COMMENT: It was great seeing you here in Europe. It was even more interesting to see how the central banks are starting to use the ECM rather than wait six to nine months before acting. Back in 2007, your model turned in February, but the Fed Funds Rate did not drop to 3% until one year later. I agree; you are impacting even though you cannot say who is or is not following your forecasts at that level.
Yesterday, the ECB lowered interest rates for the first time since 2019 during your target week of June 3. This represents a significant shift in the global economy’s monetary policy. With your Panic Cycle for the Fed meeting, it looks like they will follow suit.
Congrats. You are starting to get recognition for 50 years of work after the bankers tried to shut you up so they could constantly blow up the economy.
Paul
REPLY: Thank you. It was great to see you. With Keynesian Economics failing, rational men must look at other things. It is time we recognized that the Business Cycle incorporates everything from climate and weather to civil unrest and war. You CANNOT manipulate those things by raising and lowering interest rates to create perpetual prosperity, even under the Gold Standard, which failed because they could not prevent inflation when massive gold was discovered in the 19th Century in California, Alaska, and then Australia.
Even when all the gold was pouring into Europe from the discovery in the New World, it wreaked havoc on the European Economy, causing major inflation. In the end, Spain became a serial defaulter and successfully, through fiscal mismanagement, converted itself from the richest nation in Europe to a third-world country. Sound familiar?
Even Schumpeter attempted to explain the Business Cycle as waves of innovation. Someone invents something that takes the economy to new levels—steam engines, combustion engines, tractors, airplanes, and the Internet, to mention just a few. These aspects are not in the quiver of central banks to control. Paul Volcker conceded that the Business Cycle is about eight years. I had a long discussion about that with Paul back in 1999. His Rediscovery of the Business Cycle outlined how Keynesian Economics failed back in the 1970s. Even the previous Chairman of the Fed admitted that the Business Cycle ALWAYS wins.
