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Guy Ventner's avatar

The Fed's central mission for the last 30 years is rescuing Wall Street and Federal Government from their bad actions! They STILL have near $7 Trillion of DEBT on their books from 2008 rescue!

Main Street/investing has basic DIED....travel to area's where the RICHEST Bankers, Government, Tech people don't live or go...it is unpainted houses, empty strip malls and drugged zombie death!

I call for a 3% tax on the GROSS of "All" Wall Street trades(stocks, bonds, options, etc) or moving money offshore...FORCE them to INVEST, not money spin! The richest person in NJ...hegefund guy that front runs the market using math/physic! The economic REWARDS are to SPIN MONEY...no investing required! Much of Private Equities incentive is to run companies into the ground and strip pensions, assets, land...fire EVERYONE! A couple examples...Toy-R-US, Sears, etc

The FED GIVES wall street a lower cost of capital...so they can FRONT RUN the people of the USA...something like 20% of housing is OWNED by Wall Street Entities! Their corporate shell protects ANY personal or business liability!

The Entire Housing Market set to make the 2008 Financial Crisis look like a bump in the road! The average family of 4 OWES $520,000+ Federal Debt. Go look in vacation areas of fliptopia ....vacation homes occupied less than 3 months of the year....$1, $10, $100 Million...and they have INCREASED a 100 fold in the last 30 years. An empty 1/3 of acre not on the water in Naples Florida...$20 Million dollars!

We have REACHED THE TIPPING POINT...I am guessing the 100 year RESET is ON US!

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ScottB's avatar

All wonderful suggestions and I expect that the Fed will do what they can. However, unless the Executive and Legislative branches of our government do their parts, the Fed is going to be left with few options if inflation spikes and unemployment falls. Monetary policy can only do so much when fiscal policy does not cooperate.

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Perry Boyle's avatar

Brilliant as usual. John, I would love to amplify your message to my 11k plus LInkedIn base and get you more subscribers. I can't find you on LinkedIn.

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John H. Cochrane's avatar

I'm on LinkedIn but not very active.

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Kwaku's avatar

All intelligent and cogent recommendations, however it is doubtful that either party or our dysfunctional congress will address these issues or the impending meltdown as we approach $40T in fiscal debt. It seems to me that as with tariffs, Adam Smith's ghost will appear as the next crisis emerges from Wall Street, perhaps starting with Treasury debt but quickly becoming systemic...

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Paul OBrien's avatar

John, it sounds like you are suggesting a swing to the "rules" side of the old "rules versus discretion" debate, but you don't really say so. Your points make perfect sense, but they don't really address the fact that the Fed is run by a bunch of fallible, emotional humans in a highly political environment. Wouldn't some rules lead to a better equilibrium?

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Ivan Tcholakov's avatar

"Borrow long." Who would be the buyer? :-)

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Craig Yirush's avatar

That was informative, especially the distinction between changes in relative prices and a rise in the price level. Not clear, though, why you say the the Fed alone is not responsible for inflation? Isn’t it always and everywhere a monetary phenomenon?

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John H. Cochrane's avatar

It is not. It is always an everywhere a joint monetary-fiscal phenomenon, both in its cause and in its cure.

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Craig Yirush's avatar

But how can fiscal action (such as borrowing and spending) be inflationary if the total

stock of money is not increased?

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Philalethes's avatar

Do I understand correctly that FTPL implies that, if the government will not forswear stimulus and not build fiscal buffers, then raising policy rates by the Fed in response to a supply shock would result in higher, not lower inflation?

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Daniele Vecchi's avatar

A couple of points: 1. true bondholder picked up the bill in terms of real returns. I think we can add also that wages in real terms have been absorbing the shock 2. if the FED should stop trusting forecasts than there are two conclusions: models are wrong and / or let the army of economists go. they can rely on investment banks for low quality forecasts....

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D. J. Roach's avatar

The WSJ version is an improvement over the original version submitted for publication. Normative statements, typical of the writing of economists, are replaced by positive statements. Other changes improve readability, correct factual errors, and condense paragraphs, all with a view to increasing reader comprehension of the author's essential original thoughts.

