October 9, 2022
By: Laura Christie
A recent poll suggested that over 80% of Americans are concerned about the economy and inflation. Given the rarity of such an occurrence – to wit, 80% of Americans agreeing on anything, I sat down with the seven members of the Federal Reserve Board of Governors and the twelve Federal Reserve Bank presidents to ask them why things are so FUBAR. Here’s what they had to say*.
Laura Christie (LC): Thank you all for being here today. I’m going to forgo the usual ass kissing introduction and just jump into my list of comments and questions and let each of you respond as you see fit.
LC: Given that all of you hold advanced degrees, I’m going to assume that you’re all aware of the existence of various diseases that can disrupt the normal growth patterns of fauna. Some of these diseases prevent humans from ceasing to grow. Instead of reaching a final size somewhere in their late teens/early twenties, they continue to grow taller and taller, or wider and wider, straining their organs, joints, and bones. Unless they receive treatment, they will die much younger than their contemporaries and often suffer emotional and physical pain. The bodies of fauna are designed to grow to a certain point then cease growing so as to not over-tax their systems. I’ve often heard economies described as living organisms. How do you all reconcile your goal to continue growing our economy at a minimum of 2% every year for eternity on top of the horrendous inflation you created in 2021 and 2022? Is there not a time when our economy reaches adulthood and ceases to expand so it can remain strong and thrive? Aren’t you constantly straining the working class, the heart of our country? Do you not feel that you are a tumor on the pituitary of our economy, afflicting us with acromegaly – gigantism, if you will, for the benefit of the top 1% of the country’s wealth holders?
Mr. Ariari: We absolutely are! There is no reason that our economy couldn’t be left to run in the background of a mature capitalistic society. But we don’t have an economy of capitalism. American leaders talk a good game about capitalism, free markets, etc., but they constantly interfere for the benefit of their large donors, lobbyists, and their own personal bank balances. Using your analogy of a body, consider this. If a child is fed a constant diet of junk food and couch sitting and becomes obese, the rational response would be, eat better and exercise, but in America we don’t do that. In America there is not as much profit in promoting simple things like the consumption of non-processed foods and recommending taking brisk walks and doing jumping jacks; but there is enormous profit in pushing pharmaceuticals and selling exercise equipment. If everyone ate a healthy diet, one that was routinely cooked at home; and exercised using free and low-cost options, there would be no need for hugely expensive interventions. When you extrapolate the analogy to the larger economy, if Americans refused to be profit centers for corporations – I mean, who actually needs a new cell phone or car every 2-3 years? – then they would not need increases in wages every year and corporations would not need to raise prices and make risky investments to pay for those wage increases while still showing growth to keep their stock prices propped up and appease Wall Street analysts and “journalists” who can make or break a company with one bad business review. If corporations and government-sponsored entities did not make risky investments, then our job would be a lot easier. The simple truth is, America’s economic body, the organism we created, is on life support. We at the Fed are trying to keep it going, but it’s so sick that everything we do creates a failure in another part of the system. Plus, we’re fighting two other teams of professionals – politicians and business “leaders” who want to keep taking blood and tissue from the system to support their own systems – not realizing that their systems are dependent on the whole surviving. Every time we intubate, Congress stands by while corporations puts more weight on the chest with higher prices. Every time we put the patient on dialysis to pull the debt toxins from the blood, the politicians send out checks and the patient binges on more consumerism. America is a caste welfare state, plain and simple. Some businesses are protected while others are left to fail. Some Americans are protected while others are left to suffer. The notion that something is Too Big To Fail is simply unnatural. We don’t have T-Rexs or Woolly mammoths wandering around anymore. They were too big for the ecosystem and they failed to survive.
LC: Are you suggesting that our economy will go the way of the dinosaurs?
Ms. Denier: Definitely. It can’t support the enormous demands of the largest resource-draining consumers for much longer. Our economy, our country for that matter, will probably evolve very much like the dinosaurs – the largest, most lumbering gluttonous organisms will die off while agile, environmentally beneficial, low maintenance organisms like dragonflies will thrive and survive.
LC: Are you speaking in metaphoric terms of generations?
Ms. Denier: You caught that, did you? Yes. The Baby Boomer generation is, by far, too large and too taxing on the economy. They will bring it down. From their welfare requirements to their investment return demands, they are consuming more than they ever contributed, more than their children and grandchildren can provide. And to add insult to injury, theirs is the loudest voice in a political arena dominated by them so theirs is the most catered to generation simply by virtue of old white people looking out for old white people. It is absurd that the same generation who demanded their own parents do their duty and die to make way for the them to rise are now squatting in political office like giant toads, blocking their own children and grandchildren from participating in their own futures. But there is a ray of hope. If Generation Z, which is to say the children of Gen X and Millennials, can become like the dragonfly – can pare down their needs, can bend with the times and be smart, clever, and patient…they can survive and quite possibly thrive when we’re all gone.
