central banks, fiscal policy, and the markets
I saw Kyla’s MIT presentation - every bit as good as you might expect. The drawings are also much better than she advertises.
Thanks for another wonderful view of our complicated world from your brilliant perspective. I shudder at the finger-pointing and fault finding by so many as to why we have the inflation dilemma that faces us right now. I too love the idea of continuing to invest in fossil fuels while continuing to nurture ESG future sources.
Thanks for the acknowledgment that we need to continue some sort of sustained investment in hydrocarbons! We can’t rip the roof off until the new shingles are here.
As is obvious, the fossil fuel industry needs all the rational commentators available, because they suck pretty badly at it themselves. Exxon thinks dividends are good news for US citizens - maybe acknowledge the paycheck to paycheck people of which there are…far too many.
> But the top 1% of Americans own ~50% of the stock market
I find this to be a misleading statistic when it drops the qualifier that it only considers US individual investors’ direct holdings outside of retirement accounts.
Here’s a study up to 2019 from the Urban-Brookings Tax Policy Center that provides a more nuanced analysis, https://www.taxpolicycenter.org/taxvox/who-owns-us-stock-foreigners-and-rich-americans
* The statistics that I’m critiquing only accounts for 25% of the US stock market
* So the top 1% own 12.5% of the total US stock market
* Retirement accounts, including both 401ks and pensions, own 30%
* The bulk of the remainder is owned by people and entities outside the US, accounting for 40%
Further, since roughly half of American adults have at least a pension or a 401k,  the majority of Americans have skin in the game when it comes to financial market performance.
Note this doesn’t excuse away wealth inequality. But it is misleading to drop the qualifier as it can misinform us about the size and breadth of stakeholders in the US stock market.
I was quite dismayed by Sherrod Brown’s letter because it contains so little of substance. Instead, it looks like a bunch of political sound bites strung together. I’m afraid that he is simply positioning himself politically to blame the Fed in the future should we fall into a recession.
When he does mention items of relevance for the Fed—the lag of monetary policy or the potential effects of simultaneous central banks tightening—he is not telling the Fed anything new. The Fed has an army of elite macroeconomists and collaborates with academics and market participants. The Fed officials are quite aware of these issues and have a sophisticated and holistic understanding that informs their monetary policy.
Of particular frustration, Brown avoids the hard issue of balancing inflation against employment. There would be something commendable if Brown simply stated that we should all accept high inflation for longer to minimize the risk of a recession. Yet he won’t, because he knows inflation is the top priority among American voters and to blindly challenge that would be political malpractice.
Brown could attempt to educate the electorate about the basic challenges of macroeconomic policy and explain the hard tradeoffs that we face. He’d then be positioned to boldly critique how the Fed is balancing inflation vs. employment. Yet Brown refuses to put in that hard work. Or he may simply have so little faith in the intelligence of the voters and their media ecosystem to believe this would be impossible.
Worse, I fear this could be just the tip of the iceberg for blind political attacks against the Fed and other central banks. Should we fall into a recession, everyone will be looking for a scapegoat, and some politicians may find the Fed an attractive target. And I fear that Brown is positioning himself for that.
Again, it’s totally valid to critique the Fed policy, but lazy attacks for political gain risk further eroding Americans’ trust in the institutions essential to our society.