Pushing a String

You can't push a string. I've heard that phrase many times, even when I was active as an economist. I don't remember who first said it, but memory says it was some general, perhaps Patton. One source, be still my heart, attributes it to Keynes! Who knew? I still think it first came from a general; the phrase originally referred to leading troops into battle.

In any case, while looking for the source, I also came across this story. Note the date, and that it cites a Fed researcher. I hadn't read the piece when I composed the first entry in this blog. (Which, it turns out, meant that I was concentrating on the wrong thing. If I'd put gobs of money into the market on 22 March 2009, I'd be very much richer. As it was, I remained concerned with explaining the situation while looking for the next database assignment. Let that be a lesson.) The point of this missive is to wonder what Fetchit and Bernanke must be thinking. Big Bold Ben must know that he's been trying to push a string neigh onto three years, and the only "success" is inflation in the stock market.

While unemployment, as described by the BLS number of record, is a bit lower, much of that is due to expiring benefits. Not on the dole, you're not counted as unemployed. Yesterday the market went up by more than 300 points, and today, a bit before the open, it looks to be giving much of that back.

Monetary policy can only try to push the string, on the way up. On the way down, easy as pie, as Volker demonstrated. As I've written in the Flation Series, monetary policy only works when there is demand pull inflation; which means lots mo money in the hands of consumers. That isn't happening. Given population surging and the BRIC countries demanding our profligate lifestyle, inflation is, and will be, driven by physical shortage of materials. Strangling an economy with monetary policy under that condition will only make matters worse for the vast majority. It'll be fine for those Fatmen in Famine, however.

And you know who the Fed really represents.