LC: What about Gen X and the Millennials?
Ms. Denier: For the most part? They’re screwed! Look, when you demand to be able to spend your hard-earned money on $5 cups of coffee and buy whatever some fool on social media tells you to, you’re gonna go down with the ship. No one in government will bail them out – as evidenced by the President’s student loan debacle; and their Boomer parents will not be leaving them an inheritance outside of casino loyalty cards and cruise ship meal coupons. If Gen X and Y went on consumerism strike, they might be able to shift course and not hit the iceberg head on, but their Golden Years are going to be mostly pyrite.
LC: Does anyone want to expand on the idea of a consumerism strike? What would that look like? How would you convince people to go on one? Would it make your job at the Fed easier or harder? Would you fight it?
Mr. Inti: I’ll take that subject!
LC: For the record, there is a mischievous twinkle in Mr. Inti’s eye that leads one to believe he’s going to enjoy this…
Mr. Inti: Indeed, I shall. The straight up truth is, we at the Federal Reserve live in a bubble filled with academic hypothesis and research. We’re very educated in financial rules, economic physics, the actions taken by our predecessors, and the machinations of the business world, but none of those topics has anything to do with the real world. People in different circles talk about Volker, Greenspan, Bernanke, Keynes, Yellen, etc. as if they were or are some kind of messiahs. They talk about Steve Jobs, Bill Gates, Bezos, Musk, Page & Brin et al. like they’re gods. But the fact is they’re just dudes for whom the stars aligned. We as humans can study their stories and possibly learn a few things, but for the most part their stories are just documentary fodder because those stardust, lightening-in-a-bottle, end-of-the-rainbow kind of stories never repeat themselves. Just because we know that Volker crushed inflation with his policies, Greenspan and Bernanke fanculo-ed everyone for the benefit of their bffs, and Keynes had A LOT of time on his hands to play with numbers, it doesn’t mean that if we use a page from their playbooks we will have the same results.
Every academic knows this so we knew when the Pandemic hit we’d be writing our own playbook. To put it bluntly, we experimented on US citizens and residents during the Pandemic and will be continuing to do so for the next ten years or more as we gather, analyze, and study data from our response to the Pandemic and the subsequent fallout.
We confirmed there are, of course, some fundamental and universal truths which all of us in the know take full advantage of. For example, when the Fed engages in Quantitative Easing assets will go up in value. And when there is an emergency, Congress, the White House, and all the States’ Governors will throw money at it in completely predictable, biased, and wholly irresponsible ways. There is no greater time to quietly make piles of money than during the chaos of a crisis, and if you’re on the inside making the decisions to intentionally tank mortgage rates and explode housing prices or dole out money to corporations promising solutions – you can make truckloads on the DL!
Luckily for us here at the Federal Reserve the feast won’t end with Quantitative Tightening because each one of us who participated in the Fed’s response to the Pandemic will make millions selling our memoirs and making speeches over the next ten to twenty years off the material we gather studying how society and the economy reacts to this unicorn moment in our history.
The COVID Pandemic was, for us, an opportunity to experiment on not only individual states and the nation as a whole, but on the entire population of the world. If you think about it, it’s quite fascinating…The entire planet shut down almost overnight. Hundreds of millions of people suddenly out of work, treading water in a choppy sea of financial obligations. The supply chain ground to a halt juxtaposed against hoarding. Corporations were brought to their knees because none of them operate in responsible manners, choosing instead to live on just-in-time inventory strategies and leveraged debt. And politicians, as usual, were caught with their pants around their ankles.
We knew that people going into the Pandemic who owned a home would be better off because it’s simple to order a loan servicer to put everyone into forbearance. Boom! No mortgage payments, no foreclosure, no worries. But that still left a vast swath of Americans with no way to avoid losing their homes to eviction so of course eviction moratoriums were enacted, expanded unemployment was invented, stimulus checks were printed, and student loans were paused for what, nearly three years? Then of course an entire class of employee was conceived – the essential worker! Emergency workers and first responders always expect to continue stepping up during a crisis, but during the Pandemic, scores of people were back to work within just a few days of the scattershot state-mandated lockdowns, pressed into service to keep supply chains running, shelves stocked, trash picked up, and students educated. And just like with every other catastrophic tragedy, corporate grifters popped out of the woodwork to hawk their wares for enormous payouts – ventilators, Personal Protective Equipment (PPE), diagnostic tests and accompanying accoutrement like swabs, reagents, tubes, tips, and caps; administration of Paycheck Protection Program (PPP) grants, err, sorry, “loans”; processing of applications for and distribution of unemployment benefits, and of course – vaccines!
