PREVALENT ECONOMIC SCHOOLS OF THOUGHT

Economics is a soft science—with different variations and flavors to pick.
These are the top 3 and most relevant today:

KEYNESIANS

The majority of global hegemony approaches economics through
this lens. Academia and CNBC are both saturated with this school of
thought. Places more emphasis on stimulating aggregate demand,
as opposed to savings and capital investment. Define inflation as
“rising prices.” Believe in central bank tools and interventions. Less
emphasis on debts and deficits, as long as minimum interest payments
can be made. Believe in QE (Quantitative Easing) is stimulative and
inflationary, because if you can lower the nominal interest rates
below the real rate of inflation, people will be more likely to put their
depreciating dollars to work—generally through buying stocks, real
estate, fine art, gold, silver, Bitcoin, and making loans as opposed to
buying bonds or staying in cash.

AUSTRIANS

Generally believe in free markets, flexible prices, stable money, and
have a more rigid economic paradigm, and often wish to see less
central bank intervention or perhaps The Fed to be ended entirely.
Place added emphasis on the cyclical nature of markets. Austrians
generally believe the free market should set interest rates, and are
leery of debt, deficit spending, abnormally low rates, Fed tools and
intervention. It is also important to note that their definition of inflation
IS NOT “rising prices” (as with Keynesians), but expansion of the
money supply. Believes that QE is inflationary, very inflationary. But
may also tend to believe central bank stimulus merely blows asset
bubbles while stymieing real economic growth.

MODERN MONETARY THEORISTS (MMT)

“New age”, growing in popularity, and probably wrong, LOL. Advocate
strongly on behalf of central bank intervention and government
spending. Focused on “fiscal flows” and believe that as long as currency
is being sent to the right places, we good fam. Not as concerned with
debts and deficits, assuming the interest payments can be made, and
even encourages massive government spending.

Most tenants of MMT often do not believe QE to be inflationary, but rather deflationary,
because as central banks buys bonds in order to drive bond yields down, rather than incentivize commercial banks to issue new loans, the central bank simply ends up crowding out the private sector. This has a deflationary effect, because although you’ve increased the money supply, it’s sitting on institutional balance sheets and never entering the real economy (think back to money velocity). They are probably wrong
though lol, only an idiot would raise interest rates in order to create inflation.

U.S. INTEREST RATE POLICY OVER THE LAST 10 YEARS

The historical average Fed funds rate has been about 6.5% since 1913. Recessions, which occur on average every 6-9 years, are regarded as requiring an interest rate cut of 5.5-6.5% (or 550-650 basis points) in order to ward off contractions (recessions/depressions). The Keynesians believe this anyway, and that’s the primary school of thought driving the global hegemony. Austrians also believe this, but their paradigm is (sadly) rather irrelevant today.

As you can see, the Fed was never able to roll off its balance sheet, nor raise interest rates in time for the 2020 depression. We only had 2.16% or 216 basis points of cutting/stimulation available, as opposed to the 550-600 basis points of ammunition needed for cutting, and thus staving off the recession. This amount of stimulus is most likely inadequate, therefore more than likely requires negative nominal rates in the U.S. by as early as 2021, or maybe just staying at .42%, while printing trillions on top and expanding the Fed balance sheet exponentially and indefinitely.

FROM THE FED WEBSITE REGARDING POLICY NORMALIZATION

"At its December 2015 meeting, the Federal Open Market Committee (FOMC) decided that economic conditions and the economic outlook warranted the commencement of
the policy normalization process and the Committee voted to raise the target range for the Federal funds rate, the first change since December 2008." —St. Louis Fed

Below is the Fed's dot plot from 2015—charting their future interest rate projections. According to them, we should have a Fed funds rate of 3.75% today, but they lied, and now it sits at 0.42%, even lower than it was in 2015 before beginning to normalize from the 2008 crisis. Oopsies!

2015 was a hilarious year for Fed watching, because 7 years into their easing cycle, they knew another recession was becoming more probable (remember expansions historically last 6-9 years, recessions 2-4, and the last recession began 2008). But they also knew their debt burden from papering over the last crash was still too large for them to be able to raise interest rates again, roll of their balance sheet, and normalize the economy.

Think of it this way, if you have a $27 trillion loan out, would you rather pay 0.42% on it or 6.5%? As a matter of fact, the debt burden from 2008 remains so great, that if the Fed funds rate ever goes above 3.5% again, perhaps 20-40% of the S&P 500 would simply slide into the ocean.

This would explain why the Game the Fed has playing with the markets since 2015 has been “say we’re going to raise interest rates but don’t” or to put another way “talk about how the economy is improving, so much so that we’re ready to normalize the economy, but never actually do lol keep printing currency, lulz.”

INFLATION VS. DEFLATION: TUG-OF-WAR

INFLATIONARY TAILWINDS

• Quantitative Easing (Keynesians and Austrians)
• Helicopter Money (aka $1,200 stimulus check or PPP)
• Negative Interest Rate Policy (NIRP)
• Universal Basic Income
• Most other forms of Financial Engineering
  in our "Inflate or Die" paradigm
• Foreign Markets selling US treasuries/getting rid of their USD

DEFLATIONARY TAILWINDS

• Automation
• Technology
• Artificial Intelligence
• Aging Demographics
• Quantitative Easing (MMT's only)
• Exporting inflation to foreign markets/places

INFLATION VS. DEFLATION: TUG-OF-WAR

Expanding the money supply “is” inflation, and rising prices are merely a symptom. Austrians just tend to buy gold every time the Fed prints money, regardless of where it’s going. Printing money “is” inflation to them. Period.

INFLATION TO MODERN MONETARY THEORISTS

Inflation is all about “fiscal flows”. This is why (perhaps stupidly), they believe that by raising interest rates, you’re creating inflation (rising prices), and by lowering rates, central banks are crowding out the private sector with stimulus, thus creating deflationary tailwinds.