Tuesday , May 26 2020
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Stating the obvious, twice

Summary:
Kudos to Chair Powell. The following is obvious, but unfortunately must be repeated ad nauseam in order to push back against the vast sea of ignorance out there: Federal Reserve Chairman Jerome Powell made a rare appearance on national TV Thursday morning, telling NBC’s “Today” that the central bank still has plenty of tools left to support a U.S. economy that may already be in recession amid the novel coronavirus pandemic.“When it comes to this lending we’re not going to run out of ammunition, that doesn’t happen,” Powell said. And this is also pretty obvious, but needs to be said: “We may well be in a recession,” Powell said. “But I would point to the difference between this and a normal recession. There is not anything fundamentally wrong with our economy. Quite

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Kudos to Chair Powell. The following is obvious, but unfortunately must be repeated ad nauseam in order to push back against the vast sea of ignorance out there:

Federal Reserve Chairman Jerome Powell made a rare appearance on national TV Thursday morning, telling NBC’s “Today” that the central bank still has plenty of tools left to support a U.S. economy that may already be in recession amid the novel coronavirus pandemic.

“When it comes to this lending we’re not going to run out of ammunition, that doesn’t happen,” Powell said.

And this is also pretty obvious, but needs to be said:

“We may well be in a recession,” Powell said. “But I would point to the difference between this and a normal recession. There is not anything fundamentally wrong with our economy. Quite the contrary. We are starting from a very strong position.”

I wonder if the tide is turning in our favor on the phony “out of ammo” myth. Let’s hope so. I feel like I’ve been fighting a lonely battle.

PS. People often wrongly assume they know my views on the epidemic. I’ve never offered an opinion of the effectiveness of chloroquine (just on Trump giving advice), and don’t have one. (Unlike many people, I don’t form my views on REALITY based on what Trump thinks.) I’ve never offered an opinion on whether we should do “lockdowns”. I’m not even sure what a lockdown is. If you want some opinions on how to address the epidemic, you’d be better off reading my good blog today.

PPS. Today’s weekly unemployment claims report is sometimes compared to the previous record, 695,000 in 1982. But if viewed in terms of the increase relative to normal, it’s actually more like 10 times worse than we’ve ever seen. It is more than 3 million above normal, vs. a bit over 300,000 above normal in previous bad recessions.

PPPS. Italy and the US will pass China in total cases by tomorrow. A few days later, China will fall to 4th (behind Spain.)

HT: Frank Fuhrig


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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