In America alone, we created and doled out over five trillion dollars and that’s not including all the mortgage backed securities we bought so that we could make sure to keep home ownership out of reach of poor people and the lower middle-class – I mean, who will pay ever-increasing rents on homes owned my buddies at Black Rock if I don’t keep home prices so high that rent is their only option? But yeah, of that five trillion dollars, most of it went to politically connected individuals and corporate executives in the form of obscene bonuses. Very little of it went to average Americans via wage increases and stimulus, but they seemed happy enough with the crumbs we threw them. I certainly haven’t heard any complaints.
LC: I just have to interrupt for a moment to ask…Are you seriously saying that because you haven’t heard any complaints that there are none? Are you under the impression that if there had been complaints they would have made it through the layers of sycophants and security that protect you?
Mr. Inti: I use social media. I’d have noticed if people were unhappy. Sure, there were some bots and fake accounts that accused The Fed of being too slow to react to inflation, of suppressing mortgage rates with our policies for too long and wrecking the housing market, but I just reported them to the CEOs of those companies and those accounts were deactivated at my behest.
May I continue with my response to your original question?
LC: Sure. Do you recall what it was?
Mr. Inti: Of course. What would a consumer strike look like, how would be get people to go on one, and would it make our job at the Fed easier?
LC: By all means…
Mr. Inti: So, as I was saying…What I and many of my cohort are surprised by is the exuberance of spending at any cost that we witnessed. We wrongly assumed that Americans, and Canadians, Australians, and Europeans for that matter, would take advantage of our largess, of the politicians’ generosity, and save up those funds.
LC: Hold on. I’m sorry, I have to interrupt again. You thought AMERICANS would save money? You thought given the opportunity to stop paying their mortgage, stop paying their rent, stop paying their student loans – they’d SAVE those funds? You thought that by giving them stimulus money and expanded unemployment benefits – they’d SAVE those funds? You thought that when earnings rose via Hero Pay programs and wage hikes to attract employees back to work- they’d SAVE those funds? Are you new here????? Were you not paying attention during the run up to the 2008 disaster when Americans took on loads of risky debt to buy multiple homes and use them all like ATMs to live large? When Enron, Lehman, and AIG celebrated while California burned and ruined people’s lives???
Mr. Inti: Well, no, I’m born and raised American. I’m certainly not new here. But I’ll admit I and the rest of the policy makers were overly optimistic that Americans, humans in general, had learned from the Great Financial Crisis. I think we at the Federal Reserve were all taken aback by how financially ignorant Americans are and how easily they are manipulated into buying things they don’t need and paying whatever they’re told to for said things. Which brings me to my point about a consumer strike. Simply put, if people want prices to go down, they should stop buying shit! It would absolutely help us at the Fed, inflation would plummet, it would go negative and theoretically drag prices back to some semblance of normal. Inventories would rise in the face of negative demand. It’s basic economics.
LC: What do you feel is or are the biggest obstacles to a consumer strike?
Mr. Thaler: That’s simple. There are two. Number one is humanity’s base instinct to fear missing out on something, and number two is the constant noise of “media”.
LC: Would you care to elaborate?
