Economists' Predicted 2023 Recession Fails to Materialize as Fed Engineers Soft Landing
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Economists predicted a 2023 recession based on assumptions the Fed would raise rates to curb inflation, similar to Paul Volcker's strategy in the 1970s-80s. But the Fed engineered a soft landing instead.
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Steve Hanke relied on the flawed quantity theory of money, which assumes a constant relationship between money supply and inflation/GDP. But the relationship is not constant in reality.
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There are issues with measures of money supply like M2. It does not capture spending via loans and credit cards which constrain spending.
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The Fed does not directly control M2 or other monetary aggregates. M2 depends on public allocation decisions.
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Tight links between M2, inflation and output are not supported. So predictions based on M2 "wiggles and jiggles" are unwise.