“Wishin´ & Hopin´

Let´s parse this report from Jon Hilsenrath – the Fed´s “mouthpiece”:

“Friday’s disappointing jobs report increases the likelihood that the Federal Reserve will launch a new bond-buying program to boost economic growth, though it doesn’t ensure such a move”. (From recent experience, it sure doesn´t)

“Fed officials emerged from their policy meeting in late June frustrated by the slow pace of the recovery and worried that the economic outlook was deteriorating.” (That´s a surprise!)

“Yields on 10-year Treasury notes fell to 1.54% on Friday, near the lowest levels in generations, reflecting market gloom about the economy and also possibly the anticipation of more action by the Fed. Bond-buying programs are meant to push down long-term interest rates to spur spending and investment and to drive investors into riskier assets that might support economic growth, such as stocks” (You can´t have your cake & eat it too! Make up your mind!)

The central bank’s more activist camp believes more action is already justified because the economy isn’t making progress toward reducing unemployment and inflation is low. Its hawkish wing, which worries more about inflation and which has been skeptical of the central bank’s responses to financial crisis and recession, accepts that more action might be needed but wants to hold it in reserve for serious threats like recession or deflation.  (I say “go”, you say “hold” and stall seats are filling up with unemployed people coming to watch the “tug of war”.)

Some Fed officials in the middle don’t have as high a bar to action as the hawks but are waiting to see if the outlook deteriorates anymore. (Some prefer to play  the “waiting game” .)

Officials could decide to wait through the summer to watch the economic data and revise their forecasts before making their next big decision. (Who´s crazy to do hard work during a “heat wave”?)

Many Fed officials want to be deliberate because economic data are hard to read right now. (Yes, there´s too much “glare” from all that sunshine!)

However, Mr. Bernanke has made clear he believes Fed policies can boost growth:

“Monetary policy still does have some capacity to strengthen the economy by easing financial conditions,” he said at his news conference. (Sounds like even Bernanke is beginning to have doubts. Maybe he´s suffering from sunstroke”)

One factor they will consider is the changing inflation outlook. Falling commodities prices have given many officials more confidence that their easy-money policies don’t threaten to cause too much inflation. Instead, officials have been struck that inflation has been so stable during four years of economic turmoil and monetary activism. (Beats me why commodity prices should always be the “trigger”. Like in 2008 it will surely incite bad decisions.)

And that´s because, according to SF Fed president John Williams:  “Despite these dire predictions, inflation in the United States has been the dog that didn’t bark.” (By all means, appeal to old Sherlock Holmes. He´ll certainly do a better job!)

Now, whisthle along with the song!

13 thoughts on ““Wishin´ & Hopin´

  1. Marcus you’re halfway there, turn Wishin & Hopin into a song for the Fed with the appropriate words!

  2. Marcus, until a decade ago I was also a songwriter but realized there’s not enough room in this ‘widdle bwain’ if I’m going to learn anything else! Even so will spend some time with this song and give it some thought…

  3. Just one question. In the video, who should be singing this to Bernanke? (Thinking about that video should inspire us)

    • We could try to interest “Merle Hazard” in doing a gig. He was very successful with his “Inflation or Deflation”. Could even become an MM “theme”!

  4. Rough draft here with a few notes: staying close to the structure of the song narrows the focus a bit but still would remind people of the Fed’s double mandate. A couple of pictures of long lines for jobs would do nicely!

    Wishin and hopin and thinkin and prayin
    Planning and dreaming that night turns to dawn
    That won’t keep your job very long
    So if you’re lookin to find trust, prosperity we can share
    All you gotta do is hold firm, remember what you stand for, show them that you care

    Show them that you care, just for them, Do this thing, that you’ve got to do
    It’s only fair, to listen to them, oh . . .
    You won’t win this, thinkin and a prayin, wishin and a hopin,

    Just wishin and hopin and thinkin and prayin
    Planning and dreaming real growth finally starts
    That won’t get you any high marks
    So if you’re thinkin of how great real growth is (Marcus help me out here!)
    All you gotta do is bring back to target our income and level
    Yeah just do it and after you do
    We’ll get through this, we’ll get through this

  5. Marcus, it felt good to find out I could still do that. If only economic essays were as easy to write as songs are, unfortunately not even close! However, essays are the important challenge of the present. After giving it some thought and especially after today’s debates, I’m concerned that a video such as this would not quite explain to people what market monetarism needs to accomplish in the present. The recent concern of course Ben Bernanke and the Fed, but what will be the challenge tomorrow? Thanks so much for having a lot of fun with Wishin and Hopin – that was great.

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