Category Archives: markets

The Fed and Social Engineering

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President Joe Biden (D) wants our Federal Reserve System to engage in economic social engineering, so he’s nominating as the Fed’s banking supervisor the climate activist Sarah Bloom Raskin. Among her lately remarks concerning credit allocation and climate change was her last-spring op-ed in The New York Times. She led off that piece with this:

Climate change poses the next big threat. Ignoring it, particularly to the benefit of fossil fuel interests, is a risk we can’t afford.

She had this, too, in the same piece:

The Fed is singularly poised to seed strategic investments in future economic stability.

And this:

The decision to bring oil and gas into the Fed’s investment portfolio not only misdirects limited recovery resources but also sends a false price signal to investors about where capital needs to be allocated[.]

Raskin had this in her September 2020 Project Syndicate op-ed, reprinted by Duke Law:

US regulators need to be encouraged to think more imaginatively about how they can engage with local transition efforts. For example, how might financial policies from diverse agencies be stitched together to produce outcomes that enable firms to hit their net-zero targets? How can financial policy be used to help accelerate a transition that redeploys workers for new jobs, or to assist households that are being asked to change their spending habits? And how can regulatory changes relating to disclosure, access to credit, and pricing of risk support a rapid and just green transition?
…
In short…[f]inancial regulators must reimagine their own role so that they can play their part in the broader reimagining of the economy.

That’s not the Federal Reserve’s role, though. The Fed’s statutorily required goals are to maximize employment, stabilize prices, and moderate long-term interest rates. There’s nothing in there about climate change, or “guiding” lending to this or that government-favored group of Americans and away from that or this government-disfavored group of Americans, or any other sort of social engineering.

One more thing. Aside from Raskin’s own altered-state understanding of the Fed, a larger problem regards the present administration’s overall attitude. That Biden-Harris actually nominated Raskin says volumes about his own view of law and his own willingness to disregard it in order to increase his administration’s power.

Out of Touch?

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Or openly lying?

Small businesses are booming, according to the Biden-Harris administration.

President Biden’s efforts have not only helped millions of Main Street businesses keep their lights on and employees on payroll, they have enabled a remarkable rebound in small business activity, with small business demand for labor and inventories near record highs.

And

According to a leading survey of small business owners, the share of small businesses planning to create new jobs in the next three months is higher than it ever was at any point during the previous Administration. Another recent survey of small business owners found that 71 percent are optimistic about their own performance in 2022, up from 63 percent one year ago.

Carefully unidentified surveys. An openly identified survey, a Goldman Sachs survey, says otherwise.

86% of small business owners say that broader economic trends, such as supply chain issues, inflation, and workforce challenges, are having a negative impact on their small businesses

And

66% of impacted businesses say it is a problem for their business that suppliers are favoring large businesses over small businesses….

And

84% of small business owners say inflationary pressures have increased since September of 2021

And

Two-thirds of small business owners do not think the Federal government has done enough to address the economic trends

And

29% [of small business owners] think things in the US are moving in the right direction, reflecting a 38% decline since June of 2021.

That should be an embarrassing disconnect for the Biden-Harris administration, which makes me repeat my question: are the personages in this administration, from Biden-Harris on down, that far out of touch, or are they openly lying to us?

Either way, this is an incompetent administration, and it’s going to be a dangerous three years, domestically as well as globally.

“It Depends on Uncle Sam”

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Without more help from Washington, electric-vehicle sales will struggle to live up to the stock-market hype.

That Wall Street Journal lede pretty much tells the tale.

And this:

If the new technology is to live up to high investor expectations, the global record suggests that the US will need to embrace subsidies.

It depends on Uncle Sam. As long as electric vehicles get subsidies of any sort—either on the manufacturing end or to buyers of them on the other end—these battery cars can never be mainstream. As long as they’re getting any sort of subsidy, battery cars are tautologically unready for market.

Inflation Worries

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Jason Furman, ex-President Barack Obama’s (D) Council of Economic Advisers Chairman, wrote about four things about which to worry regarding the current inflation increase and its durability. Three of them were reasonably accurate. He also predicted a Fed response.

First, the economy is beginning 2022 with much tighter labor markets than a year ago. …
Second, demand should remain above pre-pandemic trends, while supply will likely continue to lag behind. …
Third, consumers, businesses, forecasters and financial markets all expect near-term inflation to be about 1 to 3 percentage points higher than a year ago. …

So far, so OK. But his fourth, not so much.

Fourth, the trajectory of Covid and its effect on inflation are highly uncertain.

In fact, it’s badly off the mark. What’s highly uncertain is the Federal government’s trajectory of variable, and often panic-hyped, (over)reaction to the Wuhan Virus. This one is beyond the ken of the Fed, or it should be, and is completely under the control of President Biden-Harris (D).

The Furman’s predicted Fed answer isn’t all that, either.

He [Fed Chairman and nominee for continuation as Chairman Jerome Powell] proved that the Fed’s actions will depend on the data, and the Fed is now on course to start raising rates in March. If inflation remains as high as I fear it will, expect him to continue to follow the data by pivoting further. Given the uncertainty, however, he should stay the course—for now.

No.

If the Fed is going to be serious about lowering inflation back into the neighborhood of its target rate of 2%, it needs to

  • stop buying Treasury debt
  • disgorge its existing Treasury debt instrument holdings (ideally by simply not rolling them at maturity)
  • set its benchmark interest rates at levels historically consistent with 2% inflation
  • sit down and be quiet instead of constantly trying to respond to every jot and tittle of market variation

More Chit-Chat

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Cynically done chit-chat, too.

Biden-Harris says he’s going to distribute bunches more Wuhan Virus test kits to schools to keep them open.

The Biden administration plans to distribute millions of free Covid-19 tests to schools around the country, part of the federal government’s effort to keep schools open amid a surge in coronavirus cases caused by the Omicron variant.
Later this month, the administration will begin shipping five million rapid Covid-19 tests to K-12 schools each month, White House officials said.

That’s in contrast to this:

The rapid tests for schools are in addition to the 500 million rapid tests the administration plans to begin distributing to the public for free in the coming weeks, a White House official said. The administration has faced criticism for testing shortages around the country that led to long lines and empty shelves at the start of the Omicron surge.

Which raises the question: where’s he going to get the tests, since he’s already unable to supply his previously promised tests? And that failure comes months after his decision to reject an industry offer to produce 700,000+ tests per month ‘way last October.

Or: are supposed to let the teachers unions keep our kids’ public schools closed for those months before Biden-Harris’ administration gets around to getting the tests and moseying them out to the schools?

Another question: how about the folks who might actually benefit from access to regular—and frequent, since each test is just a snapshot of the individual getting it, an individual who might get infected the next day, the next hour after the test—testing: folks in retirement and nursing facilities, health care workers, folks with comorbidities?

Promises, promises.