Dr. Milton Friedman tells us that 6 to 9 months after monetary expansion, there is a period of euphoria, like a drunk or a drug high which develops. This is the increase in output that comes after the monetary expansion hits the economy. This causes people to go out and pay inflated prices for goods and services. Its' the "good times."
Some 18 to 24 months into the process, price inflation catches up with output and negates its impact. This leaves us unable to pay the inflated payments we set up before, and we experience an inflationary recession.
About 6 months ago, I first heard that the Federal Reserve planned to unwind QE3, the money used from the last crash to buy up unmarketable assets. It's about $4 trillion, if my memory serves me.
Two days ago, I heard for the first time that output increased in the U. S. Economy. I am only aware of three things that can cause an increase in output:
1) increase in population/ employment.
2) increase in technology.
3) monetary expansion.
So, since population is being driven down by Trump's border position, and no dramatic increase in technology is seen, unwinding QE3 is all that is left on the table.
Within 11 months, we will see price inflation counter the additional output and the nation will hate Republicans by Election Day, November, 2018.
Janet Yellen is not a fan of Republicans.
Gene K. Chapman
I talk about Friedman's math in my book: themanwhobrokethesilence.blogspot.com
