Why has the Fed been able to produce asset inflation but no price inflation for past 10 years? My guess: lack of union power and globalization are blunting transmission into wages and prices. But I don’t see an easy way to test that hypothesis.
Jackie and I went for a nice walk yesterday, through the prairie and woods next to Winfield Village. We walked about four miles altogether.
Toward the end of the walk I paused to retie a boot, and found that my back was really tight. Bending down caused pain in my sacroiliac joints.
It was odd because it was a familiar sensation, but an old familiar sensation. I used to feel that pretty often on a long walk, but I hadn’t felt it lately. Without really thinking about it, I had attributed the change to general improvements in fitness and flexibility. But here after a fairly short walk that old pain was back again.
I was briefly puzzled, but realized right away what had happened: Because the walk was going to be wet and muddy, I’d worn my old heavily lugged goretex hiking boots.
These used to be my main boots; they’re the ones I wore on my 33-mile Kal-Haven Trail hike. I’ve kept them because I haven’t found a satisfactory pair of waterproof minimal boots, and I’ve worn them right along over the three or four years I’ve been transitioning to minimalist footwear, whenever I needed waterproofness or a heavily lugged sole. But they have the big downsides of non-minimalists shoes: Their thicker heel jacks up my posture, and their rigid sole keeps my feet from adapting to the terrain.
It might not be just the footwear. The trail was muddy enough that every step was a bit of an adventure—my foot would sink into the ground, but it would sink a different amount each step, making it hard to establish and maintain a consistent gait. I wouldn’t be surprised if that didn’t play into making my back feel a bit wonky after a couple of miles.
But clearly it’s time to retire these old boots and find some waterproof minimalist boots with sufficiently lugged soles to handle some short, steep hills on a muddy trail.
If you’ve got any suggestions, I’d be glad to hear them. Comment below, or send me email! (Email address on my contact page.)
As a big ol’ data geek, I’m by default interested in any metrics that I can get, especially ones related to me.
One of the metrics tracked by the Oura ring is body temperature, which is a metric don’t normally pay much attention to unless I think I might be sick, and I haven’t wanted to get sick just to explore this feature of the Oura ring. But a couple of days ago I did something much better: I got my shingles vaccination.
(I’ve been trying to get my shingles vaccination for months now, since they changed the recommended age from 60 to 50 and my insurance company started covering it for young folks like me. But with all the younger boomers thinking the same thing, the vaccine became scarce. Jackie and I finally tracked down shots last week.)
My immune system viewed the shot as something of a stern challenge, and sure enough my body temperature became elevated. In the graph below observe the last three data points, which show a spike to 0.7℉ above my baseline, followed by a 0.6℉ elevation the second night. Last night was only 0.3℉ above the baseline and back down in the normal range. (Near the middle you can see another spike to 0.7℉ above baseline followed by a negative deviation of a similar amount. That excursion was, I think, related to life stress.)
Observing that I was under some stress, the ring has been advising me to take it easy for the past couple of days. Knowing that the stress in question was a healthy one, I didn’t take the warning too seriously. The weather was nice the day after the shot, so I went out for a run, despite my ring’s advice.
Despite disregarding that particular day’s advice, I’ve actually been paying rather close attention to the ring’s indications as to my readiness. For example yesterday, when my body temperature and other factors suggested that I was still not recovered, I did take it easy—and I have been rewarded with an excellent night’s sleep and a moderately high readiness score for today:
Perhaps today will be a good day for a long walk. By the middle of the week we’ll have some more excellent running weather, and hopefully I’ll be ready for it.
It’s also sad not be of an age to think, “Oh. I could practice and get good at that.”My brother
I’m meaning to write something about rejecting this thinking. I’m constantly thinking, “Oh, well. Maybe if I’d started that in my teens or early twenties, there’d have been time to get good at that thing.” But this is crazy talk on many levels. You can only get good at so many things (is one level). But based on the age of my (both still living) parents, there’s no reason to think I’m not going to live for another 30 years. When I was in my early twenties, my time horizon was way shorter than 30 years.
There are a lot of skills that it might take three years of steady effort to get good at. (I’d guess that drawing is one of those.) I could do TEN of those in the time I’ve got left.
In a recent speech, Fed chair Jerome Powell talked about “balance sheet normalization” in terms that strike me as essentially admitting that the Fed is a failure as a central bank.
Here’s the quote:
The crisis revealed that banks, especially the largest and most complex, faced much more liquidity risk than had previously been thought. Because of both new liquidity regulations and improved management, banks now hold much higher levels of high-quality liquid assets than before the crisis. Many banks choose to hold reserves as an important part of their strong liquidity positions.
Powell seems to be suggesting that banks have chosen to treat reserves in the same way a gold-standard bank treated specie: as cash on hand to meet demands from depositors who want their money back.
I call this a failure because a big part of the reason behind the creation of the Federal Reserve was that this system—where every bank held some gold—was clearly inadequate. Commentators at the time likened it to a fire protection district which, instead of having a fire engine, required every household to have one bucket of water on hand.
