As Lars Christensen notes in a recent post, it is becoming increasingly clear that Janet Yellen is a strict adherent of the textbook Keynesian model. As such, she does not have much faith in thinking about the economy in terms of the markets, and risks a further drift from a nominal target than has already been the case. Indeed, the determination to further tighten, and the fact that she would not directly address the issue as posed to her, feels as though a sunset, in what should have been the sunrise of the 21st century.
Thus far, visions of 21st century progress are still missing, as governments try to move ahead on the outdated terms of the 20th century playbook. Even the musings of a potential Singularity, have little role for the citizen in the creation of wealth. Why have too many nations refused to engage their own citizens as to what they think is possible, for long term future growth? Not only has this made matters more difficult in the political arena, the backward looking focus of the Fed only makes it more vulnerable to recession in the months and years ahead.
So long as pent up demand exists, the potential of what could still be a higher growth trajectory, will remain unmet. It has proven too convenient for the Fed to ignore pent up demand, by focusing on the distractions of inflation and interest rates instead of the marketplace. However, it is the marketplace where the potential for growth still exists - not Washington, which has its hands quite full with the ever growing obligations it has taken on for well over a century.
Long term growth remains threatened by the rigid conditions of both present day supply and demand. Increasingly, the education of one's youth is becoming a travesty, for there is little room in the marketplace to include the vast potential of human capital investment. It's time for governments to face the fact that they have left too little space for the inclusion of their own citizens, to participate in the wealth creation of the 21st century. It's time to do something about this, instead of further ratcheting down monetary policy as is continuing at this moment. Don't let the sun go down on the promises of prosperity that were made, in the 20th century, when citizens trusted their central banks to do the best monetary job on their behalf.