Mr. Thaler: Okay. Well, I’m not anthropologist, but I’d wager that there is a long-documented precedence of herd mentality and hoarding buried in the primal parts of our brains right next to the fight or flight response. I would assume that it is the result of those with the DNA and societal training to follow the herd and prepare for disasters, a genetic nature and nurture software program if you will, surviving into the 21st century without ever evolving. A vast majority of humans never question anything, they just drink their pablum, take their standardized tests, and obey advertisers who demand their clients profit off society’s compliance. Take for example the start of the COVID pandemic, before it was even labeled a pandemic, before lockdowns began taking effect, people were buying closets full of toilet paper, bottled water, and 50lb bags of rice. They were clearing the shelves of masks, gloves; disinfecting wipes, gels, sprays; and over-the-counter medicines. A significant number of these people saw, on television and in stores, the herd hoarding supplies and found comfort in following them. Others found they could quell their fear of missing out on a brag-worthy business opportunity by clearing shelves and cornering the market on needed supplies. And the entire mania was fueled by the cacophony of 24/7 “news” (and I use the term sarcastically) stories and social media posts. Rather than step back and evaluate the situation, people panicked. And I understand why. Leadership in this country is a joke. There is no one to look to for guidance or comfort, so humans are left to fend for themselves. In moments of panic they have been conditioned that water, rice, pain reliever, and for some reason, toilet paper, are the things to have on hand. One might ask why they don’t always have those things in the cupboard given the unpredictable nature of disasters, but that’s a study for another day. So, why do I think a consumer strike is unlikely? I don’t think they will ever stop and think about where each of their hard-earned dollars go. They are so caught up in keeping up with the Joneses, in grasping for tiny shards of comfort and relevance in a world dominated by a constant racket of media-provided manipulation, that they refuse to ask a basic question every time they buy something. Where is this dollar going? When people shop by payment, meaning they purchase something just because they feel they can afford the monthly payment, they miss the scam being perpetrated upon them. If they forced themselves to analyze who profits off their every transaction, they’d suddenly find themselves backing away from purchases. If they knew that they were being tricked into buying a 3-year-old car, valued by the dealer at more than it was new, financed over eight years to make the payment fit their budget. If they knew that they’d be upside down on the car in a year, trapped in the loan until the car was eleven years old, forced to put repairs on a credit card at 20% interest or pony up funds to buy out their old loan just to buy a new car because the auto market makes it so expensive to repair a car and find financing for it that people just give up and buy a new one because they can afford the payment and the dealer did them a “favor” and gave them a 1.9% APR loan because they’re “loyal customers”. If people did the math on buying a new phone every two years, a “luxury” branded bag or pair of sneakers, or a fancy vacation and asked themselves if they were okay with being debt slaves for the benefit of already absurdly wealthy business executives – they might decide to walk away from a purchase. But never in the history of man have a majority of humans declined to be financially sodomized. It’s only when they are totally skint that they finally stop spending, and by then it’s too late.
LC: So, to sum up, the reason there will never be a consumer strike, the reason that inflation will continue to compound on top of the highs of 2021 and 2022, is because humanity is addicted to buying things to post about on social media?
Mr. Thaler: Verily.
LC: Do you think the Federal Reserve bears any responsibility for the current economy or are you just going to blame consumers?
Mr. Pula: To the extent we trusted Americans to manage their money responsibly, yes, we are to blame. We used the crisis to flood the economy with money. Some of us perhaps hoping to profit off it personally, but many of us hoping that the policy would lift a significant number of people out of poverty. Where we failed was A) not recognizing that consumers would elect to spend it all and then some at a time when supply chains were broken at each of their weakest links, and B) not shutting of the taps in mid 2021. However, there is another factor that needs to be addressed and that is politicians. They created a scheme during the Pandemic that resulted in fraud and waste the likes of which we’ve never seen simply due to their standard policy of “Throw money at it until it goes away”, all during a very condensed time frame when we created trillions of dollars out of thin air. Additionally, politicians have utterly failed to put gates in place that would prevent graft. As a matter of fact, they’ve made careers out of clearing the way for graft because it benefits their patrons. They have also failed to protect the most financially vulnerable by blocking and fighting against rent controls, predatory sales tactics…
LC: Please define predatory sales tactics…
Mr. Pula: Two examples that come to mind are hospitals and car dealerships. In a hospital setting there is no menu of prices. There’s supposed to be, but there are no penalties for being out of compliance because politicians are pussies, but I digress. If you go to a hospital you will be charged based on your insurance or lack thereof, you will be charged differently if you have a PPO, an HMO, Medicare, Medicaid, or no insurance. Costs at hospitals are malleable and crippling when people are at their weakest and most vulnerable and politicians do exactly nothing but talk about doing something. Why? Because hospitals and insurance companies are some of their biggest donors and benefactors and you don’t bite the hand that feeds you. Car dealerships are only slightly less insidious. They only stock over-accessorized cars because they have the highest profit margins, then they tack on dealer markups on top of the MSRP. They add on aftermarket crapware like window etching, flashing third brake lights, fabric treatments, etc. and tell you that’s just what the car comes with so pay up. And politicians allow car manufacturers to allow this behavior from their dealers. If you walked into a home improvement store and wanted a fridge but were told there was a special markup over the listed price, that you had to pay for a special coating they’d put on the shelves, and that they only had two models in stock – both of which were enormous Wi-Fi enabled models that wouldn’t even fit in your home and were far more appliance than you wanted or needed…Would you just buy it or would you go to another store hoping they had a smaller, more affordable basic model? The latter, right? Well, what if all the stores had conspired to act the same? Only stock the most expensive units, only sell units pre-loaded with expensive OEM and aftermarket junk? What if the manufacturers had encouraged and enabled this behavior by only building the most expensive units and turning a blind eye to store markups and their pre-installing of third-party add-ons? And then imagine you bought the fridge without knowing the price. Imagine a scenario in which a salesperson says they’ll send you a bill for the cost of the unit 30-60 days after delivery. That’s the hospital business plan merging with the car manufacturers’ build-a-handful-of-only-the-most-expensive-models plan. I guarantee you it’s coming. You’ll no longer know the price of anything. You’ll just blindly pay whatever you’re told to over time with interest or in full, months after receiving the product or service. To some extent, it’s already happening in the American economy. Too many corporations are conspiring to only offer the most expensive options to consumers, to pad profits by forcing them to pay for things they don’t want or need, by turning everything into a digital product or subscription, and by playing shell games with pricing policies. No politician or government agency is fighting back against this conspiracy to financially defraud and disenfranchise the public. And the public refuses to revolt. It’s like they’ve had their gumption bred out of them. I’m sure the wholesale destruction of the public education system hasn’t helped any either.
