Georgia has to decide who can guide its state political economy through a rough patch of inflation

Raphael Bostic, president and chief executive officer of the Federal Reserve Bank of Atlanta, recently released a video reiterating the Board of Governors of the Federal Reserve System’s policy of achieving an inflation rate of two percent. President Bostic defined inflation as an imbalance between aggregate demand for goods and services and aggregate supply of the same.  Achieving the two percent inflation rate during a “soft landing” is achievable but will be rough, according to the Atlanta Fed president.  A soft landing is defined by Investopedia as a moderate economic slowdown following a period of growth.  Central banks line up on their economies’ runways hoping for a soft landing while raising interest rates for the purpose of curbing inflation.

The Board of Governors uses a number of monetary policy tools to curb inflation including changing its target range for the federal funds rate; buying and selling securities; changing the reserve requirements for its member banks; changing the amount of interest it charges at its discount window for loans to its member banks; and changing the amount of interest it pays on commercial bank excess reserves held at the system’s twelve federal reserve banks.

Mr Bostic also noted an apparent imbalance in the United States’ labor markets where only 60% of available and open jobs have been filled.  There is where I think about the state of Georgia’s management of the political economy.

The role of government is to act as a transfer agent between taxpayers and bondholders.  Government taxes the spread between a taxpayer’s work efforts and what the taxpayer yields from those efforts.  Government takes its cut and passes on the rest to its bondholders.  As a people manager, government creates narratives to encourage more yield and implements policies to encourage or support actions that create that yield.

State governments are less incubators of democracy and more incubators of tax-generating activities.

In the case of Georgia, bond holders and bond traders should not only keep their ears open to narrative spun by Georgia’s gubernatorial candidates, but keep their eyes open when reading the policies proposed by the candidates.  How well do their proposals lend to the need for yield creation?  Are their proposals designed solely to tug at heart strings or can proposals be tied to activities that ultimately increase yield from taxpayers that can ultimately be transferred to bond holders?

Followers of state elections rarely if ever tie state government policies to national dollar and monetary policies.  I think bond holders and bond traders should start looking at state and federal governance of the American political economy to best understand how well the United States is doing on generating yield.          

 Alton Drew

25 May 2022

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