Regular People Don’t Care

A panel of highly-qualified technocrats will use its “tools to prevent higher inflation from becoming entrenched.”

That’s according to prepared remarks from the Chairperson of that panel, who was set to be interrogated on live television by a separate panel comprised of people who, while not uniformly qualified to weigh in on the matters at hand, were at least elected. Albeit by an undereducated populace, some of whom probably shouldn’t be allowed to vote.

“Both the initial shutdown and the subsequent reopening of the economy were without precedent,” the Chairperson went on to say, in the same brief statement. He described “persistent supply and demand imbalances and bottlenecks,” which led to inflation unseen in a generation. The technocrats, he said, “know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing and transportation.”

The Chairperson is, of course, Jerome Powell, and the oblique reference is to Powell’s renomination hearing before the Senate banking committee. His prepared remarks, available here, were perfunctory. No one expected otherwise.

It’s all too easy to lampoon or, in the current conjuncture, lament. Powell’s hearing came a day after his Vice Chair, Richard Clarida, said he’ll be stepping down early. Clarida will resign on Friday, two weeks before his term ends.

Clarida’s trading activity was back in the news last week, when Jeanna Smialek, whose byline now appears in The New York Times (apparently, the former Bloomberg economics reporter decided to become a real journalist), noticed an amended disclosure showing the Vice Chair’s controversial purchase of a stock fund on February 27, 2020, was actually a re-purchase. He sold the same fund, in the same amount, just three days earlier (figure below).

Clarida described the omission as “inadvertent,” but rational people, like Smialek, were forgiven for noting that the sequencing raised questions about the Fed’s “rebalancing” explanation of Clarida’s trades. Some might suggest Clarida sold the fund then, 72 hours later, bought it back, knowing the Fed was on the verge of intervening to shore up capital markets.

Within hours of Clarida’s decision to rebuy the fund, Powell released a statement. “The fundamentals of the US economy remain strong,” he said, on February 28, at 2:30 PM in Washington. “However, the coronavirus poses evolving risks to economic activity,” he added, noting that the Fed was “closely monitoring developments and their implications for the economic outlook” and was prepared to “use our tools and act as appropriate.”

Just days later, the Fed delivered an emergency rate cut. Two weeks after that, they cut rates to zero and announced a $700 billion QE program. Fast forward eight more days and Powell unveiled open-ended QE and pledged to backstop the corporate bond market.

“The sale-and-purchase move would have made money within a few days, as stock markets and the fund in question increased in value after Powell’s announcement,” Smialek wrote, adding that although the fund “would have then lost money as stocks sank again amid the deepening pandemic crisis [it] recovered after the Fed’s extensive interventions in markets.” Ultimately, she noted, “the holdings would… have appreciated in value and turned a bigger profit than they would have had Clarida merely held the original investment without selling or buying.”

Elizabeth Warren, who may very well be richer than Clarida, wasn’t amused. “I am deeply concerned that your continued refusal to release information about Fed officials’ trading is at odds with your stated commitment to address the scandal ‘forthrightly and transparently’ and that, particularly in light of the new report, it raises suspicions that the Fed may be failing to disclose the full scope of the scandal to the public,” Warren wrote to Powell on Monday. She continued, quoting the Times for dramatic effect,

The sale of his multi-million dollar holding in the stock fund as the market tanked, and subsequent repurchase upon the Fed’s announcement that it would act to protect the economy, was ‘most likely a lucrative move’ — raising concerns that Clarida may have been trading on inside information about the Fed’s planned policy moves. Moreover, despite the important context this new disclosure provides about Clarida’s trades, the Fed did not appear to publicize the disclosure amendment or identify the new disclosure for members of Congress, despite the obvious Congressional interest in this information.

My disposition is too serene to delight in casting aspersions but more than that, I’m wary of making allegations regarding matters that are impossible to prove without availing oneself of a telepath and a polygraph. That said, it seems fairly obvious that “rebalancing” isn’t the right word to describe at least one of Clarida’s trades in February of 2020, and the fact that the Fed didn’t make an effort to address the almost comically bad optics before someone like Warren noticed, perhaps suggests the institution also suffers from lapses in the PR department.

The Times flat-out suggested “officials are working… to profit from their own actions.” The idea that Clarida, the Vice Chair, didn’t know what the Fed was planning to do in March of 2020 seems implausible, to put it nicely.

Clarida will apparently teach economics “in-person” at Columbia this spring, which somehow feels like insult to injury. “I’m glad [he] resigned,” Warren said, citing “public outrage for his unethical actions.”

And therein lies (one of) the problem(s). I’m not sure there was much in the way of “public outrage.” The American public is desensitized to any and all manifestations of malfeasance by government officials. One of the great ironies of the Trump presidency was the extent to which it simultaneously represented the most corrupt administration in history while purporting to exemplify a rebuke of traditional corruption. Trump decried “swamp” dealings, but reveled in Sopranos-style interactions both in domestic politics and foreign relations.

The general public is apathetic. Step away from Twitter and Facebook, turn off Fox and CNN, and what you’ll discover are people trying (in some cases desperately) to deal with the realities of everyday existence, whether putting food on the table, getting their kids to school, dealing with the hodgepodge of psychological issues that go along with being human and just generally trying to make it through another day.

That quest is made more difficult by inflation, which is one of the few points of obvious intersection between the tragicomedy that is American policy and politics and the equally tragicomic life of an everyday voter.

To be sure, policy, politics, Wall Street and Main Street intersect all the time, but average citizens don’t notice because hardly anyone has the wherewithal to chase down myriad rabbit holes which reveal, for example, how “hundreds of thousands of single-family homes are now in the hands of giant companies, squeezing renters for revenue and putting the American dream even further out of reach.”

For most people, everyday life is hard. Physically, mentally and logistically. If you immerse yourself in social media and cable news, you’ll come away believing all Americans are enraged hyper-partisans who spend their days in search of new flashpoints and confirmation bias. The reality, I’m afraid, is much less exciting, but no less grim. Regular people simply don’t care because navigating an average day leaves no time for reflection or debate, and even if it did, scarcely anyone is capable of either in any meaningful sense.

Commenting further in his Tuesday remarks to Congress, Powell said the Fed “works for all Americans” and knows its “decisions matter to every person, family, business and community across the country.” As Chair, Powell promised to “make those decisions with objectivity, integrity, and impartiality, based on the best available evidence.”

If any regular people were listening, they would’ve scoffed. But they weren’t listening. They were too busy milling around and otherwise trying to find meaning in the meaningless.