GDPnow is at 2.4 percent on 7/25. M2 is growing at a 5 percent rate. But that masks the composition of the money stock. Means-of-payment money is growing at a 9 percent clip. The FED is not tight. If you lower policy rates lower than NIMs then bank credit will accelerate.
The Fisher Effect must also play a role? Will it exacerbate the problem as we approach Fiscal Dominance?
Great post, David. It sounds very similar to what fiscal theory of the price level proponents are saying.
Excellent post, David, as always. A lot of folks forget to think about the consolidated government balance sheet.
This paper on central bank independence and sovereign borrowing just came out as World Bank working paper: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099216207252528618
GDPnow is at 2.4 percent on 7/25. M2 is growing at a 5 percent rate. But that masks the composition of the money stock. Means-of-payment money is growing at a 9 percent clip. The FED is not tight. If you lower policy rates lower than NIMs then bank credit will accelerate.
The money supply can never be properly managed by any attempt to control the cost of credit. The FED's already lost control.