{"id":30812,"date":"2018-02-11T12:27:29","date_gmt":"2018-02-11T17:27:29","guid":{"rendered":"http:\/\/olduvai.ca\/?p=30812"},"modified":"2018-02-11T12:27:29","modified_gmt":"2018-02-11T17:27:29","slug":"the-feds-impossible-choice-in-three-charts","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=30812","title":{"rendered":"The Fed\u2019s Impossible Choice, In Three Charts"},"content":{"rendered":"
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The Fed\u2019s Impossible Choice, In Three Charts<\/a><\/h3>\n<\/header>\n
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Critics of \u201cNew Age\u201d monetary policy have been predicting that central banks would eventually run out of ways to trick people into borrowing money. There are at least three reasons to wonder if that time has finally come:<\/p>\n

Wage inflation is accelerating<\/strong>
\nNormally, towards the end of a cycle companies have trouble finding enough workers to keep up with their rising sales. So they start paying new hires more generously. This ignites \u201cwage inflation,\u201d which is one of the signals central banks use to decide when to start raising interest rates. The following chart shows a big jump in wages in the second half of 2017. And that\u2019s before all those $1,000 bonuses that companies have lately been handing out in response to lower corporate taxes. So it\u2019s a safe bet that wage inflation will accelerate during the first half of 2018.<\/p>\n

\"\"<\/a>
\nThe conclusion: It\u2019s time for higher interest rates.<\/p>\n

The financial markets are flaking out<\/strong>
\nThe past week was one for the record books, as bonds (both junk and sovereign) and stocks tanked pretty much everywhere while exotic volatility-based funds imploded. It was bad in the US but worse in Asia, where major Chinese markets fell by nearly 10% \u2014 an absolutely epic decline for a single week.<\/p>\n

\"\"<\/a><\/p>\n

Normally (i.e., since the 1990s) this kind of sharp market break would lead the world\u2019s central banks to cut interest rates and buy financial assets with newly-created currency. Why? Because after engineering the greatest debt binge in human history, the monetary authorities suspect that even a garden-variety 20% drop in equity prices might destabilize the whole system, and so can\u2019t allow that to happen.<\/p>\n

The conclusion: Central banks have to cut rates and ramp up asset purchases, and quickly, before things spin out of control.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Fed\u2019s Impossible Choice, In Three Charts Critics of \u201cNew Age\u201d monetary policy have been predicting that central banks would eventually run out of ways to trick people into borrowing money. There are at least three reasons to wonder if that time has finally come: Wage inflation is accelerating Normally, towards the end of a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[9021,303,1849,7544,534,3650,18469],"class_list":["post-30812","post","type-post","status-publish","format-standard","hentry","category-economics","tag-dollarcollapse-com","tag-fed","tag-financial-markets","tag-john-rubino","tag-monetary-policy","tag-us-federal-reserve","tag-wage-inflation"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30812","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=30812"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30812\/revisions"}],"predecessor-version":[{"id":30813,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30812\/revisions\/30813"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=30812"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=30812"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=30812"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}