By having a large common stockpile of gold at the Federal Reserve, a loss of confidence in any one bank could be easily handled. Faced with a bank run, a solvent but illiquid bank would bring some assets (loans, bonds, bills, etc.) to the discount window and receive enough gold to handle redemption requests.
Powell is saying that banks seem to have decided that they can’t count on the Fed to discount their illiquid assets—a basic function of a central bank. Instead they’re choosing to stockpile large quantities of reserves exactly the way nervous banks stockpiled gold reserves in the pre-Fed days.
I’m sure this is based on the experience of the financial crisis, where many banks held a bare minimum of reserves and safe assets, choosing instead to invest the maximum amount in complex derivative instruments, which were highly profitable until they suddenly became worthless (or at least of dubious value).
But that just means that this is a double failure by the Fed:
- As a lender of last resort it can’t be counted on to provide reserves to a solvent but illiquid bank.
- As a regulator it can’t be counted on to require that the banks hold enough high-quality assets with sufficiently transparent valuations to be usable at the discount window.
By paying interest on these reserves, the Fed is enabling this behavior—solving the old problem that “gold in the vault pays no return.” But banks should be in the business of facilitating commerce in the economy, not the business of using their depositor’s money to score some free cash from the Fed.
I completely understand the Fed not wanting to again put itself in the position of having to decide what discount rate is the right one to apply to 3rd tranche mortgage-backed subprime paper. But a strategy of “just hold more reserves” is a pretty poor solution to the problem, for exactly the same reason that “just hold more gold” was a poor solution in the pre-Fed days.
I marvel that the 1% is being so indifferent to the large and widening leftward political shift in the U.S. and elsewhere. It seems to me they should have already started telling their politicians, “Give the poor folks 20% of what they want, quick! We need to nip this in the bud!”
Of course, maybe they’re right and I’m wrong.
They got away with globalization, after all. And then they got away with the financial crisis. And so far they’ve gotten away with Trump’s tax cut.
Now, I can understand the first two. Globalization, despite how it crushed many individuals, families, and communities, did make people better off on average. Having the average person end up better off makes a policy supportable at some level. I can see it providing enough political cover for them to get away with it. Who doesn’t like buying cheap crap at WalMart? Nobody but freaks and weirdos like me.
The financial crisis is harder to understand, which I think is due mainly to it being harder to understand. There was a real sense that our whole economy could implode—and it was a real sense because it was actually true. The technocrats managed to save the economy, so they get some credit for that. They did it in a way that crushed homeowners, which is bad. They did it in a way that subverted the rule of law, which is bad. And they did it in a way that crushed a whole generation, which is also bad. But they did save the economy.
But now we’ve got multiple cohorts of people who have already turned against the system. It’s no longer just the freaks and weirdos who care about their local community and the natural systems that support life. It’s no longer just former homeowners whose homes were seized to save the banks. It’s no longer just millennials who graduated into a job market so bad that they’re a decade behind their parents’ generation in things like family formation (and further than that in preparing to retire).
Now it’s basically everybody except the 1% who is being harmed, and they’re being harmed right now, every day.
The Trump tax cut is just a naked grab at wealth by the wealthy. It didn’t help anybody else. Trump’s tariffs aren’t even that—they don’t help anything but Trump’s ego.
I cannot imagine that any amount of voter suppression and gerrymandering—even with the structural anti-democratic features of our constitution—will keep the supermajority of people being harmed by our current system from making some major changes.
If the 1% had any sense they’d have thrown some bones to the people already. I can’t imagine that the smart ones haven’t figured this out already.
Sure, there are plenty of dumb ones who figure that they can build a survival bunker in Alaska or New Zealand and survive the ensuing revolution and climate catastrophe. But are they really all that dumb?
Evidence so far suggests they are.
Or maybe they’re right and I’m wrong.
“After having been cold for six months, I’m about ready to spend some time being warm,” I say as I crank the thermostat up to 72℉.
Of the many good things about spring, about now is when the lightening sky starts providing useful cues for waking up. If it’s still dark, I don’t need to check the time and can just go back to sleep. And if it’s getting light outside, it’s time to get up.
Interesting thoughts about meditation here:
Meditation, by contrast, is more palliative than instrumental, especially in its modern secular applications. It’s meant to soothe mental dis-ease, not to unlock accomplishment previously unobtainable to our species.
It clearly bears more thinking about, but my almost automatic response is to point out that the earliest traditions of meditation that we know about were not the “palliative” mindfulness meditation currently being taught to a mass audience, but the meditative practices of shamans and such, whose purpose was to induce altered states of consciousness along the lines of those produced by psychedelic chemicals.
Those practices were precisely to unlock capabilities otherwise unavailable.
I went ahead and removed the link to my Google profile from the social media menu at the bottom of each page here, and removed Google+ from the list of tabs I routinely open on my browser.