The feds effect on the overall economy was, and continues to be exaggerated.
What the Fed Reserve is telling you is that they want to invert the yield curve. They had to raise their target because the 10Y yield had recently increased to almost 3%. And for those of you who don't know, once they invert the yield curve, that's the fat lady singing that the Fed Reserve has taken the punch bowl away. "In December, the ''central tendency'' of Fed officials' projections was for an interest rate target of between 2.4 percent and 3.1 percent at the end of 2019; that range has now shifted up to 2.8 percent and 3.4 percent."
The 1960s? REALLY? I lived through the 1960s; grew up during the 1950s. Working class Americans were the driving machine of our nation. We had industry, more fairly distributed tax policies and a thriving nation. Ronald Reagan and his false narrative fed through "trickle down" was the beginning of the end for America. The HOURS one must work today to enjoy even a basic standard of living when compared to a half century ago is mind-boggling. As I see it, this is yet one more false narrative used to seduce working Americans into a new myth; one that keeps them in a state of serfdom while the rich lavish themselves on the backs of us serfs.
3
It all sounds lovely. But what happens to the economy when Trump, the Chinese and everyone else starts imposing new import taxes?
Chairman Powell, try as he and the Fed will, cannot accomplish their goal with the profligate spending by the Trump-Pence-GOP that is keen to increase national debt by way of tax breaks for the top 5% and failing to pay-as-they-go.
Conservative pundit Neil Irwin claims that the American economy in 2019 and 2020 "will be the healthiest it has been in half a century."
Only if one ignores the fact that Trump and the Republicans have enacted a tax plan and budget that creates massive budget deficits as far as the eye can see. Only if one ignores the fact that our already yawning and immoral income inequality is about to get far worse, the Republicans having handed massive tax cuts to big business and the wealthiest of the wealthy. Only if one ignores Trump's illegal tariffs that are about to ignite a trade war. Only if one ignores Trump and the Republicans'destruction of what was our emerging system of national health care that provided 20 million more people with access to health care and began to improve the health of the American people.
Only if one closes one's eyes to the horrendous and destructive policies of Trump and the Republicans can one possibly claim that this economy will be "the best" in any way.
9
Keep both hands on the wheel.
This can work - IF - we keep the Democrats out of power. Otherwise, it goes 'poof', like it did under Obama.
Little interest in politics but do like history and have to remind you it was under Bush the economy took a dive into the financial crisis. Obama's stimulus plan was weak, 1/2 of what was needed but the excuse was never get a strong one pass Republicans and timid Democrats.
1
I think you mean the "poof" under George Bush and the Republicans in 2008.
1
I really don’t understand these constant comparisons to the 1960s era as if it were the norm. Demographics between then and now are hugely different. Then there was a very large cohort of baby boomers hitting their home formation years. They represented a far larger percentage of the population then than the 16-35 group does today. In addition to a population growth now that is below replacement levels there are huge numbers of boomer retirements also acting as a brake on the economy. Demographics alone argue that our new norm of GDP growth will be significantly below levels seen for the 30 years after WWII.
2
As in the sixties:
1) inflation is beginning to grow.
2) unemployment is decreasing.
Inflation is nowhere close to the sixties though fear of it is, which will likely push the Fed to keep it in check, and unemployment is so far not having much effect on wage inflation.
In any case, potential peak demand is nowhere near as great as it was when the population reaching household formation was a much larger percentage of the population. Moreover, Fed studies concur, estimating at least a 1% drag from the lower birth rate plus baby boom retirements.
As long as the big double lie of “there is no inflation” and “there is no bubble” can be sustained anything is possible, it is a Goldilocks position for the government to be in, denying inflation allows denial of increases in Social Security benefits and therefore a back door means of doing away with a safety net for the millions who paid into it. Allowing interest rates to remain at historical lows also allows banks and Wall Street access to cheap capital while making big bucks off credit cards and M.and A. activity. The rich have known for a decade inflation numbers are fantasy and have invested accordingly in anything with the potential to retain capital from real estate to stocks to art and vintage autos. There are indeed bubbles in all those asset categories and how long the lie holds up is anyone’s guess. Many brilliant investors have thrown up their hands and left the room, in particular a hedge fund guy who made billions shorting subprime tranches, then turning his attention to gold realizing the degree the fed was debasing the currency, needless to say he has taken significant losses. The old saying goes don’t fight the Fed, to that should be added don’t fight the liars cherry picking stats guaranteed not to trigger inflation such as t shirts sourced from some third world country. Health care, insurance, rent, food, real stuff continues to rise dramatically. Powell is more realistic but he will be brought to heal, the system can’t survive on the truth.
2
"heal" in the last sentence should be "heel".
The problem isn't the Fed which has hit the limits of monetary policy. The problem is the lack of fiscal policy by Congress. Congress does not do its job to help U.S. citizens. All Congress does is help corporations under the false "trickle-down" belief that this will eventually help citizens. Forty years of policy show this belief is misplaced. The burden should not be placed solely on the Fed. Congress is an utter failure & the members must be voted out.
