Chaotic Growth Oriented Economic Policy

Current economic monetary policy in the USA seeks to achieve an equilibrium of not too hot and not too cold, under the dictates of the dual mandate of optimizing inflation and employment.

This has mostly been good thing, but, economic growth has been generally underwhelming — especially in the last few decades.

https://www.crestmontresearch.com/docs/Economy-GDP-R-By-Decade.pdf

I propose that we consider a chaotic growth oriented economic policy.

Such a policy is characterized by large scale spending focused on infrastructure and investment, to both propel GDP growth as well as create the infrastructure needed to support industry and quality of life.

But it is not only spending. When the economy overheats and inflation becomes a problem, the Federal Reserve would not act in a measured careful pace of rate rises to cool the economy. Instead, it would act abruptly and brutally, raising rates enough for an immediate and strong effect.

Why is this better?

The first part of the spending is to engage all productive assets in building, drawing in marginal resources and getting them trained up. Everyone has work.

But the second step is vitally important as well. If it is understood that the Fed could brutally pull the rug out from under the economy, with no warning, it would calm those who find it advantageous to buy up hard assets or raise prices. For example, if you know that rates could go from 3 percent to 13 percent overnight, people might be less willing to buy up houses and buildings, hoping for appreciation.

If you look at the economic performance that we had from the forties to the sixties, it was much stronger. There is no reason to say that we could not achieve those number today.

Chaotic economic growth policy would require an understanding between the government and the central bank, since both have a role.

We are now averaging about 2 percent growth per decade, on an annual basis. Would it not be better to average 5 percent growth?