So fast forward to 2020, and comes the pandemic, comes the falling off the cliff in March. And what does the Fed do? The Fed - never mind the kitchen sink - the furnace, the plumbing, the furniture, everything in that house got tossed at the problem... The Fed took charge of that this pandemic did not lead to a depression. And what follows is one of the most astonishing light shows in the history of central banking. By the time 2021 came to a close, the broadly defined money supply was showing growth year-over-year in excess of 20%, never before seen in such a short period. Interest rates collapsed. The speculative fervor that this created was lifting stocks, bonds, real estate... cryptos, NFTs, everything that wasn't nailed down. Nothing was nailed down. Massive levitation of the everything bubble, some of us called it.
What also occurred was an undesired inflation on Main Street itself, at the cash register, at the checkout counter. So the Fed never minded the inflation at the corner of Broad and Wall Streets, New York Stock Exchange. That was desirable because that made people spend and encouraged investment outlays and the like, but the Fed is in business to prevent and ameliorate, if it does occur, inflation at Main Street. It wrecks wages, it wrecks budgets that distorts the values that gets elected officials defeated at the polls. That's the kind of inflation they don't like. But we got that, too.
So now here we are with inflation rampant. It's not an exaggeration. Stock prices still elevated by historical lights, bond yields still very low by historical reckoning. So what does the Fed do? Well, it's rather in a quandary.
~ Jim Grant, interview with William Green, 39:20 mark, August 20, 2022
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