I don’t claim to have ever thought that the quality of Reuters financial reporting was or is stellar. But it seems to go in fits and starts, sometimes worth reading and sometimes more logically pathetic than the stuff that usually lines the bottom of the birdcage. Reading the “Markets” section tonight was more toward the latter regarding the easy money policies of the ECB and the Fed. One headline was particularly mystifying, claiming that the ECB won’t know if its new negative rate policy will work until year end even though markets barely budged on the news.
It runs around the same theme, low interest rates mean people gorge on loans and run prices up for no good reason, driving the monster of inflation and setting us up for the next big financial crisis. I suppose if one is interested in the superficially plausible, these might be satisfying reads. But I’m not really satisfied with surface appearances and questions about causality come up – because it’s not like there are any real door-buster investments out there and certainly do not see investment money flying all over the place as was the case in the 1990s. Where are they and where is it?
After so many years of harping on bubble and inflation nonsense without any of it coming to pass, and if consumer credit growth is graphed as I did here with it depicting the opposite, it would seem that they might stop and reexamine the narrative. That is what intellectually capable people generally do. Is it not? The Market Monetarists are still making the point that monetary policy isn’t easy, and despite the decrease in headline unemployment from the peak of the crisis in the US it is still elevated with inflation at microscopic, historic lows, and they are barely making headway into the mysterious abyss of macro folklore and fallacies that work some serious overtime.
I wonder why sticky wages has not had an impact on these financial reporters at Reuters who appear to believe the longer they insist and more the zeal they put into anti-inflation monetary extremism, the greater the chances it will become fact – that inflation will rise without the LFPR dramatically increasing. Perhaps the bubble, worthless froth, is actually in financial reporting. Really, who is out there buying all that stuff with 47% of working age adults on the sidelines? A high inflation forecast with the present “fundamentals” is not only wrong, it is absolutely absurd!
The repetitive and utter stupidity is completely frustrating partly because each and every one of these logically pathetic inflation apocalypse stories has an ambiance of righteous indignation as if monetary expansion is immoral. But I see the situation from an entirely different angle thinking that it is highly immoral to allow tens of millions of people to be put out of work, to be robbed of the fruits of a lifetime of labor, lose their businesses into which they poured their blood sweat and tears for years, and leave them without a basic means of survival because the price of gas is perceived as too high, or might be too high if they got jobs. We do not have too much demand for gas, we have too little gas for the demand!
And that only scratches the surface of the cost to society from extreme views about inflation that ignore every other aspect of an economy. We’re currently sitting in a $4T hole in GDP, indicating a steep (and real) opportunity cost to such policies of non-expansion, a tradeoff that none of the proponents wish to discuss. Add to that the additional tax burden that falls on the remaining 53% of working age adults who are employed (somebody has to pay for the largess) and the immorality just keeps piling up. It seems to me to be a quite a bit cheaper for monetary expansion when required and until the job is done while being more socially friendly at the same time. But this line of reason never seems to don on these imbecilic ideologues who won’t let silly facts get in the way of the narrative.
It really is sad that a once respectable news organization has turned into such an extremist propaganda machine that fronts for derelict central bankers.
PS: I don’t provide links to any stories or call anyone out by name here because there is so much of it there. If you really want to torture yourself, go to the “Markets” section or search central banking on Reuters website and read some of it. But don’t blame me if you leave feeling quite depressed about present the state of humanity.
Correction in my numbers for LFPR: I used a historic data table from 2012 that includes revisions. The current household survey reflects closer to a 60/40 split rather than 53/47 split. It was not my intention to overstate the meaning of the situation, though the correction does not have a material impact on the point.
This post has a link to an employment calculator from one of the regional Fed branches that can be used to assess the situation in context of where we were pre-Great Recession vs. where we are – and we still have a very long way to go toward a full recovery, about 700k jobs per month for five years to have even a vaguely similar inflationary outlook. That was and is my point, which I absolutely and unequivocally stand by. Hints at as of yet unidentified inflationary pressures are nothing more than delusions from the imaginations of inflationophobics.