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How can he go wrong? We've just filled the tank with the credit card. The question is whether we do anything useful.
1
The better metaphor would be that he is trying to keep the car driving at a high speed while downshifting to a lower gear
With so many poor people in the country (45 million), and so many in the middle class in a precarious existence, the idea that we are in a "economic recovery" is laughable.
10
Many don't know that a trillion is a thousand billion. But a million billion outside the US. Is that right?
I read that we as a country are again loaded with credit card debt and record debt on autos. Raising interest rates seems like a stupid idea to me...
2
Yeah, he’s off to a great start, isn’t he?
What could go wrong?
1
If he can bring back the feelings of "we went through it all and saved the world and we're still the only functioning modern economy" and the rich are willing to share even if there aren't millions of trained ex-soldiers expecting their reward. I say have at it. I don't expect the rich to increase wages or charitable donations or develop housing for the poor and middle-class without the fear of an armed uprising. (see civil war vets and WW1 veterans demonstrations.)
1
The Fed's role in directing the economy is way overstated. It can usually encourage private sector borrowing for investment and consumption, but even that ability is limited and not entirely benign. Believing against all evidence that the Fed and monetary policy can do it all is the hair of the dog that keeps biting us.
1
Adjusting interest rates will not magically make the economy "as healthy as it has been in the last half-century." In order to do that, you would have to end wage stagnation, prevalent since the 70s. Without fixing that, there is no fixing small-business, consumer-based economy.
5
The economy is running just fine and has been for at least the last six years however it's certainly not the best since the 60's defined by the usual mix of data points. This happened in the second half of the 90's. Interest rates do need to rise if for no other reason than to provide room for maneuver when the next downturn hits. There are at least two possibly three little clouds on the horizon that could be the source of that downturn.
3
The Fed is no miracle worker, it is just a regulatory arm.
Their job is to do the best they can preventing the economy from coming to a halt or the opposite overheating and causing it to come to a halt.
Nothing more, nothing less.
5
We tend to give the Fed to much credit for being able to direct the economy. It's track record has been spotty since its inception at the end of 1913. Overall, its has done a much better job of fighting inflation with interest rate increases. Stimulating the economy, not so much. If they had such good control over the economy, they would not have needed to resort to policies that had never been used before to combat the effects of the latest recession.
1
Leaving aside the fact that today's Fed doesn't remotely resemble that of 1913, they are undoubtedly the major internal player in determining the trajectory of the economy. As to their record it has not been without mis-steps but overall they deserve an A- for the period since the end of the Bretton Wood era in 1973 which ushered in far greater global instability. There have five global recessions since 1980 and only one in the Bretton Woods era which was largely the consequence of the quadrupling of oil prices 73/74. And in the worst and most recent of them the Fed was instrumental in rescuing the US and world economy for which they deserve an A++.
3
Sure, but that was a much different Fed than today.
Keep interest rates the same and increase wages until then higher interest rates only increase the rate of inflation not the other way around.
2
"Powell Put" may run into bleak reality when $1.5T is used to power tax cut and trade wars - not to mention about the possibility of real wars - to placate a regressive base.
Good luck, Chair Powell, you will need it
2
Good luck with that! We almost never actually plan to deal with a crisis until the crisis has already happened and then our efforts are all about assigning blame. When the crisis passes, we quickly forget about it and want to "get back to normal" despite the fact that the old normal no longer exists.
Keynes advised governments to keep the taxes reasonably high and create surplus cash for the next crisis. Hayek told us to give the surplus to the "job creators" (the already wealthy).
There are opportunities galore for the next crisis. The EU could put a 25% tariff on agricultural products. Another war will drag us in. Another massive natural disaster. Even a game-changing scientific breakthrough could cripple an economy.
Powell relies more on luck than skill.
2
The stock market is not the economy and visa versa but one can cause trouble for the other. Trump's trade policy on china "Trump Plans to Slap Stiff Tariffs and Investment Restrictions on China" is not going to help the markets and that may eventually have a negative effect on the economy no matter what Chairman Powell does.
5
Nobody knows what will happen in the future, but right now it seems more important to prevent financial bubbles than worry about inflation. Too many overly smart financial engineers are taking too much risk with cheap borrowed money.
4
60s was a bubble economy where the nation paid the price with the 70s hyperinflation and the long recession. There are bubbles everywhere in the current economy and the bitcoin crash as well as the VIX explosion are the early warning signs of what is to come just as Washington Mutual and Bear Sterns were before the great recession. Please do not put so much faith in the Fed as it has only one lever to pull and it invariably leads to bubbles, whether it is the roaring 20s, the 60s, the Savings and Loans debacle of the 90s, the Dotcom explosion and implosion or the Housing Bubble. Remember when Easy 'Al' Greenspan was feted as a great economist, how did that turn out?
10
The biggest issue is the wholesale deregulation of the banks and other financial tools by the GOP. Their decreased regulation with a new tax bill spending billions along with the dissipation of middle class wealth through destruction of unionism, pensions and disavowing our safety net to pay for their profligate spending is of great concern. The Central bank cannot do anything about this salient attack on our national finances.
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