Tapering? What the hell for?
Posted: Tue Dec 10, 2013 11:47 pmLet's consider, just for a second, the dual mandate:
Inflation
Unemployment
I would argue that both suggest the need for continued monetary easing and that all of this talk regarding a "taper" is nonsense until I see some real improvement in figures that matter to the fed. Yes, some measures of the Unemployment Rate have come down and on their face suggest modest improvements but on the whole does nothing to analyze what kinds of jobs have been created in the past five years, wages/earnings, or taken into consideration if these jobs are full or part time. Commensurate with the mandate of the Federal Reserve I'd like everybody to consider the micro level details of these reports when deciding if now is the best time to "taper." I would say no for two reasons, and my first will be substantiated in the form of a graph courtesy of one Tim Duy:
These are figures, YoY, suggestive of a trend of disinflation. Let's couple this with anemic growth in wages (Until relatively recently) and shoddy job production overall (We haven't been producing, en masse, jobs that pay enough to produce anything remotely near a robust growth rate on an annual basis - people, let's remember that the new 3.6% GDP growth figure is for Q3, Q4 will probably substantiate some of my claims regarding household incomes via NRF data on consumer spending this holiday season - furthermore this is a single quarter for the year, the annual will be averaged out with our not so stellar 1.1% growth in Q1 and 2.8% in Q2). Needless to say, the degree to which inventory restocking had an impact on Q3 growth portends bad things for Q4 in my mind.
But basically I am going mad with all of this talk over the now certain tapering that will occur within a couple months if not weeks time. Current data doesn't support such a move, I don't care what the U measures indicate. Aggregate Demand is still short, investment in the real economy sucks balls thanks to our fantastic legislative bodies, and workers continue to have no power/leverage over wages and benefits as employers wield the only door many people seek today. Inflation rates bear this out. Inflation, the Central Bank's primary focus, is nonexistent in terms of a threat to the economy. It continues to slow year over year...consumers do not have the money to spend to keep that bad boy rising due to a decline in income from either a loss of a job or accepting lower pay in another.
I mean what, am I supposed to think that we should start tapering because the equity markets have bounced back so well? Really? We're just breaking barriers now...five years after the original crash. That's not a great growth trajectory taking into account the WILD oscillations we've witnessed throughout these past years with several other smaller crises taking place around the globe.
Help me out guys. Convince me the Fed should start to taper. Do it with numbers...and charts and stuff.
Inflation
Unemployment
I would argue that both suggest the need for continued monetary easing and that all of this talk regarding a "taper" is nonsense until I see some real improvement in figures that matter to the fed. Yes, some measures of the Unemployment Rate have come down and on their face suggest modest improvements but on the whole does nothing to analyze what kinds of jobs have been created in the past five years, wages/earnings, or taken into consideration if these jobs are full or part time. Commensurate with the mandate of the Federal Reserve I'd like everybody to consider the micro level details of these reports when deciding if now is the best time to "taper." I would say no for two reasons, and my first will be substantiated in the form of a graph courtesy of one Tim Duy:
These are figures, YoY, suggestive of a trend of disinflation. Let's couple this with anemic growth in wages (Until relatively recently) and shoddy job production overall (We haven't been producing, en masse, jobs that pay enough to produce anything remotely near a robust growth rate on an annual basis - people, let's remember that the new 3.6% GDP growth figure is for Q3, Q4 will probably substantiate some of my claims regarding household incomes via NRF data on consumer spending this holiday season - furthermore this is a single quarter for the year, the annual will be averaged out with our not so stellar 1.1% growth in Q1 and 2.8% in Q2). Needless to say, the degree to which inventory restocking had an impact on Q3 growth portends bad things for Q4 in my mind.
But basically I am going mad with all of this talk over the now certain tapering that will occur within a couple months if not weeks time. Current data doesn't support such a move, I don't care what the U measures indicate. Aggregate Demand is still short, investment in the real economy sucks balls thanks to our fantastic legislative bodies, and workers continue to have no power/leverage over wages and benefits as employers wield the only door many people seek today. Inflation rates bear this out. Inflation, the Central Bank's primary focus, is nonexistent in terms of a threat to the economy. It continues to slow year over year...consumers do not have the money to spend to keep that bad boy rising due to a decline in income from either a loss of a job or accepting lower pay in another.
I mean what, am I supposed to think that we should start tapering because the equity markets have bounced back so well? Really? We're just breaking barriers now...five years after the original crash. That's not a great growth trajectory taking into account the WILD oscillations we've witnessed throughout these past years with several other smaller crises taking place around the globe.
Help me out guys. Convince me the Fed should start to taper. Do it with numbers...and charts and stuff.