Monthly Archives: September 2016

Central Banks’ Unconventional Policies

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Richard Barley had a piece in Monday’s The Wall Street Journal concerning the confidence gap that’s growing between Central Banks’ unconventional policies and the realities of the market place and the economy that underlies both.  He closed his piece with this:

But there are more valid worries. One is that while central bank efforts are proving enough to keep the economic show on the road, they aren’t doing more than that; the persistent downgrading of growth expectations and the constant refrain from policy makers themselves for politicians to take measures to boost growth sustainably are testament to that.

But, meanwhile, they are producing asset-price inflation. The fear is that the gap between asset prices and reality will close sharply as markets correct. It isn’t clear what might cause that or when: markets are still dancing to the tunes being played by central banks.

Unconventional policy in the immediate wake of the financial crisis undoubtedly helped to boost confidence in markets. But the longer unconventional policy persists, the less confidence it inspires.

That last paragraph introduces the point I want to make.

Unconventional policy helped in the immediate wake because it was new, and so novel, and came in the face of a strong and already discouraging economic dislocation—much like Keynesian stimulus is supposed to help in such a circumstance when it’s new, and so novel (I won’t here get into whether Keynesian stimuli actually do help in their necessarily zero-sum applications).  However, when the policy is no longer novel, when it becomes the steady-state condition, it loses its stimulative capacity—whether the policy is unconventional or Keynesian stimulus.

A Propos Missing Devices

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A report from cloud access security firm Bitglass analyzing all breaches of financial services firms since 2006 found lost and stolen devices [behind a registration wall] accounted for 25.3% of breach events

These missing devices only emphasize the incredible “excessive carelessness” of Democratic Party Presidential candidate Hillary Clinton’s utter negligence in her handling of her own devices.  The damage to which we’re exposed and the damage done by…careless…handling isn’t limited to national secrets or even to politics.

Employment and Interest Rates

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The US economy added 151,000 net new jobs in August, below consensus expectations for 180,000. Meanwhile, the labor force participation rate remained stable at 62.8%, as did the jobless rate at 4.9%, though it was expected to tick slightly lower to 4.8% for the month. The closely-watched U6 rate, or “underemployment” rate, which measures unemployed workers and those working part time for economic reasons, remained stuck at 9.7%.

The unemployment rate and the jobs numbers are misleading when taken out of context.  The context of importance here is the historically low labor force participation rate, from folks having given up looking for work, even though they’re perfectly viable potential employees rather than boomers who’ve retired (a number of whom actually have retired earlier than they wanted to and still would work, were there jobs).

Then there’s this, from Dan North, of Euler Hermes North America:

The most important part [of the report] is the weakness in hours and wages. That slammed the door on September [rate-hike chances].

I’ve said it before, and here I am saying it again: if the Fed wants 2% inflation, then it needs to stop chasing the market; it needs to stop focusing on jobs numbers, per se; and it needs to stop holding out for 2% inflation before it moves.  It needs to set its benchmark interest rates at levels historically consistent with 2% inflation and then sit down and watch.  Watch the economy recover, watch folks who’ve given up come back into the labor force, watch wage growth reappear, watch the labor participation rate, from that, recover to more normal levels; and watch the unemployment rate, still low, actually mean something.

And watch prosperity and productivity resume growing.

Early Stage Alzheimer’s?

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From the latest FBI document release last Friday, we learned or received a measure of clarification on a few things.

Democratic Party Presidential candidate Hillary Clinton told the FBI during the interviews that were the subject of the document release that

Clinton could not recall when she received her security clearance or whether it was carried over from her time in the Senate. She also could not recall any briefing or training by the State Department “related to the retention of federal records or the handling of classified information.”

And further,

Clinton recalled being briefed on Specific Access Program information (for classified material). But [she] could not recall any specific briefings on how to handle information associated with the SAPs[.]

And

she requested a secured BlackBerry while at State but could not recall why they were unable to provide one[.]

And

Clinton repeatedly claimed to have little training or understanding about the classification process—despite leading the department that handled such information on a regular basis and having a security clearance[.]

And this:

FBI agents also asked Clinton about three emails marked classified. They contained a “C” or portion marking, indicating the intelligence was at the lowest level, or confidential. Clinton said she thought the “C” was part of series like bullet points or a listing, like A, B, C.”

More than 30 times in the FBI’s Friday release, Clinton told the FBI agents interviewing her that she couldn’t remember this or that major briefing or training or similar event.

Recall that Clinton signed off on documents certifying that she had had security briefing when she became Secretary of State.  Recall that then-Senator Clinton served on the Senate Armed Services Committee, in which capacity she also was briefed and periodically trained in handling classified data and documents, and in which capacity she routinely handled classified data and documents.

Couple these memory lapses and instances of confusion with her deflections when reporters ask her questions that she doesn’t understand (back when she was interacting with them)—”You mean like with a cloth?”, her efforts to change the subject when told things she doesn’t understand, and her current months-long (more than 270 days) hiding from interactive meetings with the public (the TV interviews her campaign touts aren’t live; they’re “edited to fit the time slot”).

Assume she’s telling the truth about all of this, about her confusion concerning really quite routine classification protocols, about her not remembering.  Assume she’s not being evasive in response to simple questions when she deflects or changes the subject.

All of this may be why she’s hiding from interactive public meetings like press conferences.

All of this begins to look like Clinton is in the throes of early-stage Alzheimer’s.

Some Labor Day Questions

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First published in 2015, I’ve updated it for today.  In an ideal world, I’ll be able to update it again next year, with a more optimistic tone.

The Wall Street Journal asked some questions on Labor Day 2012, and supplied some answers.  Here are some of those questions and answers, which remain as valid this Labor Day.

  • Q: How are America’s workers doing? Not good. Over the past decade, over the ups and downs of the economy, taking inflation into account, the compensation of the typical worker — wages and benefits—basically haven’t risen at all. … The Labor Department recently said that 6.1 million workers in 2009-2011 have lost jobs that they’d had for at least three years. Of those, 45% hadn’t found work as of January 2012. … Federal Reserve Chairman Ben Bernanke said Friday that unemployment is still two percentage points higher than normal….
  • Q: Things ARE getting better, though. The US economy is creating jobs, right? Back in December 2007 when the recession began, there were about two jobless workers for every job opening.  When the economy touched bottom in mid-2009, there were more than six unemployed for every job.  At last count, the BLS says there were 3.4 jobless for every opening.
  • Q: How much of this elevated unemployment is because the unemployed just don’t have the skills that employers are looking for right now?  …the bulk of the evidence is a lot of the unemployment really is the old-fashioned kind: the kind that would go away if the economy was growing at a stronger pace. Mr. Bernanke said as much at the [2012] Jackson Hole conference….

The Democratic Party President has taken a bad situation and done little to improve it, even though he’s had four more years in which to do so.  He has, though, actively attacked businesses—the hirers—demonizing them, (over)regulating them, demanding to raise taxes on them.

At least as importantly, the current Democratic Party Presidential candidate has vowed to continue these Democratic policies, and to extend them.  Even with nearly eight years of empirical data demonstrating the bankruptcy of these policies.

Happy Labor Day.