The Fed's Upcoming Productivity Bet

In 1995, Fed Chair Alan Greenspan made an unconventional bet that the U.S. was undergoing an era of faster productivity growth based on the adoption of technology. The decision enabled a significant shift in monetary policy that resulted in faster non-inflationary growth and increased prosperity. The adoption of easier monetary policy also fueled the Dot-Com Bubble.

The boom of the late 1990s earned Greenspan the moniker of the “maestro”. Some even speculated that the Fed may have abolished the ups and downs of the business cycle. However, Greenspan cautioned in an October 2002 speech that “long-term productivity optimism may currently seem a bit out of place”.

As Trump appoints a new Chair at the Fed and his allies tilt monetary policy to a more dovish direction, a new Trump-dominated Fed is likely to make a Greenspan-sized bet on AI productivity.
 

What does that mean for investors?

 

The full post can be found here.