We at the Federal Reserve created a situation where money was flowing freely. We were trying to keep people employed and able to keep purchasing necessities. If someone could refinance their home at a lower rate, they’d have extra money in their bank account each month to build up their savings, pay down debt, and continue to go out to dinner while the cost of doing so went up due to the Pandemic supply chain and wage increase issues. If homeowners had the money to eat out occasionally, the restaurant staff would have jobs and be able to pay their bills and perhaps save some money, and so on. The notion was to keep individual families’ economies humming while we navigated an unprecedented moment in history when multiple state and national economies, each the size of the Titanic, stopped on a dime. What we did not foresee was the voracious appetite of consumers or the unmitigated greed of corporate executives – although, to be honest, neither should have been a surprise. But controlling both of those things is not in our wheelhouse. We can print the money, we can ease its flow through the economy by lowering lending rates. But it’s politicians and consumers who have to have self-control and demand civilized behavior from product and service providers during a crisis. Now we’ve baked in a new era of pricing. Americans have just bent over and accepted a new normal – technologically over-bloated, over-priced products and services. Another example I can give you is restaurants. Do you recall when the Affordable Care Act was passed and required that businesses provide health insurance to their employees? Do you recall many restaurants added a special service charge to their bill to compensate for that cost? What happened when Trump removed the financial penalty for not providing that feature? When he essentially negated that requirement? Did the restaurants remove that charge? Nope. They just pocket the difference if they decided to stop offering coverage. During the pandemic, restaurants began adding “cleaning fees” to bills to offset the cost of supplies and labor to disinfect the tables between seatings. Have you seen anyone do more than wipe crumbs off tables onto the floor with a dirty rag lately? Nope. Have you seen the “cleaning fee” fall off the bill? Nope. It’s all profit and people have become conditioned to paying it because they refuse to change their behavior or question anything. Americans, hell, humans for the most part, refuse to elect better leaders, and in general just say no to abuse, both of which would cause businesses and politicians to change their behavior.
LC: What do you say to people wringing their hands over what your recent inflation-fighting policies are doing to the economy – specifically housing, car loans, and the stock market? Are they right that you’re messing this up? That you should go back to lower rates and buying mortgage backed securities again?
Mr. Guilder: Look, it’s not like we didn’t warn people that higher rates and Quantitative Tightening were coming! No one could have expected us to continue to print money and repress lending rates for eternity! I mean honestly now! Sure, we could have started earlier, we should have started earlier, but when we finally decided to stop nattering about, eh-hem, “transitory” inflation and get serious about orchestrating a “soft landing”, we warned people that it was time to get with the program. We warned them that we’d be raising rates in March, ramping up QT, and focusing on bringing down demand to bring down inflation. Now, somehow, it’s a surprise that mortgage rates are going up and affecting home prices? Somehow, it’s a surprise that stocks are going down as investors reallocate their funds to Treasuries that are finally paying a measurable return or sell them to pay the jacked up property taxes on their 5th home?
