When I wrote the original post Thoughtless Stuff People Say, I didn’t intend to do a second part. But it seems like the ringing in of a new year is a signal for an urgent need repeat the same old warmed over and debunked myths as if we had managed to forget all about them during the holiday break because nearly all of them are being trotted out with renewed vigor this week, perhaps in the hope that repeating them might somehow make them true.
To his credit, Mr. Lieberman who has a regular column of sorts on Bloomberg, does a much better job of trotting out the old idea that a tight labor market equals the need for “neutralized” monetary policy by attempting to address the arguments of its critics, including me. The problem here though, is that Lieberman selectively substantiates his claim and provides only one labor force composition data point that has nothing to do with the major portion of the claims made by critics, and apparently expects us to take the rest of his reasoning at face value, such as the question of whether an aging portion of the population is dropping out of the labor force as fast as those who make the claim predict.
Other problems with Lieberman’s argument are that there is currently little evidence that monetary policy has ever been accommodative in the recent past, and there isn’t any proof that the natural rate hypothesis controls in the given situation even if the Fed’s estimate of 4.6% is accurate, which stands at the moment in the area of requiring an economy sized box of table salt to throw over one’s shoulder given the current domestic inflation experience and unemployment figures compared to inflation figures in Japan, a country that has recently done enough QE to double the base and then some.
I’ve already presented data that leads to a reasonable doubt about the validity of two of the claims contained in the Philips curve argument for tight money, the aging workforce myth and the low headline unemployment rate impacting inflation myth (here and here), while Lieberman presents none to substantiate his counter claim of retiring boomers or the high inflation consequence of monetary policy makers doing nothing.
After reading this commentary, I took a look at Lieberman’s bio, which tells the cynic in me everything I need to know about why and how this unsubstantiated line of tortured logic ended up published with his name on it, because when one assumes that the unemployment figure is as meaningful as a dot on a chart, it’s as easy to say what one likes in as speculative a manner as desired as grilling up hamburgers with meat bought from the corner store. The grocery store makes it easy to not think about where the hamburger came from. But what goes into making a hamburger makes a huge difference to cows nonetheless, and policy choices based on employment data make a huge difference to people who need their paychecks to get by; and I wonder where civility has gone when certain points that mean everything to some people, the difference between surviving and not, aren’t worth what little time it takes to do at least a back of the envelope validation of them and asking at least one question that should be asked: Are these things true or just sound plausible?
I’ve even made a high level and cursory validation easy to do by showing the data I used to form my opinion at the links above, far from paywalls, providing at least a direction of where to look if one chooses not to take my word for it. Even aside from this, there is no excuse whatsoever for thoughtless perpetuation of this mix of myth, fantasy, and materially damaging intellectual abuse that makes up the bulk of the article.
I mean, geez, the headline unemployment data plot isn’t all that frightening, and I fail to see why prime age LFPR data plots would be.