Original article from: Reuters
WASHINGTON: Federal Reserve policymakers on Friday began fleshing out what their new tolerance for inflation will mean in practice, an issue critical to how investors and households reshape their own outlooks even if it may not be relevant to any immediate decisions by the U.S. central bank.
The new policy, laid out in a strategic document last month and incorporated into a policy statement issued on Wednesday, pledges to keep interest rates near zero until inflation has hit the Fed’s 2% target and is on track to “moderately exceed” it “for some time.”
LEFT VIEWPOINTS
American Citizens have been sold a myth: scarcity. Politicians tell us we can’t afford universal healthcare, public-funded college, or even decent schools in all neighborhoods because it’s too expensive. “How are we going to pay for it?” they ask. The truth is, there is no scarcity. The Fed prints money from thin air, and the government borrows it and figures out where to spend it. We’ve spent more than we’ve taken in for years. In fact, under Trump, the deficit reached $1 trillion BEFORE the pandemic!
Currently, the Fed is desperately trying to print enough money to fill gaping holes in the economy. Congress’s problem is almost entirely due to a Republican Senate that believes we need to be frugal during an economic depression. That type of thinking is flawed and dangerous.
Deficit spending is not a problem when it leads to more growth; it becomes an investment. As Ray Dalio points out in the following video, one person’s spending is another person’s income. Cutting spending during a depression simultaneously cuts incomes and exacerbates the depression. We should spend money on things that will help all families and grow the economy, such as universal healthcare, incentives for small businesses, and more equitable public education. We need a functional Congress that understands that.