Inflation and the Fed: A Follow-Up

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Ryan Cooper suggests that we don’t really know if the Fed can significantly raise inflation:

Here’s the thing: this is pretty much what the Bank of Japan has been doing for the past few years. The chart on the right shows QE in Japan compared to the US over the past six years (indexed to 100 at the end of the Great Recession). The BOJ balance sheet has more than quadrupled since then, and the inflation rate in Japan is….

-0.4 percent.

Since this hasn’t worked—and since doubling the Fed’s balance sheet in 2013 has produced declining inflation—it seems likely the Fed would have to increase its balance sheet by, say, 8x, to have any chance of producing substantially higher inflation. In dollars, that means $28 trillion in additional asset purchases. They would run out of treasuries to buy long before they hit that mark and would start gobbling up every corporate and MBS bond in sight. That’s really not a tenable suggestion.

This is all just back-of-the-envelope stuff, not meant to be taken too literally. For one thing, we’re starting off with a higher inflation rate than Japan did. Still, this gives you a rough idea of what the Fed is up against. In theory, they can do endless helicopter drops until they get the inflation they want. In practice, it’s a lot less clear they truly have a plausible path to 3 or 4 percent inflation.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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