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Facing a strong economy, Fed puzzles over how to slow it down
(www.washingtonpost.com)
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this post was submitted on 31 Oct 2023
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Caveat: I'm no economist.
Despite the clear desire to see mass layoffs and unemployment so we will slow all our damn spending, the usual club to make that happen isn't working. Labor is strong. Support for unions is strong.
To explain this, I'd look at what has changed. I believe stock buybacks have been extremely high of late and that would be my guess. The big companies aren't leveraged so, just like how the rates aren't affecting recent home buyers who bought before the hike, they also aren't hurting companies as much as would normally be the case.
Another possibility is lingering effects of boomers taking COVID as a sign to retire, creating a labor shortage and putting pressure on companies not to have a layoff because they are worried they might have trouble re-hiring folks when the economy cools off.
If anyone else has ideas, I'd be curious. I might not be right about the cause, but I'm right about looking at what is different right now.
Since the article is quoting some of the top economists in the world, I would t let not being one really limit your options for commenting.
Here’smy hot take: economists have discussed sticky prices and sticky wages - which is a (imho) crappy way of describing effectively friction in economics. I wonder if what we are seeing here is sticky consumer spending. Normally we’d expect spending to react most quickly to interest rates and inflation, but people have gotten used to a certain level of spending and escalating debt, and so they might simply feel (or need to feel) unaffected by the fed changes.
Honestly, until we update the idea of an economic rational actor, I don’t think we’re going to get very far. In fact I think we risk getting further afield the longer we persist, and the more difficult it will finally be to realign everything.
I agree. The idea of humans being rational is so divorced from reality it makes me wonder if economists know real people.
To be fair, they don’t get invited to a lot of parties.
It always struck me that, most hostesses being more than one foot wide, those would lead to one of those Very Special Episodes of Star Trek, like when the rock tried to eat Kira.
This is so rarely brought up and is such a massive fucking deal that it's criminal not to discuss it.