March import prices came in smokin’ hot at 6.9% YoY. What’s important about that cardinal number, however, is not its probable transiency per the daily palaver from the Fed heads, but something far bigger: Namely, that it actually nails the everlasting folly of the entire Keynesian macro-management project.
During the past 12 months we have had an unprecedented live fire drill in Keynesian stimulus of “aggregate demand”, which was undertaken on the grounds that the US economy was functioning below its theoretical Potential GDP or Full-Employment level. Accordingly, the fiscal and monetary authorities aimed to fill up the GDP bathtub with free stuff from the US Treasury and easy money from the Fed, and they did so hand-over-fist.
Alas, on the margin all that double-barreled stimulus did not goose output in Lincoln NE, Youngstown OH or anywhere else in the US of A. Much of it went flying right through the import terminals and ended up as purchase orders on the factory floors of China, Vietnam, Mexico and other low-cost manufacturing venues.