Member-only story
9.5 Reasons Why Monetary Policy May Fail at Restraining Inflation
I will be the first to argue that there is some point at which monetary policy will have an impact on the economy and on wages and hiring. I just think that this time around it is going to be much more difficult to control this way. The Bank of Canada is trying to engineer a soft landing for the Canadian Economy while bringing inflation down to about 2%, and the Fed is doing the same in the USA. It should be noted that neither central bank has ever had a soft landing when they have moved interest rates as aggressively as they have so far in 2022.
I suspect that for the next foreseeable future we may have inflation running at 4% to 5%, or the government will have to accept the consequences of crashing the economy in a very spectacular way. This article is my opinion based on extensive reading from many sources, the central thesis being that labour shortages and a shrinking labour force will drive wages and thus inflation up. I also feel that we can safely allow the economy to run a little hot in the 4% range for the next 5 or so years.
Problem #1 — Lack of Immigration
We live in interesting times. The western world is trying to contain inflation, but the problem is that the labour force…
