Commentary
The lag effect of monetary policy changes will surprise the Federal Reserve as the fiscal “pig” of stimulus begins to exit the economic “python.”
For those unfamiliar with the term “pig in a python,” it refers to when a python consumes its prey. It does so by swallowing it whole—in this case, a pig. The American-English definition of “pig in a python” became an analogy for the demographic bulge in the United States: the people who were born during the “baby boom” of the years immediately following the Second World War (1939–45), considered as a demographic bulge;
any short-term increase or notably large group. We can apply that analogy to the massive fiscal and monetary stimulus injected into the “economic python” in 2020–21. As discussed previously, those massive monetary and fiscal inputs were the root cause of the current inflationary spike. To wit:…