There are several unique forces shaping the current Federal Reserve. Among them are:
1.) A Chief Executive willing to deny facts as manner of being, not simply for political gain.
2.) The rise of MMT.
MMT states that a government that can create its own money, such as the United States:
Cannot default on debt denominated in its own currency;
Can pay for goods, services, and financial assets without a need to collect money in the form of taxes or debt issuance in advance of such purchases;
Is limited in its money creation and purchases by inflation, which accelerates once the economic resources (i.e., labor and capital) of the economy are utilized at full employment;
Can control inflation by taxation and bond issuance, which remove excess money from circulation, although the political will to do so may not always exist;
Does not need to compete with the private sector for scarce savings by issuing bonds. These tenets challenge the mainstream economics view that government spending should be funded a priori by taxes and debt issuance. MMT asks in effect: “Why not create the money to buy what we think is important, and then raise taxes or issue bonds when we get inflation?”
The first four MMT tenets are not in conflict with mainstream economics in terms of how money creation is executed and inflation works. For example, as former Fed Chair Alan Greenspan said, “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.” However, MMT disagrees with mainstream economics about the fifth tenet in terms of impact on interest rates.
3.) A decade of financial repression/distortion
4.) Macro trend change in demographics
We do not know where this is going, but it promises future opportunities in volatility.