Mr. Grivna: To be fair though, it was a bit like warning toddlers that it’s almost time to clean up and go home during a play date. We gave them a 30-minute warning, we gave them a 5-minute warning, at the appointed time we told them it was time to go and they begged us for 5 more minutes, then another 5 and when we finally picked them up and put them in the car they had a total meltdown because they wanted to keep playing. Our mistake was in forgetting that toddlers can’t. Tell. TIME. They don’t have watches, they don’t know 30 minutes from ambergris. And they had no faith that we’d follow through because we kept giving them time extensions. What’s pathetic is that grown-ass investors and politicians act like toddlers and that we have to tailor our communications to their rudimentary understanding of words and context!
Ms. Florin: And to expand on your analogy…At the moment we were trying to load the kids in the car, AKA make progress on tackling inflation and forcing a housing market reset, the hosts of the playdate came out and gave the kids cupcakes! By which I mean it’s a midterm election year and politicians have been passing out money to buy votes. Just as we’re getting serious about fixing our mess, States start passing out new stimulus money to counter inflation. Seriously? We finally got the kids strapped in the car and politicians start passing out cupcakes and pot brownies? And lawwwwd help me if the paste-eaters didn’t start prattling fulltime about mandating electric vehicles and passing huge spending bills geared toward climate change to raise their profile with voters. Of course oil and gas prices spiked! Gas companies want to frontload their profits if EVs and renewable energy sources are coming down the track, and they need to get people so used to $7 gas that they think $6 gas is a bargain. And how exactly did politicians think OPEC+ was going to respond? Of course OPEC+ decided to cut production by 2 million barrels which will keep the prices higher through the election and through the end of the year obliterating any chance of negative or even flat growth in gas prices, travel costs, and food prices. Every time we seem to be making a little progress on inflation, toddler politicians pour lighter fluid on it.
Ms. Lira: And can we just for a minute talk about the Fed Pivot rumors? I’ve never seen anything like it. Never before has the world been flooded with social media influencers and self-appointed “experts” jibberjabbering 24/7 about what the Fed may do, should do, must do! People dunk on the Plunge Protection Team for being a shady group that rescues their buddies!? Have you seen the talking heads on news channels colluding with influencers on social media to hype rumors of a Fed Pivot all to goose the stock market and cryptos? It’s happened at least twice – once over the summer and now in October. They grasp onto some parsed wording in a Fed speech or some paper written by the UN or actions by another country’s central bank to declare that WE are going to pivot back to lowering rates and QE. AND PEOPLE BELIEVE THEM! People blindly follow some random person on social media or some dude who bangs buttons on television and pour their money into the stock market strictly for the benefit of the manipulators who cash out knowing full well we have no intention of pivoting because we simply can’t back down or we risk a wage-price spiral that will see tomatoes at $75.00/lb.
LC: You have to admit though, you do have a credibility problem.
Ms. Riksdaler: Yeah. We fucked up.
Mr. Drachma: That seems harsh.
Ms. Lempira: We didn’t force people to spend all their money and take on so much debt! You can’t ask us to shoulder all the blame for this! I think of it this way, we may have walked into an addiction rehab center and dropped off craps tables and video poker machines, kegs of beer and cases of tequila, syringes prefilled with Grade A heroin, silver bowls of sherbet-colored blow, boxes of candy-coated oxy, and baggies of special brownies – but we didn’t force anyone to partake. How were we to know addicts would addict?
Ms. Riksdaler: Come on, you know it’s true. Everyone with more than two brain cells knows it’s true. We should have jumped on this in mid-2021. We fucked up and now no one thinks we have the stones to follow through with the detox program. I do love that addiction analogy. It fits.
Ms. Hwan: If average people don’t know by now that the game is rigged against them, how is that our fault? The fact that people were surprised by a group of investors conspiring to run up GameStop only to be crushed by another group of bigger fish pulling the plug on their ability to buy because they had the right to, based on the Terms of Service agreed to by the first group…the fact that ANYONE is surprised by this flabbergasts me! The first rule of humanity is Trust No One. Why anyone takes advice from a random stranger, a self-appointed “expert” on a TV show or social media account is beyond my comprehension. That anyone blindly trusts a real estate agent is shocking. How do you not do your own due diligence given the world we live in? First of all, no one cares about you – they care about themselves. They care about their bottom line, their liability exposure, and how much they can get away with. Secondly, there is so much information in the public domain due to public records laws and the internet. How does a home buyer NOT research a home they want to buy and see that it just sold two days prior to listing and that the home is being listed for $100,000 over the last sale price – TWO DAYS AGO? How do you not know you’re getting screwed? You trusted your real estate agent to tell you? HAH! They are financially benefitting from your ignorance. They make commissions off your ignorance. They make money off their own properties that you are driving up the value of every time you set a new comp. They lie and obfuscate and no one stops them. You think there was really a competing offer on that house you bought? Hah! They got a buddy to write it if it existed at all! That anyone agreed to buy a home in 2021 or 2022 at double its price in 2019 or 2020, that they agreed to waive inspections and appraisals because they wanted to get a low mortgage interest rate and could afford the monthly nut. That anyone bought into the lie of a “Housing Shortage”…That people chose to pay $600,000 for a home just because they could afford it at 3% APY instead of doing the math on what the home would cost financed at 5% APY on its actual value of $400,000 if they’d just waited for the hysteria to die down instead of feeding it…I just can’t!
