So Far The Bandaid Worked

Is The Federal Reserve On The Right Path?

For years we have heard everything from the demise of the Federal Reserve to it being the next best thing to toast. As a “student” of the Federal Reserve, until Jerome Powell took charge, the only Chairman I ever truly respected was Paul Volcker. Maybe I have lived through too many administrations, after all Paul Volcker’s appointment was the only good decision Jimmy Carter made in 1979 following what can only be considered a decade of trials and tribulations. A “blind squirrel” finds a “nut” every now and then.

Times were totally different then. Taxes were too high. Volcker was a true beneficiary of a “purge” in the overall administration. Between then President Reagan, Treasury Secretary Regan, the Congress and himself, Volcker was able to fight inflation. Face it, he did a pretty good job but remember, it took him four years.

Powell does not have the luxury of lowering taxes more than they already are and that is a problem he’s endured. Qualitative easing that dramatically turned into qualitative tightening was a battle precipitated by the COVID-19 excesses and again, Powell did not really have a choice, rates were going higher. While Bernanke and Yellen should have acted and raised rates earlier, they did not. That’s where the penultimate mistake was made. Like all history, it is easy to look in the rearview mirror. What is harder to do is to “look forward” and so far most of the interpretations I’ve read and listened to believe we’ve skirted the worst. Economically, I agree but in my opinion, the 2% target rate of inflation is understated. The only economic situation that can help to achieve that goal is a “recession”.

A 2% Inflation Goal Is A Dream

It doesn’t really matter what index I look at or what survey I depend upon, not a single one suggests won’t see a 2% inflation rate for years, if ever. While Powell continues to stress this target as one the Federal Reserve seeks I simply do not believe him. Frankly I don’t think anyone does nor should they. Unemployment has remained “remarkably” low but the manner in which true unemployment is calculated seems specious at best. I’ve written articles about how that calculation could be improved but to date nothing has changed. While you can address “city hall” you can’t change it so we’re stuck with what we have. Besides the changes I suggest would only make the unemployment rate higher so in essence I’m fighting a losing battle.

Nonetheless, a 2% inflation rate is not going to happen unless a “new administration” is elected. I still find it extremely hard to think that the inflation rate is headed much lower than it’s running today because of the potential for a prolonged conflict Middle East wise. How long is the price of oil going to remain depressed? The cost to travel around the Cape of Good Hope far exceeds transiting through the Suez Canal. Costs are going to be incorporated into everything you consume with the result being high prices at the grocery checkout. Corporations pass cost increases to their customers. If you don’t believe me just check the overall price of chocolate candy bars the next time you buy them. Higher prices at the source require higher prices borne by consumers.

What Could An Administrative Change Bring

In discussing this section, instead of dealing with the minutea of a change at the head of the Federal Reserve or a “dramatic” reduction in interest rates, stick with gasoline prices at the pump. I’m not a believer in Electric Vehicles other than, like anyone else, I would like to see a “better” environmental situation or at the very least the “illusion” of it happening. Face it, the electricity necessary to run these electric vehicles comes to fruition from and through burning hydrocarbons.

If there was one economic change that turned our economy upside down it related to hydrocarbons. The current administration is averse to everything they represent and it gets worse every day. Seems their intentions are good but their plan is impossible to accomplish. Having an owner of an EV in the family assures that I’m right. Despite an ability and desire to live a “woke” life, trying to maintain and effectively run around in a Tesla is not working for them and they live in Texas. They cannot travel from Austin to Houston without “charging” up. What’s the use? Besides, what they paid for the EV is more than twice what they could recoup in today’s market.

It’s like “Trading Places” but instead of “turn those machines back on” it is more like “turn those oil and gas rigs back on” and “drill, baby, drill”. No one is admitting being defeated; it’s just reality speaking. While the idea was great, feasibly there was no way it could work. Twenty to twenty-five years from now maybe, but not now. We need to hit that 2% inflation target and we’re not going to accomplish that with foreign oil.

So How About New Hampshire

In the words of Hillary Clinton, “what difference does it really make”. Despite Nikki taking all six votes, a 100% of the available ballots last night, in Dixville Notch, seems to me the Republicans have spoken. I like Nikki if for nothing else she is experienced and is not in her seventies. Otherwise, like Desantis she’s just not ready.

I have a great amount of difficulty supporting either Donald Trump or Joe Biden. I see them both being flawed in many ways but who am I really. I represent one vote in the upcoming election and if I had my way it would be for someone else.

Nonetheless, there’s an election being held in New Hampshire. It’s crazy to see Biden isn’t even on the ticket. Maybe that’s the election and the race we should think about. It doesn’t seem to matter and that’s turning people’s heads towards the Trump-Haley battle.

Come on “third” party. You talk a good game but nothing has materialized, has it? It seems to me that if there was ever a time for a “real” confrontation it’s now. Someone, please step up to the plate and take a few swings. The worst that could happen is that you strike out. Remember, every time you strike out you are closer to getting a hit.

Time to watch and listen to the results from New Hampshire. What many people say out loud to us and take the time to write is important. I’ll be listening to their voices, how about you?

“Will It Go Round In Circles” was one of Billy Preston’s best. As a “major” part of his 1972 album “Music Is My Life” he brought to us an idea that the real world spins on its axis never certain of where it’s headed. Why do I believe he encompassed much of what we’re going through today. The world is still spinning destined to repeat much of what was attempted in the past to no avail. Some problems simply cannot be solved and that’s fine, it’s just the way it is. Best to all as always.