The end game of central bank lunacy is surely near. Even the Fed heads appear to be mumbling bits and pieces of truth in public.
Former Philly Fed President Charles Plosser, for example, told Bloomberg TV this morning that central bankers “wring their hands all the time,” are very “concerned about credibility,” and are “pretty good at conjuring up reasons not to act.”
Having screwed up his mutinous courage, he then let loose with words that haven’t been heard from a central banker in decades, if ever:
The Fed “shouldn’t be afraid a recession might come,” he exclaimed, “there’s a real problem here”.
Then again, Plosser recently retired and perhaps it wasn’t all that voluntary. By contrast, Stanley Fischer is in line to takeover the joint, and perhaps soon.
That’s because Janet Yellen is surely finished whether the Donald wins or loses. Her dithering and double-talk have become a laughingstock even in the Wall Street casino.
So you might have thought the good professor from MIT—-by way of the IMF and Bank Of Israel—– would be carefully parsing his words. Instead, he was apparently moved during a speech to economics students to confess that he is more or less flummoxed by his own policies:
WASHINGTON—Federal Reserve Vice Chairman Stanley Fischer on Tuesday expressed frustration with ultralow interest rates, saying they should rise over time.
“It bothers me, it really bothers me,” he said when asked about low rates at an event for economics students at Howard University in Washington…….I don’t like it, but I don’t want to raise the interest rate too much. I think we should at some point. I don’t know when,” he said. “The interest rate I believe is not at zero at a normal level and it should be [normal] at some point, not immediately.”
“I think there’s also a problem in going to a zero interest rate in the sense that it says that capital isn’t very productive, there’s not much going on in the economy,” Mr. Fischer said, adding that “we would be better off if there was a price for using money.”
Well, now. Imagine exactly that!
Apparently, the day traders and robo machines, who are back gunning for the all-time high chart points again this week, wouldn’t be caught dead even trying. Indeed, at 2171 or 24.95X LTM earnings, the S&P 500 is hanging by a thread. That is, its priced for permanent paralysis at the Fed—even when its presumptive leader wants to raise rates but just doesn’t exactly “know when”.
The reason for Fischer’s confusion, of course, is that like all Keynesian economists he is desperately searching for some evidence that the nation’s GDP bathtub is near to being filled to the brim. At that point, presumably, it would be time to declare full-employment victory and begin to normalize rates.
In fact, in the same speech the Fed vice-chairman averred that the US is “beginning to see the fruits of a higher pressure labor market” and that “we think of 3% as a rate that’s consistent with a reasonable rate of inflation.”
The man has a keen sense for rounding errors. During the last four years, the hourly wage rate for private non-supervisory employees has increased at a 2.32% annual rate, while in the most recent 12 months that has accelerated to 2.51%. Apparently, 19 bps on the average rate of wage gain means that the “slack” is nearly drained out of the US labor market.
Oh, c’mon. The truth is, there are about 180 billion annual labor hours attributable to the adult population under 68 years of age not employed in the monetized economy and only about 240 billion hours that are. You could call that a 43% unemployment rate and be done with it.
On the other hand, you could recognize that 75 billion hours are accounted for by unmonetized homemakers, 40 billion by debt-mules called “students” and 18 billion by working age adults who profess to have back pain and psychic anxieties that warrant disability payments rather than shouldering their share of society’s work requirement.
Beyond that, there are tens of billions of potential labor hours that have been off-shored owing to the China Price for goods and the India Price for services; and tens of billions more among adults under 35 who are still in mom and pop’s basement playing video games between part-time gigs at McDonald’s.
Yet any and all of these endless hours of “slack” labor could be pulled into paid employment. It just depends upon an endless array of factors—such as anti-dumping cases, student loan rules, day care costs, Obamacare coverage regulations and much more—–that are beyond Stanley Fischer’s ability to impact or to even imagine.
At the end of the day, this blithering academic fool is apparently willing to deprive Wall Street indefinitely of the very thing upon which a capitalist economy depends to remain stable, healthy and productive. That is, an honest price for money and capital.
So after 94 months of no price at all for “using money”, the great and mighty Stanley Fischer still does not espy a sufficient fraction of gain in the rate of wage inflation. While he is waiting, of course, the robo-machines rage and the mother of all financial bubbles keeps on inflating.
In the Trumpian vernacular: pathetic!