The next time you complain about modern monetary theory (MMT), another incarnation of money-printing, you are sexist because you are “mansplaining.” This is what one Axios reporter purported after several economists pushed back against a New York Times profile fluff piece on MMT queen Stephanie Kelton, hilariously declaring that she can now take a “victory lap.”
As the kids say, here is the lowdown on what happened: The former newspaper of record published a glowing article on Kelton and championed the broader progressive monetary doctrine while dismissing 40-year high price inflation. But the article led to an influx of criticism, including former Treasury Secretary Larry Summers, who likened it to “publicizing fad diets, quack cancer cures or creationist theories.”
Summers, who went scorched earth on the rosy article and MMT, posted a number of tweets accusing the MMT movement of not submitting its work to peer review or even engaging in a public debate with critics. Summers was not the only economist to take exception to the article.
Economist Noah Smith published a Substack piece titled, “The NYT article on MMT is really bad,” arguing that the author failed to perform any substantive follow-up to MMT criticisms. Smith stated:
“…there was no conceivable state of the Universe in which MMT people would not have taken a victory lap. They always take victory laps, all day long, rain or shine. When you have an unfalsifiable meme complex instead of a concrete and falsifiable theory, it’s easy to claim that your ideas cannot fail, they can only be failed.
But to the rest of the world, inflation gave a reason to be skeptical of MMT’s constant advocacy of yet more deficit spending.”
Axios did not appreciate these lamentations. Instead, the website released an article that compared MMT pushback to mansplaining, complaining that “the gender dynamics … look terrible here” because “a handful of prominent male economists … are freaking out.”
So, criticizing MMT and eternal money-printing is labeled as “freaking out” and sexist nowadays by the gatekeepers of allowable opinions. You loathe, detest, abhor, despise, and hate women by refusing to endorse an idea centered around fairy dust and unicorns that can destroy the nation’s currency. This grievance is about as earnest as MMT itself.
Quantitative Tightening: Supersize Me
Well, that was quite the inflation report. In January, the annual consumer price index (CPI) advanced to a four-decade high of 7.5%, higher than the market forecast of 7.3%. Last month, everything was more expensive across the board, with no signs of slowing down. So, is there an entity that could come to the American people’s rescue? The Federal Reserve, the institution that caused this mess in the first place.
The debate on Wall Street is now how aggressive the Eccles Building will be when raising interest rates to rein in 40-year high inflation. Will it be cautious with 25-basis-point movements, or will the organization throw caution to the wind and start pulling the trigger on 100-basis-point hikes? Investors would prefer the former, but the average person would opt for the latter.
What does St. Louis Federal Reserve President James Bullard desire to see? Speaking in an interview with Bloomberg following the inflation report, Bullard revealed that he would “like to see 100 basis points in the bag by July 1.” With just three Federal Open Market Committee (FOMC) policy meetings left until that date, the rate-setting body could give the nod to a single half-percentage-point rate hike, the first in modern rate-hiking cycle history.
The financial markets appear to agree with the hawk. Citigroup economists are penciling in a 50-basis-point hike in March. Ditto for Grant Thornton chief economist Diane Swonk. Contracts traded at CME Group are pricing in a half-percentage-point jump next month.
But not everyone concurs, prompting Bullard’s colleagues to engage in some damage control following the Feb. 10 selloff. Cleveland Fed Bank President Loretta Mester does not envision the case for a 50-basis-point boost, although she does endorse a faster pace of rate hikes and accelerating the $8.86 trillion balance sheet runoff. San Francisco Fed President Mary Daly and Richmond Fed President Thomas Barkin are also opposed to a half-point hike.
Whatever the case, brace yourselves. Rate hikes are coming!
Consumers Losing Confidence in US Economy
Wow. U.S. consumer confidence has not been this low in more than a decade, according to the University of Michigan’s preliminary Consumer Sentiment Index for February. The monthly reading dropped sharply for the second consecutive month, clocking in at 61.7, the lowest since Oct. 2011. The market had penciled in 67.5, and the figure is down 19.7% from the same time a year ago.
Consumers are ostensibly bearish on everything. Consumer expectations for the economy eased to 57.4, while current economic conditions declined to 68.5. Near-term inflation projections rose to 5% this month, and five-year forecasts held steady at 3.1%.
“The recent declines have been driven by weakening personal financial prospects, largely due to rising inflation, less confidence in the government’s economic policies, and the least favorable long term economic outlook in a decade,” said Richard Curtain, Surveys of Consumers chief economist, in a statement.
If this downward pattern persists for much of 2022, and voters adopt the view of “it’s the economy, stupid” at polling stations nationwide, it could spell trouble for Democrats in the upcoming mid-term elections. But President Joe Biden insists that inflation will improve toward the end of the year, which would be just in time for Election Day. As Captain Renault utters in Casablanca, “I’m shocked, shocked!” that relief comes when Americans head to the voting booth.
~ Read more from Andrew Moran.