Just when you think you have something figured out the dynamic of change kicks in. Not to worry students, as they probably won’t be re-writing your textbooks just yet. This is mainly because they are not sure what to write. The U.S. economy and those of other wealthy nations have run with a combination of basic supply and demand (firms and consumers), and have been steered by governments via fiscal policy and quasi-governmental central banks who have tweaked monetary policy.

This has been largely the case since the stagflationary economic times in the ’80s. Governments worry about the economy on a more macro level while tackling a myriad of other issues. Central banks like the Fed around the world are charged with keeping the business cycle in check by inserting and removing money from the market.

The government wants job growth and increasing GDP, which will behoove them at election time, as the economy is almost always the top concern on the minds of the public.

Growth is good, but historically growth has meant inflation, the other side of the economic coin. The Fed steps in and as former Federal Reserve Chairman William McChesney Martin once quirked, “Independent central banks are needed to take away the punch bowl just as the party warms up.”

The macroeconomic data is not adding up anymore. The correlation between lower unemployment and higher inflation has gone missing, as evidenced in our own economy. America’s jobless rate, at 3.5%, is the lowest since 1969, but inflation is only 1.4%. Interest rates are so low that central banks have little room to cut should recession strike.

Supporting the demand curve, as was done after the Great Recession in 2007, involved what is known as quantitative easing (QE), which is essentially the government buying bonds, putting more money in circulation for growth. Here is where globalization fits in. Global supply chains mean prices do not always reflect local labor market conditions as they once did.

Savings have resulted in more than a quarter of all investment-grade bonds, worth $15 trillion, to now have negative yields, meaning lenders must pay to hold them to maturity. Remember that the financial mechanics behind negative yields and interest rates are two different things. It starts when an investor buys a bond for more than its face value (par). If the total amount of interest the bond pays over its remaining lifetime is less than the premium the investor paid for the bond, the investor loses money and the bond is considered to have a negative yield.

A negative interest rate means that the central bank (and perhaps private banks) will charge negative interest. Instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. Yes, it is Alice in Wonderland.

If the point comes to where central banks can no longer steer the ship because of the enormous debt on their balance sheets, the heavy lifting will be done by the federal government.

Joe Biden and his fellow Democrat candidates don’t understand this. Like the good comrades they are in altruistically giving the word “free” a new meaning, they will be like putting gas on a fire by increasing government spending. Enter modern monetary theory, another catch phrase of the left that circumvents their normal abnormal desire to spend your money.

AOC and the squad throw this term around as if they had graduated from the London School of Economics. The notion says there are no costs to expanding government spending while inflation is low, so long as the central bank is supine.

How we retool our fiscal and monetary policies will decide the future of America. Be careful what you wish for in the next election. It’s the economy stupid.