If you had any doubts as to whether the demonstrable economic progress the US has made over the past several months counts as “substantial” in the context of the Fed’s express desire to see “substantial further progress” before beginning any discussions around policy normalization, John Williams’s answer is an emphatic “no.”
Or at least that’s the way it sounded Monday, when Williams delivered remarks for a Women in Housing & Finance webinar. “The data and conditions we are seeing now are not nearly enough for the FOMC to shift its monetary policy stance,” he said, adding that while he’s “optimistic that the economy is now headed in the right direction,” there’s a “long way to go.”
That’s about as unequivocal as it gets. Williams does expect growth in 2021 “to be the fastest in decades,” but he specifically mentioned worrying developments “in other parts of the world,” where that surely meant India. He cautioned on “slower” immunization rollout, “emerging strains of the virus” and areas around the globe where the pace of the economic recovery is “more subdued.” Europe slipped into a double-dip recession during the first quarter.
That’s the kind of rhetoric market participants want to hear. Or, wait, let me rephrase. That’s the kind of rhetoric that’s conducive to an extension of the current policy backdrop, which has helped support risk appetite. Not everyone wants to hear it, though. Some market participants say it’s perilous or foolish or [fill in the blank with your favorite derisive adjective].
If you want to traffic in normative statements (e.g., the Fed is encouraging “bad” behavior), that’s your prerogative. Just remember that normative statements are subjective — there’s nothing inherently “bad” (or “good”) about excessive risk-taking in markets. We tend to lose track of that reality (of all reality, really) in our daily quest to spin narratives and tell ourselves the kind of stories that imbue our lives with what we swear is meaning. The truth, of course, is that all human pursuits are meaningless. We’re born. We live. We go about doing this or that for a while. Then we die. And that’s the end of it. Just like squirrels or birds or caterpillars.
But the pursuit of money is meaningless even as meaningless pursuits go, given that money isn’t real. So, when you hear pundits on financial television or peruse their 140-character social media posts deriding Fed policy (everyone’s favorite pastime these days), just remember that, in reality, they’re piling nonsense atop nonsense. It’s neither bad nor good for a group of technocrats (the Fed) who control the price of the shared myth we call “money” to encourage risk-taking in instruments people utilize in the hope of gathering more money.
All of this is nothing more than a game we’ve created for ourselves. It can be fun, sure. There are “winners” and there are “losers” on any given day, month, quarter or year, but in the final analysis, it has scarcely more bearing on the universe than two children playing a board game. Of course, our adult board game has immense consequences for the social orders we’ve constructed for ourselves and also for the fate of the planet which, in many respects, depends on what the players (policymakers, corporations, consumers, etc.) decide to do next. But even if, as some postulate, humans become earthly gods in the 21st century, it’ll make little difference beyond a tiny floating rock orbiting a dying star.
New readers should be apprised that occasionally (ok, more than occasionally) you’ll get existential reminders in these pages. Consider it tough love — my way of pulling you out of the bushes, where you’ve spent the day rooting around with the rest of humanity, arguing about nothing in search of something that isn’t there and never was.
Jerome Powell spoke Monday too. “Good afternoon. It’s a pleasure to be with you today,” he told the National Community Reinvestment Coalition.
Powell talked at length about the extent to which the US recovery has been profoundly uneven. He began by describing a relatively rosy “30,000 foot view” but quickly pivoted to what he called the “street level” situation, which is considerably more vexing. Consider three excerpts (below) from Powell’s Monday remarks.
While the recovery is gathering strength, it has been slower for those in lower-paid jobs: Almost 20% of workers who were in the lowest earnings quartile in February of 2020 were not employed a year later, compared to 6% for workers in the highest quartile.
The Fed’s latest Survey of Household Economics and Decision making which will be published later this month, will show that, for prime-age adults without a bachelor’s degree, 20% saw layoffs in 2020 versus 12% for college-educated workers. And more than 20% of Black and Hispanic prime-age workers were laid off compared to 14% of white workers over the same period.
Our upcoming SHED report notes that 22% of parents were either not working or working less because of disruptions to childcare or in-person schooling. Black and Hispanic mothers—36% and 30%, respectively—were disproportionately affected.
Capitalism in America doesn’t work. Meritocratic advancement is, with few exceptions, just a story we tell ourselves to justify our relatively fortuitous circumstances. You can’t have a real meritocracy without equality of opportunity. Equality of opportunity doesn’t exist in America, but the truth is, it doesn’t exist anywhere else either — not in any “pure” form. The playing field can never be truly “leveled.”
