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.”