The Fed's Credit Channel Is Broken And Its Bathtub Economics Has Failed | David Stockman

``This entire Keynesian bathtub model is nonsense, of course, not the least because the US economy is not a closed system, but functions in a rambunctious, open global economy. In that setting, massive flows of trade, investment and finance impinge heavily on prices, costs, wages and productive asset returns, and therefore the daily behavior of millions of domestic workers, businessmen, investors and financial intermediaries. Accordingly, if domestic costs and wages are too high relative to the global competition, the Fed can create "aggregate demand" to its heart's delight, but the added borrowing and spending will leak off into incremental imports, not added domestic production and jobs.''