Thursday 17 November 2022

Ready For The Next Recession?


So, who is Jerome Hayden Powell? He’s the 16th Chair of the Federal Reserve and he holds your future in his hands.


Who elected him? No one, yet in his rise to the “most important financial position in the world” he’s been given the leg up by Presidents Obama, Trump, and Biden. But perhaps Bloomberg News’ description of him as “Wall Street’s Head of State” hints at his true allegiance.


Barely a year ago this suave man for all season was quite certain we were experiencing a little “transitory inflation” brought on by the pandemic, pent-up consumer demand, and Putin’s war in Ukraine.


Of late, however, he’s morphed into Clint Eastwood galloping into town and informing us that he will continue to raise interest rates until inflation is tamed and “the job is done.”


He gives no estimate of just how high rates must climb, but he does caution that his actions may cause a recession.


He neglects to mention that his interest raising policies have already affected broad swathes of the populace who can no longer afford the American dream of home ownership because of high mortgage rates.


He often cites former Fed Chairman Paul Volcker as a role model. In the late 1970’s, early 1980’s, Mr. Volcker did stamp out inflation by raising interest rates to 19%. And yes, you guessed it, this brought on a recession that lasted years, and led to unemployment rates of over 10% and the loss of up to 4 million jobs.


Obviously neither of these gentlemen ever heard my stonecutting grandfather’s advice, “Never use a sledgehammer when a chisel and hammer will do.”


Living in the impecunious East Village, I barely recall the Volcker recession – I probably downsized from Heineken to Pabst Blue Ribbon - and soon enough along came President Reagan who drastically raised government spending and it was morning in America all over again.


But I remember vividly the Great Recession of 2008 - watching grown men cry in the corridors of a national music company as they studied their pink slips.


Predicting economic trends is both science and art. Certain indicators can reveal much, but you always have to factor in prevailing winds, human error and common sense.


And right now you can tell that “Clint” Powell has about as much of a clue as the rest of us – partly because he resides in the rarified upper echelons of the financial class and has forgotten what his mother - or more likely nanny - once told him, “When prices go up, they rarely come down.”


One of the prime reason prices are rising is because workers are finally getting the raises they have long been overdue.


Mr. Powell believes that such “labor costs” will need to come down before inflation does. But should “labor costs” come down – emphatically, no! 


Mr. Powell would do well instead to cast his jaundiced eye on Wall Street. So far a majority of S&P 500 companies are beating third quarter earnings expectations. 


With supply chain problems steadily improving, it’s unrealistic to think that profiteering and price gouging are not adding to current chronic inflation. 


Look at the recent record earnings of companies such as Exon and Chevron, and President Biden’s wish to tax them on windfall profits.


There is, however, definitely still a pent up demand for some services in our booming economy. Last Friday night every restaurant and bar in Soho was jammed to the gills with customers splurging on overpriced meals and drinks. How about imposing a temporary 10% inflation surtax on incomes over $100K?


Doubtless, this would be an unpopular move, but a targeted and temporary one that would cool off some of the spending that is stoking inflation.


Even a 90 day price freeze similar to President Nixon’s in 1971 might buy some time to consider other targeted measures.


But, please, no more loose talk about a “soft-landing” recession. Too many lives and futures are at stake, particularly those on the bottom half of the economic ladder. 


We have endured enough sledgehammer, shot-in-the-dark corrections that have caused long-term recessions.


With unemployment hovering around an all time low and 10 million jobs waiting to be filled, a recession is the last thing we need.

Monday 7 November 2022

A Recent Week in Ireland - Long Live The New Republic!

 I recently spent a week in Ireland. I usually take a group over annually on a historical/musical tour, but because of the pandemic this was my first time back in three years.

I enjoy this work-vacation as I get to see the country through the eyes of others.

From traveling with Black 47 I found that you’re much more invested in what’s happening around you when working rather than merely on vacation.

Thus while touring Argentina in the fall of 2000, because of our dealings with promoters and vendors we were never less than aware that both country and currency were on the verge of collapse.

Ireland was in no such straits on my recent visit, and yet the country has changed much in three years.

It’s more youthful, European, and multi-cultural. I’m sure there are many who miss the old Ireland, but that’s not hard to find – take a couple of steps off the beaten rural track and you could well imagine you’re in a scene from the Quiet Man, or at least The Snapper.

Ireland is still incredibly beautiful. Though I spent much of my youth in County Wexford I’m still astonished by the deepness of the green. Johnny Cash may have rhapsodized about 40 shades of the color, but he neglected to mention the myriad others.

And though the Dingle Peninsula is one of my favorite places on earth, I never saw it as beautiful as on this trip.

As for Galway City, even on a Monday night it was alive and kicking, with traditional music pumping out of bars, and buskers galore ripping it up on Shop Street.

And yet, there was a certain unease, though it was usually muttered rather than voiced aloud. Hospitable and socially aware though Ireland may be, there was a definite feeling that, given the shortage of housing, the government had welcomed too many Ukrainian refugees


This was not the xenophobic distaste for foreigners that you sometimes hear in the US, more a sense that the situation had been badly handled officially. Hopefully, time and patience will ease this situation, but with inflation rising rapidly, there could well be a backlash.

Oddly enough, the political situation in the UK helps take the pressure off, for having the basket case of Europe on your doorstep does provide comic relief.

Brexit is finally catching up with our noisy neighbors. Politicians as disingenuous and flatfooted as Boris, Liz, and Kwazi, help their Irish counterparts appear statesmanlike and even downright serene.

There’s also a discreet triumphalism wafting around the Republic over the recent census figures in the North. No one is dancing a victory jig, but the change in Protestant/Catholic demographics has been widely noted.

There’s little doubt that Sinn Féin will lead the next Irish government; even those of a West Brit persuasion seem resigned to this once terrifying prospect.

Not to mention, Sinn Féin will head the next Northern government whenever the DUP wakes up and realizes it’s the 21stCentury.

But even the backwoodsmen of the DUP, god love them, have never suggested that the voting system is mystically rigged against them as has happened here since 2020.

I have to say I find it somewhat jarring that Ireland is now a more rational country than the US. It just feels more grown-up over there.

It could be that once the Catholic Church lost power, people began measuring their lives by a more equable moral compass.

It’s not just that gay and other rights are now readily accepted in Ireland, but a live-and-let live atmosphere pervades the country. And nowhere is that more obvious than with women. Without any church or civil by-your-leave, they have assumed their social and political rights and the country is a lot better for it.

The lads seem to have had no trouble ceding their once legendary macho control. At least that was the impression I got as I watched the Irish Women’s Football team hold on to beat Scotland and qualify for the World Cup.

The only way that Irishmen beat Irishwomen that evening was in their roars of approval for their triumphant sisters in Hampden Park.

It’s been a long time coming. Long live the new Republic!