Thank Fathom it's Friday

If Bob Marley were a central banker…

19 July 2019|

A sideways look at economics

When the Fed meets later this month, it is now widely expected to cut interest rates. Inflation has remained sluggish and there are signs that the economy is slowing, but cutting rates at the first signs of danger seems strange: not only are pre-emptive cuts rare, but the unemployment rate is below most estimates of the natural rate, and on a downward trend. The economy is operating above capacity, and a cut would reinforce the view that the Fed is pandering to the markets, and the President. What powder left to use when the economy really hits the rocks? Mr Powell seems to have backed himself into a corner, and there is no easy way out. But in a temporary cessation of analysis, criticisms and inquests, in this Friday afternoon blog post I propose that we all chill out – investors, central bankers and economists. I’ve drawn a little inspiration from Bob Marley’s No woman, no cry, while putting a little personal spin on the lyrics.

 

No rate cut, no cry
No rate cut, no cry
No rate cut, no cry
No rate cut, no cry

Said – said – said I remember when interest rates used to be
Above five percent post recessions

Oba – observing the hypocrites
As they would try to buy the independent Fed

Good companies we had, oh, good companies we lost
It’s called creative destruction

And with r* so low it’s easy to forget the past
So dry your tears, I say

And no rate cut, no cry
No rate cut, no cry

Investors, central bankers, don’t shed no tears
No rate cut, no cry

Said – said – said I remember when interest rates used to be
Above five percent during recessions

And Paul Volcker would make those rates tight
Causing emerging market capital flight (flight)

But over the years, something went wrong
And so I’m telling you (you)

You see, those rates, they aren’t the only thing
So Powell should take a chill pill

‘Cos if he stays on hold-a baby:

Everything’s gonna be all right!
Everything’s gonna be all right!
Everything’s gonna be all right-a!
Everything’s gonna be all right!
Everything’s gonna be all right – yeah!
Everything’s gonna be all right!
Everything’s gonna be all right-a!
Everything’s gonna be all right!

No rate cut, no cry
50 basis points? No, no rate cut, no cry

Hey politicians, try something else
No rate cut, no cry

Thank Fathom it's Friday

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