3 more months data of unemployment below 4% and inflation below 4%, i am calling it a soft landing. Some people already say that soft landing has happened. Apart from some hiccups (recent problem with food prices, Russia cut Ukraine grain exports, oil spike etc), things on right track. There's more lagging disinflation in the pipeline with Housing/rents which will materialize in coming quarters.
Things are looking up, but there is still a nagging fear that the Fed will delay reducing interest rated too long. If you are planning to slow a car, you ease up on the brake before reaching the desired speed. lest you reduce speed to below "target."
2% is the target and inflation rates were up last I looked. Commodity prices have been on the rise and continue to climb. Rates need to rise again and a recession needs to happen. The Jpow FED unlike Volcker has too many friends at the bank to be brave and do what is needed. Inflation is rising, not falling and yields agree.
But your 4% target though.... no doubt conveniently spot on. Things are right on track are they? Equally as meaningless. It woul dseem that your words, unlike inflation, are rather....... transitory.
Soft Landing? The price of sirloin steak at Costco went up $1 a pound in the last month. Gas is up from 3.19 to 3.59. Nothing has been done to penalize monopoly pricing power. THAT will continue! All that has happened is you've adjusted to inflation if you are middle income or above. But down below in say China where production is happening there is a slowdown. Got that? So don't be surprised when the stock market bubble gets pricked. Stagflation.
I live in Portugal and chuckle when my friends and family back in the US complain about gas prices going up when in Portugal gas prices are close to 2.1 times higher than in the US and their average salaries are 5.2 times lower. They still drive cars.
In the 1930s and 40s you could go vitually anywhere in the US by public transportation. Shipping was done by train and locally distributed by truck. There were trollies, light rail, connecting local communities to their neighbors. The post WW2 expansion of population created suburbs with larger accomodations per unit of housing than the immigrant constructed tenements of the cities but dispersed housing. Stamford CT for example, 45 minutes from midtown Manhattan by rail. Cars absolutely required. An additional factor was the monopoly activity of the big three auto monopolies. They bought up and destroyed the trolley infrastructure thus preparing us for our fossil fuel dead end.
At least you did not invent the Phillips curve! Bill Phillips did some really interesting work on system dynamics, but his legacy has been steamrolled by that curve - put to a use that he never intended.
There is a rule of design that I find comforting: you need to design it to know that it doesn't work. I have proven it repeatedly! So, maybe it's a good thing the rule is being broken so soon. Would you want it built-in to central bank or treasury models causing untold misery before anyone realised they were using it to ask the wrong question?
I think people need to stop the recession talk for 2023. Its not going to happen. Big fiscal works it helped to keep the economy going and yes that even included the int payments via the rate hikes to the private sector. Yes, core inflation is a pain in the neck with rent and shelter but that will take time. Unemployment and inflation both below 4% no more phillips curve or any of these other outdated macro trash.
For the record, no Powell doesn't get any credit for getting inflation down. Hard to do so when supply chain pressures leveling off played more of a role than the hikes.
I disagree. Supply shocks make the Fed's job more difficult. It made the mistake of waiting too long to start raising rates, but if we get through 2024 with no recession, the Fed should get the credit for a quick save.
An enjoyable read, Claudia, and it is more interesting when rule breaks!
Thank you Claudia. I always forget to breathe. Enjoying my new niece in Jersey this weekend helps immensely.
3 more months data of unemployment below 4% and inflation below 4%, i am calling it a soft landing. Some people already say that soft landing has happened. Apart from some hiccups (recent problem with food prices, Russia cut Ukraine grain exports, oil spike etc), things on right track. There's more lagging disinflation in the pipeline with Housing/rents which will materialize in coming quarters.
Things are looking up, but there is still a nagging fear that the Fed will delay reducing interest rated too long. If you are planning to slow a car, you ease up on the brake before reaching the desired speed. lest you reduce speed to below "target."
2% is the target and inflation rates were up last I looked. Commodity prices have been on the rise and continue to climb. Rates need to rise again and a recession needs to happen. The Jpow FED unlike Volcker has too many friends at the bank to be brave and do what is needed. Inflation is rising, not falling and yields agree.
Did Jesus Christ gave the gospel of 2% target? I neither believe in 2% target nor i believe in Christ. It's a figment of CBs.
But your 4% target though.... no doubt conveniently spot on. Things are right on track are they? Equally as meaningless. It woul dseem that your words, unlike inflation, are rather....... transitory.
Soft Landing? The price of sirloin steak at Costco went up $1 a pound in the last month. Gas is up from 3.19 to 3.59. Nothing has been done to penalize monopoly pricing power. THAT will continue! All that has happened is you've adjusted to inflation if you are middle income or above. But down below in say China where production is happening there is a slowdown. Got that? So don't be surprised when the stock market bubble gets pricked. Stagflation.
I live in Portugal and chuckle when my friends and family back in the US complain about gas prices going up when in Portugal gas prices are close to 2.1 times higher than in the US and their average salaries are 5.2 times lower. They still drive cars.
In the 1930s and 40s you could go vitually anywhere in the US by public transportation. Shipping was done by train and locally distributed by truck. There were trollies, light rail, connecting local communities to their neighbors. The post WW2 expansion of population created suburbs with larger accomodations per unit of housing than the immigrant constructed tenements of the cities but dispersed housing. Stamford CT for example, 45 minutes from midtown Manhattan by rail. Cars absolutely required. An additional factor was the monopoly activity of the big three auto monopolies. They bought up and destroyed the trolley infrastructure thus preparing us for our fossil fuel dead end.
At least you did not invent the Phillips curve! Bill Phillips did some really interesting work on system dynamics, but his legacy has been steamrolled by that curve - put to a use that he never intended.
There is a rule of design that I find comforting: you need to design it to know that it doesn't work. I have proven it repeatedly! So, maybe it's a good thing the rule is being broken so soon. Would you want it built-in to central bank or treasury models causing untold misery before anyone realised they were using it to ask the wrong question?
It was a nice try and there's no need to feel bad about the try. Especially since you were very up-front about admitting when it failed.
In retrospect, wouldn't you say the source of the error was in leaving out Fed policy?
I think people need to stop the recession talk for 2023. Its not going to happen. Big fiscal works it helped to keep the economy going and yes that even included the int payments via the rate hikes to the private sector. Yes, core inflation is a pain in the neck with rent and shelter but that will take time. Unemployment and inflation both below 4% no more phillips curve or any of these other outdated macro trash.
For the record, no Powell doesn't get any credit for getting inflation down. Hard to do so when supply chain pressures leveling off played more of a role than the hikes.
I disagree. Supply shocks make the Fed's job more difficult. It made the mistake of waiting too long to start raising rates, but if we get through 2024 with no recession, the Fed should get the credit for a quick save.