Comment by Analemma_
15 hours ago
> It bugs me that the Fed has no mechanism to really deal with supply-shock driven inflation.
I mean, what would that actually look like? The Fed is insulated from democratic accountability, for very good reasons, but flipside of that is that their powers are intentionally limited. If they had the same immunity to public opinion but with the power to address supply shocks, that would quickly veer into tyranny.
It's a careful balancing act and there is no perfect solution. What's supposed to happen is that Congress acts on supply-shock driven inflation, but this current Congress would rather eat a bag of broken glass than actually govern, which the Fed can't really do anything about.
What it would look like, at the barest minimum, would be the Fed rightly and with receipts calling out the fact that they’re a monetary policy function, and that the current inflationary problems aren’t a monetary one, so if the U.S. would like something done about its inflation issues, then it needs to look someplace else besides the Fed to deal with it.
It doesn’t have to do anything to monetary policy when monetary policy isn’t the problem. It can do nothing.
It’s not the Fed’s job to try to fix terrible fiscal & trade policy, but that’s now what it’s basically trying to do. So, it’s become a political function by virtue of the political apparatus offloading the consequences of its idiocy onto the Fed to clean up after it with a set of tools that can’t even actually do the job.