Mr. Kip: I think what my colleagues are trying to say is that if people had not allowed themselves to be manipulated by others looking to profit off of them and their FOMO, either via their attention or their wallets, the country and the world would be in a much better place right now economically speaking. Now we’re in a position where we as the Federal Reserve have to detox the nation and the countries tied to her, off easy, abundant cash and detox is never fun. Addicts will say they don’t have a problem, they’ll beg for just one last hit to carry them through the process, they’ll whine and manipulate to keep the party going. The problem is, if we keep this particular party going we’re going to be facing $100,000 Toyota Corollas and $50 lettuce. If we back off our current policy meant to crush demand and mop up the money we flooded the world with, the addicts will just go right back to the cycle of spending whatever to buy everything, thus depleting inventory, raising prices, raising debt, and raising wages to afford to do I all over again and again and again. We have to stop the madness.
Mr. Drachma: I do have to admit, I’m a bit concerned about what happens after the election. If the Republicans take the House and/or Senate will it be enough to calm OPEC+ or will they keep up the pressure until a Republican takes the White House? Fuel prices are at the root of food price inflation. If we can’t get food, housing, and gas & energy price increases under control our credibility will be further eroded and this could be a long painful road.
LC: Do your models tell you whether or not a consumer strike would bring prices back down to Q4 2019 levels? Or are we all just supposed to accept your goal of 2% inflation on top of the compounded inflation you caused by waiting to raise rates and start QT? Let’s assume that by July 2023 you get it down to 3% CPI YOY. That will have been a 22.5% increase in CPI between July of 2018 and July 2023, and by July 2024 we’ll be at a compounded CPI of 24.5% assuming you finally get CPI back down to 2% by then. If consumers put the brakes on spending and demanded lower prices, could they cause negative YOY inflation and drag prices back to 2019 levels?
Ms. Piastra: Anything is possible, but I can’t imagine Americans changing their behavior so dramatically to affect any sort of change, especially one that dramatic. If you’d asked me about this in the 1950s, I’d say absolutely. By and large, people who lived through The Great Depression and World War II were much more protective of their money, they were much more conservative and aware of the dangers of debt. They were proud of living within their means and building wealth through savings and sound investment. They were far more averse to gambling and waste. If they felt that prices were too high, they’d just walk away en masse. Beginning with the Boomer generation, that all went out the window. I can’t imagine Boomers or their children giving up their over-priced coffee, manicures, expensive watches, eating out, vacations, multiple cars, gizmos and gadgets in great enough numbers to send a message to corporations. I can’t imagine them pulling their money from banks and brokers and learning how to invest their money wisely. I can’t imagine them waking up to the fact they are nothing more than piggy banks to be smashed and robbed by everyone they encounter.
Mr. Gazeta: But I would love to live in that world. I would love to see people bail on their institutional rentals and move in with family and friends to save money until housing owners learn that housing is a basic human right not an investment. I’d love for college students to quit universities until they lower tuition and housing costs. I’d love for Americans to send the message that they won’t be extorted just to have a roof over their heads, buy a car, go on holiday, or eat out at a restaurant. I’d love it if Americans would elect leadership who would create a health insurance program funded by a hybrid of taxpayer funds and personal premiums that cuts out the for-profit middle men who demand higher profits every quarter. I’d love to see Americans embrace a life of waste reduction instead of waste creation. We live in a disposable world where everyone just accepts planned obsolescence for the benefit of corporate profits. It’s frustrating because it hasn’t always been this way and anyone who studies history knows this, but to point it out invites ridicule and abuse. People have been so brainwashed that to point out they have choices evokes a tirade of cruelty as they defend their position. Consumerism and debt slavery have become a religion, and like Grandma said, “Don’t discuss religion, politics, or money if you want to have friends. People aren’t smart enough or confident enough in their beliefs to defend their positions or accept other philosophies. They’ll just attack you. It’s a lonely existence to question others.”
