Powell vs. the Pandemic: Some Simple Monetary Arithmetic ()
ABSTRACT
The lack of inflation in 2020 despite the fastest
money growth rates since World War II at first seems puzzling for anyone
believing that money still matters. The monetary expansion merely offset the
effects of declining velocity of money and reduced spending associated with the
lockdowns, however, making the scale of the 2020 monetary expansion both
appropriate and justified. The subsequent uptick in inflation in 2021 that
accelerated in 2022 was caused not by the rapid money growth in 2020 but rather
by the Federal Reserve’s failure to
sufficiently adjust policy in 2021 as the environment changed. The need
to adjust policy in 2021 is clearly demonstrated in the monetary data analyzed
in this paper. It took far too long for the Federal Reserve to recognize the
problems inherent in continuing its 2020 policy bent into 2022.
Share and Cite:
Burdekin, R. (2023) Powell vs. the Pandemic: Some Simple Monetary Arithmetic.
Modern Economy,
14, 66-75. doi:
10.4236/me.2023.142006.
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