Monday, November 17, 2014

Six Questions for John Williams, President of the Federal Reserve Bank of San Francisco

The following chart shows the number of unemployed (in millions).

Click to enlarge.

I have added a trend line in red. Note that it is an unsustainable parabola. What's new?

We are getting extra growth as the unemployed are being put back to work. This extra boost to growth is definitely not sustainable over the long-term. I'm really starting to wonder if most investors realize it though.

So, without further ado, here are my questions.

1. As seen in the chart, does the Fed expect to see a 0% unemployment rate by 2019?

2. If zero is not the ultimate target, then how much longer can this unsustainable growth party realistically last?

3. What will our country's growth look like once we are done tapping our unemployment reserves?

4. How is the Fed going to engineer a soft landing when our unemployment reserves are literally falling like a meteor?

5. Has the Fed given any thoughts to deploying a parachute to reduce the velocity?

6. How big will the recessionary impact crater be?

March 12, 2014
Q&A: The Fed Will Manage a Soft Landing

John Williams, president of the Federal Reserve Bank of San Francisco, is feeling pretty good about the economy. He is ready to continue the Fed’s retreat from bond-buying and forward guidance. And he says he’s optimistic that this time, the Fed will manage to produce a soft landing.

Source Data:
St. Louis Fed: Unemployed

1 comment:

Stagflationary Mark said...

August 18, 2006
The Wall Street Journal: Soft Landing?

Imagine you're riding shotgun in the cab of an 18-wheeler hauling a load of nuclear waste down the side of a mountain. The driver, a well-respected veteran known to envious rival drivers as The Maestro, has let the truck get a bit out of control and is busily trying to slow the beast down to keep it from plunging you to your deaths and making the valley below uninhabitable.

Fantastic analogy! Never did get that @#$%ing vehicle under control!

The Wall Street Journal Online: So has the Fed engineered a soft landing?

Ed Yardeni: I'm not sure it's a landing at all. The economy is growing along its trend line, at roughly 3% to 3.5%. And since much of that growth is coming from productivity, it's not inflationary. That really means this is the best-of-all-words scenario, allowing the Fed not only to pause, but maybe to leave rates unchanged for a while.

Ed's "best-of-all-worlds" theory was just a wee bit optimistic in hindsight, much like I'm being a wee bit sarcastic.