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Free-Spending Americans, Blockbuster Hiring May Complicate Fed Decision
The US economy's doing pretty well. In aggregate.
Note the caveat: In aggregate. There's absolutely a sense in which America's a Potemkin village. Behind the gilded facade is a worsening "haves" / "have-nots" divide, and the pandemic threw it into even starker relief. There are pockets of almost Third World poverty in the US, and inequality is, in my view, criminally extreme.
But everything can't be a wailing lament for the deplorable state of American society. Sometimes (which is to say every
The fomc can cut because inflation is approaching target and real rates are high. What’s missing in the simultaneous equation is productivity. It’s likely robust. That’s why jobs can grow, wages can grow, and inflation stays down. The Fed’s job is not to keep real rates elevated under this scenario. It is to maximize employment with stable prices.
“Stable prices.” “Inflation stays down.” I like you, really I do. You’re a long-time reader, but as I’ve said a hundred times if I’ve said it once: You’ve been in a state of denial about what happened with inflation for a very long time. You’ve left hundreds of comments here, including some pretty emphatic ones, arguing for rate cuts and premature policy pivots, and railing against Larry Summers and Mohamed El-Erian, and as far as I can tell, you actually believe you’ve been right the whole time, as if what we all saw happen somehow didn’t happen.