The surge in A. I. Investments continue to progress rapidly. Over the last year, business spending on technology equipment and software has risen by over $250 billion. This accounts for an astounding 40% of the total growth in real GDP. Despite the strength of the A. I. Investment surge, it has not yet led to a significant increase in the overall economic growth rate. The real GDP growth of 2.7% over the past year, while respectable, falls well short of the higher growth ra

Fed Chair Nominee Kevin Warsh intends to link the Fed's inflation target to median or "trimmed" price measures. These measures are a statistically manipulated version of reported inflation, creating an "alternative reality." They are the 2000s version of Arthur Burns' 1970s core inflation. If implemented, this would be the fourth time inflation measures used for policy have been dumbed down, primarily benefiting the finance sector, as it would create the impression of a lowe

The US economy is currently facing a major energy shock, and the Federal Reserve needs to apply strategies designed for supply shocks. Yet, the Federal Reserve appears to be operating under the belief that they are still dealing with the long-term impacts of a demand shock. The projections from the March 17-18 Federal Open Market Committee meeting suggest a long-term forecast of official rates at 3% and inflation at 2%, resulting in a real official interest rate of 1%. In tod

Kevin Warsh's nomination for the position of Fed chair generated some unease and uncertainty on Wall Street. This wasn't because he was notably dovish or overly hawkish on monetary policy, but because he shares a similar perspective with Greenspan: asset prices are important when considering the economic and financial outcomes of monetary policy decisions. Greenspan and Warsh approach asset prices from distinct angles. In his well-known "Irrational Exuberance" speech, Greensp

If you rely on the GDP estimates from the Federal Reserve Bank of Atlanta's team, the US economy is performing the improbable by growing well beyond its potential, despite two key sectors experiencing no growth and minimal new job creation. The Atlanta Fed's GDPnow estimate suggests that Q4 GDP growth is at an annualized rate of 5.1%. However, that estimate of output growth is at odds with the weak growth picture depicted by data from manufacturing, housing, and employment. T

Nominal GDP increased at an annual rate of 8.2% in Q3, after a 6% annualized rise in the previous quarter. These consecutive strong increases in nominal economic activity are the largest since 2022. Monetary policy affects nominal spending, and the Nominal GDP/Fed Funds rule suggests that the current monetary policy stance is "far too easy". GDP price Index +3.7%. Earth to Fed!