020
Emergency COVID-19 Stimulus Programs Are a Short-Term Solution
Once the crisis passes, policymakers should wind down stimulus spending or risk compromising long-term prospects
…National policy must address the crisis at hand, and most policymakers agree that the current economic stimulus programs are necessary. If such policies remain too long in place, however, their overall effects will be negative, including lower GDP growth and a greater disparity in wealth among US citizens. These policies portend a poorer future and greater economic uncertainty, and they will ultimately undermine economic and political stability. Implementing them with moderation and a strategy for a timely exit, however, will best avoid these unwanted outcomes and promote economic growth.