One of the nicest E.O.Q.W.D’s (end of quarter window dressings) I’ve seen – the Dow popped up 134 points on Monday and the techs were up over 1% as the Fed boss came out and started to hint around at what I told you would be an inevitable necessity: The Fed is going to print for as long as it takes to get the economy back to the old “way it used to be.”
The Fed, where it seems the dynamic stochastic general equilibrium (DSGE) model is pushing policy to some extent, seems to be beset by the lack of a good algorithm to project how people will revise their long-term lifestyles in the face of repeated screwings.
What’s amazing to me is that the Fed boss sees what Americans are feeling yet her faith in “the models” is still pretty darn high. That’s why she can say on the one hand:
“…In some ways, the job market is tougher now than in any recession. The numbers of people who have been trying to find work for more than six months or more than a year are much higher today than they ever were since records began decades ago. We know that the long-term unemployed face big challenges. Research shows employers are less willing to hire the long-term unemployed and often prefer other job candidates with less or even no relevant experience.”
But then turn around, on the other, and promise to repeat the same policy approaches that got us there in the first place…In other words, they’re going to keep being accommodative.
Yellen spoke the answer, but maybe didn’t hear herself:
“…If unemployment were mostly structural, if workers were unable to perform the jobs available, then the Federal Reserve’s efforts to create jobs would not be very effective. Worse than that, without slack in the labor market, the economic stimulus from the Fed could put attaining our inflation goal at risk. In fact, judging how much slack there is in the labor market is one of the most important questions that my Federal Reserve colleagues and I consider when making monetary policy decisions, because our inflation goal is no less important than the goal of maximum employment.
The problem faced by the Fed is simple. As the number of people losing jobs to offshoring and robotics continues to increase, and as self-driving cars and other employment “category killers” are coming down the pike, printing all the money in the world will not keep up with the voracious growing need for increased tax revenues to minimally feed and house a massively increasing underclass.
If there’s a failing to DSGE model reliance, it is likely that it fails to address society-wide tipping points that are now coming into view, as outlined in Saturday’s Peoplenomics report.
What’s coming to gobble the Western Empires within three or four years is a variant of “future shock” – a term coined by futurist Alvin Toffler.
In Peoplenomics, we labeled this FutureCrock because in addition to disruptive technologies, not the least of which will be modular manufacturing (there go more jobs!) we will have the added bonus of mass cognitive dissonance igniting SocialRevs right and left.
The Fed boss was (perhaps rightly) proud when she pointed to local Fed steps to help communities get back on their feet:
“…Leadership recruitment is also at the heart of a grassroots-oriented program called Economic Avenue that was developed by the Kansas City Fed. In Northeast Kansas City, Kansas, residents and neighborhood leaders are forming a leadership council that will have responsibility for managing the program, which aims to create and grow local businesses, create jobs, and promote homeownership. The bank’s community development staff is providing education and training to get the council off the ground, will measure and evaluate
But in a counter to that, a sane observer of mass change would have to note that humans are self-organizing and that there is another “Economic Avenue” being built spontaneously. And that all lives under the headings of “barter and bitcoins.”
Unlike the global world order that’s struggling to market a global tax system to support global government, or the US government which is printing paper six-ways to Sunday to attempt a restart, the new internal breakaway civilization (NuCiv) is laying out its own alternative financial foundation.
I don’t think Ms. Yellen has ever worked construction (just a guess, mind you, but I think a safe one). But a concrete worker would recognize what’s going on in a heartbeat.
“What’cha got is a crumbling foundation. So I can either mix up a sack of topping mix and trowel it on to make it look good, so it will pass inspection for a little while. Or, I can rebuild the foundation right, one section at a time…”
The wise observer will see both tracks in play: The Fed is opting for the topping mix. But off on the sidelines, barter is booming and so is BitCoin. Regular people will find workable solutions, even if it means trading in silverware and home gardening.
Crumbling Foundations Detail
As our work on pricing has projected, BitCoin has continued to fall. As of this morning, it’s down to $482 and likely to continue falling toward our projected possible low of $325.
The reason is – in part – the IRS guidance of last week that BitCoins would be treated as property.
However, lest you think Capitalism of the Old School sort is out of the woods, guess again.
One group of the April Fools today are likely to be the high frequency Wall St.
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