Inflation and the Fed: A Follow-Up

Fight disinformation. Get a daily recap of the facts that matter. Sign up for the free Mother Jones newsletter.


Ryan Cooper suggests that we don’t really know if the Fed can significantly raise inflation:

Here’s the thing: this is pretty much what the Bank of Japan has been doing for the past few years. The chart on the right shows QE in Japan compared to the US over the past six years (indexed to 100 at the end of the Great Recession). The BOJ balance sheet has more than quadrupled since then, and the inflation rate in Japan is….

-0.4 percent.

Since this hasn’t worked—and since doubling the Fed’s balance sheet in 2013 has produced declining inflation—it seems likely the Fed would have to increase its balance sheet by, say, 8x, to have any chance of producing substantially higher inflation. In dollars, that means $28 trillion in additional asset purchases. They would run out of treasuries to buy long before they hit that mark and would start gobbling up every corporate and MBS bond in sight. That’s really not a tenable suggestion.

This is all just back-of-the-envelope stuff, not meant to be taken too literally. For one thing, we’re starting off with a higher inflation rate than Japan did. Still, this gives you a rough idea of what the Fed is up against. In theory, they can do endless helicopter drops until they get the inflation they want. In practice, it’s a lot less clear they truly have a plausible path to 3 or 4 percent inflation.

HERE ARE THE FACTS:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

ONE MORE QUICK THING:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate