Tribune. Since January 20 and the inauguration of President Joe Biden, the waltz of the figures of the American fiscal stimulus has made you dizzy. From the 1,900 billion dollars of the American Rescue Plan, voted in March, to the preliminary announcements, on May 28, of a ten-year plan of 4,400 billion in additional spending, the gigantism of the support given to the American economy crushes the 750 billion euros of a European recovery plan, the historical nature of which is finally put into perspective. It did not take more to see the European public debate import the idea of a Joe Biden putting an end to neoliberalism in the name of the return of the State in the fight against inequalities and global warming.
Yet despite the importance of public spending and the obvious impetus given to economic activity, most of the transformation underway in the United States is located elsewhere. After four decades of a disinflationary cycle started in 1979 by Paul Volcker – then chairman of the Federal Reserve – it was first American monetary policy that underwent a transformation with radical consequences … August 27, 2020, a little more two months before the election of the Democratic candidate.
While the control of inflation has been the priority of American monetary policy over the past forty years, it is a maximum employment objective that will henceforth be pursued, with a determination unheard of since the “glorious thirties”. This revision constitutes a structural change in US economic policy, while fiscal stimulus plans are cyclical in nature and depend on the political vagaries of the moment.
“High pressure” regime
Forecasters are already taking this new paradigm into account. According to the latest projections made by Goldman Sachs bank, the level of American unemployment could reach the level of 3.2% of the working population by the end of 2023, the lowest since 1953.
Such a result could not be achieved with the old monetary approach of the Federal Reserve. In December 2015, faced with an unemployment rate that was approaching the 5% threshold, the Fed judged that the risk of seeing inflation arise justified a tightening of its policy, thus causing a slowdown in activity until 2018. It is, among other things, in view of this error that the Federal Reserve decided to change its approach.
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