My own view is that, despite the efforts of the Biden administration and irrespective of how hard the Fed works to bridge an inequality gap it helped widen, things won’t look much different four years from now. Not at the “street level,” as Powell put it, anyway.
“Unfortunately and unsurprisingly, most reactions to [Joe Biden’s] tax plan have been either extremely negative or extremely positive based solely on the biases of people who are either net gaining or net losing from the plan,” Ray Dalio said Monday.
“I try to be more like a mechanic than an ideologue, simply trying to see the implications for what will happen in the economy and markets and hoping for what produces the most prosperity for the most people,” Dalio added, playing the utilitarian, on the way to saying that “frankly, I don’t care what plan we have as long as we collectively accept it so it doesn’t tear us apart, it raises living standards and it benefits most of the people.”
So I guess, to coin a phrase, we’re a long way from neutral…
ha!
Haha, as a wise man once said “it’s all vanity”. Unfortunately most of us are sucked in by the system and never figure out what really matters in life.
So I take it Mr. Dalio is accepting of his taxes being raised. It also shows a consistency with his very own principles about the nature of money.
H I love your work. Nothing much new here but so fun to read. Please don’t stop.
“We’re born. We live. Then we die.” Sartre, Kierkegaard…help? So enjoy these pieces, now back to that meaningless board game.
Reminds me more of perhaps my favorite piece from Nietzsche. At least it’s opening lines, which I believe I may have posted here once before in response to similar wisdom laid down by H:
“In some remote corner of the universe, poured out and glittering in innumerable solar systems, there once was a star on which clever animals invented knowledge. That was the highest and most mendacious minute of “world history”—yet only a minute. After nature had drawn a few breaths the star grew cold, and the clever animals had to die.
One might invent such a fable and still not have illustrated sufficiently how wretched, how shadowy and flighty, how aimless and arbitrary, the human intellect appears in nature. There have been eternities when it did not exist; and when it is done for again, nothing will have happened.”
Well, the pursuit of more money for those who already have money may be meaningless. But for those at the bottom, it makes a huge difference. So Powell is telling us he is more concerned about employment among the poor than he is about a minor bump in inflation, or gaining the approval of bankers. How did Trump end up appointing this guy? (Of course, he later regretted it.). Perhaps Powell and Biden together won’t make much improvement in the situation, but no progress will be made unless we pay attention to the problem and make it a priority. Powell has been growing on me.
“We’re born. We live. We go about doing this or that for a while. Then we die. And that’s the end of it. Just like squirrels or birds or caterpillars.” “All of this is nothing more than a game…”
Thank you, thank you, thank you for the chuckle and for the perspective readjustment. I feel much closer to the squirrels and birds and caterpillars in my yard this morning. And thank goodness “it’ll make little difference beyond a tiny floating rock orbiting a dying star.” I am a little sad about “the fate of the planet” though, because of the fate of the squirrels, birds and caterpillars is tied to it.
This lovely video puts much in perspective. Enjoy.
H, I think the biggest reason I subscribe and read your work is that you can somehow mix philosophy with analysis and it makes sense. Life is fleeting, money is meaningless, humans are some of the most flawed beings on the planet. In one sentence you sound almost Nihilistic but then you follow it up with real concern about the fate of minorities and parents who we always seem to leave behind no matter how much “progress” we think we’re making.
I’ve come to what seems to be an obvious conclusion now (though I didn’t find it obvious in my youth), that humans really are their biases and that their biggest blind spot is that they are always biased. Biases come from a plethora of influences but I think most of them are inherently constructed from deep seeded insecurities. The key to success in life to is be able to pick up on people with power’s biases and try to play them to your advantage. That’s the real game of life, that’s the real meritocracy in the world. Merit based on playing the biases of those who can help elevate you until you die, nobody ever wins. Donald Trump is living proof that you can fake your way through everything in life and as long as you present what people want to see you can go as far as you like.
To close on a more positive note though, money can help buy happiness but not alone, relationships are the only truly fulfilling pursuit in life. Your legacy can’t be measured in wealth but in the ways you help those around you grow into better more adapted humans. Problem solving is fun, you never truly win or lose unless you quit playing, and it is empirically impossible to learn everything there is to know so never stop pursuing knowledge.
I so love it when Heisenberg drops some existential tough love. This was one of my favorite pieces of 2021. It would have been hilarious — and even more portentous — if it ended right after this line: “Jerome Powell spoke Monday too. “Good afternoon. It’s a pleasure to be with you today,” he told the National Community Reinvestment Coalition.”