In sum, this is an example of English Grammer 401 meeting the technical wizard's stream of consciousness. It does happen quite alot of the time, and it fully demonstrates the advantages of a formal Fine Arts post-secondary school education. Where the technical wizard excels in analyses of physical and/or economic systems and the application and control of the same to solve important issues relating to production, utilization, and the financing and control relating to the management thereof, the English major is vital to the communication and comprehension of the technical wizard's wizardry by the generalist manager and the users and customers of the technical innovations in everyday life. Embrace it.

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Allan Dobzyniak's avatar

One must believe that the money printing post Covid was for recession prevention. This is a difficult argument to defend when the economy was in recovery mode already. It is easier and likely more accurate to support the ideology of progressive Democrat politics as a spending motivator. What we got in return was a phenomenal increase in the growth of government, not so much the private sector. Astronomical amounts of money were wasted; the private sector economy stagnated other than politically favored industries (climate change). Energy, still the life blood of any thriving economy, became a major issue in itself as well as contributing to increasing prices. Energy was a 100% politically driven self-inflicted factor.

Not to have consequential influence on our trade balances with obsessive scrutiny of the relationships with our trading partners must have future consequences to America, none of which can be imagined to be positive. "Business as usual" is not a solution to anything including economics, security and the balance of power in a world far from a Kum By Yah landscape. One can have opinions on how the issue of trade policy as it effects virtually everything can be addressed, but criticism without defensible alternatives to the role of tariffs in their economic, political and negotiating value is unacceptable.

The FED is political. The market is less so. I would continue to trust the collective wisdom of millions versus the that of a few who, given the fact they are human, will have biases, blind spots and political alignment.

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Gene Frenkle's avatar

Biden made us energy dominant after we had record fracking bankruptcies in 2020. PPP and its sibling programs were an unmitigated disaster and those free dollars exacerbated the fentanyl death surge and violent crime spike. Just like Biden fixed our energy situation he also had fentanyl deaths trending down by 2023 by flooding the country with Narcan. Biden and police agencies around the country had the violent crime trending way down by 2024. Just like in 2017 Trump has inherited a great situation and the next crisis will probably arise in 2028.

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Jakob Bruckner's avatar

A simple (maybe naive) question to your first statement: "On Wednesday, the Fed announced no change in interest rate, noting rising stagflationary risks to both inflation and unemployment. But the big challenges lie ahead. What will emerge from the conclave?" This sounds like following the Taylor Rule. Does it mean, you suggest a more forward-looking Taylor Rule to be applied? What would that mean for NK model results?

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D. J. Roach's avatar

"TOKYO—Japan’s Ministry of Finance plans to reduce its issuance of superlong Japanese government bonds, after a rapid rise in long-end yields alarmed markets.

"At a meeting with primary JGB dealers Friday, the finance ministry sought feedback on its plan to cut supply of 20-year bonds by 200 billion yen, equivalent to $1.37 billion, per sale and 30- and 40-year notes by 100 billion yen each at every auction through March 2026. The reductions would start in July.

"To balance the issuance amounts, the ministry also plans to increase issuance of two-year and other shorter-dated debt, it said.

"The MOF’s issuance plan for superlong bonds has been in the spotlight since yields hit multiyear highs recently, reflecting a lack of investor demand and concerns about the cost of repaying the government’s enormous debt. Fiscal sustainability has been a longstanding challenge for Japan, which has government debt double the size of its economy." The Wall Street Journal, June 20, 2025.

Auction failure is a significant risk for governments running fiscal deficits. The U.S. Treasury department has come close on a couple of long-date note and bond issues in the recent past. As the administration doubles down on tariff rates and as Congress engages in writing punitive legislation to penalize foreign investors for the transgressions of foreign sovereigns taxing large U.S. corporations on Pillar II and Pillar I minimum corporate tax and digital services tax, it should be anticipated that the foreign investor appetite for U.S. issued corporate debentures and bonds will diminish, and U.S. Treasury bills, notes and bonds will attract less interest from foreign governments and private sector investors.

Japan's finance ministry is simply reacting to heightened investor awareness of the government's indebtedness and the risk that lenders to the government are taking on with long-dated notes and bonds. N.B.: the term "bond" applied to a debenture denotes that the debenture is secured by real collateral and not simply the promise to repay the debt. Applying the term "bond" to long-dated U.S. Treasury issued debt securities creates an oxymoron, for there is no real collateral backing the government's promise to repay. As John has frequently noted, the means by which the government repays the security purchaser is via the inflation "tax". What's good for the borrower is not so great for the lender, under those conditions. Caveat emptor: "buyer beware".

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