The animated ursine explainers were right. And a billionaire-backed business-first broadsheet confirms it.
Christmas has come early for Ron Paulers in the most libertarian way: their past contrarian construals are vindicated by everyone suffering. Surely Justin Amash has a path to the presidency in 2024 now!
This Thanksgiving, more budgets were busted than the front button on stretch-fit Dockers. If you didn’t notice because mommy and daddy footed the 20% higher turkey tab this year, your attention may be arrested by the $70 sum on new PS5 games. That is, inflation has not abated despite the summer passage of the Inflation Reduction Act, which, in a twist of marketing nominative nondeterminism, had zilch to do with quelling swelling prices.
The consumer price index punched in at 6.3% in October, when compared to last year. While that percentage bump is less than the nearly 10% YTD rate in June, the cost jumps are still historically high. And if you’ll excuse me… *unrolls a sheet of tinfoil, folds it firmly into the shape of a conical hat, turns the cooktop burner on to singe the tip so it generates extra-hot takes, places tightly on head.* Everyone knows (if you disagree, you’re not everyone, and therefore an outcast—the perfect phrasal conspiratorial cordon!) that the CPI is deliberately calculated to underplay the actual inflation rate. Volatile commodities are excluded to provide a more stable picture. The Bureau of Labor Statistics, whose abacus-brained technocrats fashion the CPI, use something called the “hedonic quality adjustment” to anticipate vittle variation—which really just sounds like a john settling for a veteran flesh house servicer than a fresher offering based upon his thin wallet.
The point is, the CPI is calculated in a closed room, under the inscrutable cover of green eyeshades. So that when the price of the 2022 Lego Guardians of the Galaxy Advent calendar you want to get for
yourself your kids jumps up by $15 compared to similar block-sets, the headline rate may seem lower than what your lying eyes see. And we aren’t even touching on what’s known colloquially as “hidden inflation.” (If you need evidence of that concept, just look at the Reese’s Peanut Butter cup sizes over last Halloween versus the discs of gooey peanut butter we were treated as kids.)
All of these upticks at the till, both empiric and surreptitious, continue to register even as the Federal Reserve’s board of econometric-eggheads raises interest rates via decree. The economy seems to be slipping into a Carterian perfect economic storm: prices and interest rates jumping in unison, with lingering structural supply issues leaving shelves half-stocked.
And all this economic turbulence before the man with the bag is due to make his annual Earth traverse!
Of course only when market thunderheads are hanging above us, economists start questioning past behavior. In a 15-years-too-late piece at Bloomberg—Bloomberg!—columnist Allison Schrager makes a startling admission: “It’s Now Clear That QE Was a Colossal Policy Mistake.” The adverb “now” is doing a lot of work in that concession—only now can we definitely say that the Federal Reserve’s massive bond-buying binge, deceptively named “quantitative easing,” was not as on the mark as the financial industry let on. Anyone who suggested otherwise before summer 2022 was a Weimer-dreaming crackpot.
Scratch that: Anyone who suggested purchasing trillions of depreciating assets to prop up risky Wall Street bets was a Hayek-huffing submental up until October—when Ben Bernanke was awarded the Nobel Prize in economics for his “groundbreaking research on banks and financial crises.”
I know. I had to pause and read that twice before CNPing it. That Bernanke, who helmed the Fed when the housing boom wiped out Lehman Brothers and threatened to scuttle the global economy, was accorded his discipline’s highest honor just as the monetary seeds he sowed are finally bearing rotten fruit shows an incredible social disconnect. But what more do you expect from the Swedes? Their heads are in the snow, averting their eyes from everyday concerns like rampant bombings in their own Nordic welfare state.
“There is little to show in terms of the economic benefits of QE, but there are plenty of costs,” Schrager writes. She cites a compendium of studies on the mass monetary buy-up that assert any direct economic benefit of the program “tends to be smaller than the bank research claims.” More so, she points out that the Fed, along with the world’s other central banks, have printed themselves into a corner. The economy is addicted to the Fed’s gluttonous house-loan housing and government-bond bolting. Weaning it off won’t be easy, especially with a flimsy economy. “Now that QE has become the norm, the next time there is a recession markets will expect more QE, and if doesn’t happen that could cause more trouble in the debt market,” Schrager warns.
That’s a nice way of saying that if you snatch a crack addict’s pipe, you’re liable to elicit a punch in the face, or worse.
The COVID crisis and resulting spending stimulus have uncorked the Fed’s built-up balance sheet. Our central bank is perilously charting a course between Scylla inflation and the Charybdis downturn. The course is forced by its past efforts to uphold the economy in the ‘08 freefall, rather than allow the malinvestments made in the housing bubble to flush. But monetary mistakes can’t be papered over forever. The collapse of crypto exchanges like FTX, and the mass pink slipping by tech firms, suggest we’re fated to Charybdis’s market gyrations.
As they say, even Homer nods, even the Bernank errors—Nobel medal notwithstanding. Even so, every central bank skeptic who warned of hyperinflation c. 2009 can take solace in being partially right. If libertarians weren’t always vindicated a decade after their Cassandra cries, they’d never get any thanks.