LC: We haven’t heard from Mr. Kina, Ms. Korona, or Mr. Maravedi. Would any of you like to add anything before we wrap up? I know many look to the Federal Reserve to tease out your opinions on crypto currency, bank regulations, etc. Would any of you like to touch on those subjects?
Mr. Maravedi: I would say the following about crypto currencies. Anything can be a currency. Throughout history, societies have traded goods for shells, beads, coins, other goods, etc. In theory, toenail clippings could be a currency if you could find someone willing to take them in exchange for something you want from them. The problem with crypto currencies is two-fold. Adoption and regulation. I don’t see a time in the next fifty years where adoption rates become high enough that the currency flourishes, and I never see a time where the currency won’t be regulated and taxed – no government in the world will turn a blind eye to a mainstream monetary system they can’t meddle in and control. If we want to take the risk out of investment in crypto we need to start creating the rules by which it will be allowed to exist parallel to other forms of currency. Until we do that, it will be a speculative, risky, and volatile asset. But once we do that it will lose its appeal.
Mr. Kina: I’d like to touch on banking regulations, specifically this absurd policy of letting villains run banks. It is obscene that bank executives oversee systems that launder money for criminal enterprises, expose customers to fraud and theft (often from the bank itself), and deprive customers of access to high-interest savings accounts unless they agree to shift their money to online brokerage accounts. There is no reason that customers shouldn’t be able to earn 3% or more on basic savings accounts or CDs without having to open fee-bearing brokerage accounts and navigate the investment banking world on their own or pay an advisor to help them – or worse yet, turn their life savings over to an artificial intelligence-driven investment system that was programmed by nitwits! I’m hoping that as we sop up all the liquidity we poured into the system, banks will get with the program and start offering fair savings rates to customers without the burden of shunting them off to their profit-driven investment brokerage side.
LC: Can you give us an example of what you mean?
Mr. Kina: Take for example this scenario. You bank at Bank A. You have a checking account, a savings account, and a credit card with them. You’re earning nothing on your checking account while being charged a $2.00 a month fee because your cumulative balance isn’t over $10,000, you’re earning 0.01% on your savings, and paying 18% on your revolving credit card debt plus an annual fee. Your bank is offering a CD that pays a 3% APR, but it’s only visible via brokerage accounts at other banks. You would have to take your money to Bank B and open a brokerage account with them to be able to invest your savings in Bank A’s CD. Conversely, you could open a brokerage account with your bank, Bank A, and invest in Bank B’s CD, but at no time will your current bank offer you what they’re offering people whose money they do not yet have. Additionally, each time you transact, you will pay a “ticket fee” of a few dollars. Also, also, and this is the kicker. When you go to Bank B so you can “buy” Bank A’s CD, you won’t even get the entire 3% APR they are offering because Bank B gets a cut from Bank A for their trouble. There is no justification for someone having to PAY to invest in a Certificate of Deposit! I’ve said it before, but it bears repeating - repealing Glass-Steagall was one of Congress’ biggest crimes against humanity, all for the benefit of their buddies in banking who get rich off convincing average people to pour their meager life savings into the stock market merry-go-round for a chance at the brass ring.
LC: Alrighty then. I guess that leaves you, Ms. Korona. Anything you’d like to add?
Ms. Korona: I suppose I’d just like to say, I’m sorry. I’m sorry that those of us in positions of leadership, those with voices and power, have done so little to protect the most vulnerable. I’m sorry that children today will suffer the consequences of our greed and backasswards priorities for the rest of their lives. We have failed America. We were tasked with protecting her and we only protected the wealthy and politically connected. Going forward I intend to do better. I have children and I finally woke up to the fact that they are going to have to live in this world that has been made more violent, more dangerous, more diseased, and more divided by my failures as a leader. My money, my privilege can’t protect them from natural disasters, pollution, and hatred. I regret the part I played in creating a ravenously consumptive society, one that argues only by leveling every remaining tree can we finally have enough houses to create a glut of them that will bring down housing prices. It’s nauseating. Only changing my behavior can I begin to bring about the needed changes that will reduce the risks to our children’s future.
*Obviously, no such discussion ever happened and never would because American business “leaders” and politicians are notoriously thin-skinned, lily-livered blowhards. They’re pathetic schoolyard bullies who live in bubbles filled with enabling sycophants. They are all talk and no action, hellbent on protecting themselves and their inner circle at the expense of everyone else. But it’s nice to dream about them actually having scruples and compassion…
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