What has the Fed done to avoid the US becoming the next Japan?
Imagine being on the FOMC and in the mainstream paradigm. In 2008 you moved quickly to make sure the US would not become the next Japan.
- You cut rates to 0, even faster than Japan did.
- You provided unlimited liquidity to the dollar money markets, both home and abroad.
- You did trillions of QE, sooner than Japan did. You announced you expected rates to stay down for two years, etc. etc. etc.
And what do you have to show for it, 3 years later?
- GDP marginally positive, much like Japan. Inflation working its way lower to Japan-like levels, especially housing and wages.
- Employment stagnant a la Japan.
- And now, after 3 years of 0 rates, and trillions of QE, the dollar is going up, much like the yen did.
After the Fed has done all it could think of to reflate, and then some.
And all just like MMT suspected — and for what should be obvious reasons.
The post first appeared at The Center of the Universe blog.