Vladimir: “Well? What do we do?”
Estragon: “Don’t let’s do anything. It’s safer.”
From “Waiting for Godot”
In Waiting for Godot, two men spend more than an hour talking nonsense and it’s called Theater of the Absurd.
After last week’s Federal Open Market Committee (FOMC) meeting, Fed Chair Janet Yellen spent an hour talking nonsense and it was called a press conference. But, really, it could be argued that the Fed is at least as absurd as anything in Waiting for Godot. Much of the dialogue in Godot could, in fact, have come from the FOMC. For example …
Vladimir: “I don’t understand.”
Estragon: “Use your intelligence, can’t you?”
Vladimir uses his intelligence.
Vladimir: (finally) “I remain in the dark.”
Janet Yellen: “Although the unemployment rate has declined, job gains have diminished.”
Estragon: “I can’t go on like this.”
Vladimir: “That’s what you think.”
The FOMC has continued ZIRP (zero interest rate policy) for 90 months. Estragon and Valdimir waited for Godot for only a couple of days.
Waiting for a Rate Increase
Godot author Samuel Beckett would be hard pressed to match the absurdity of the Fed and other central bankers who are running the world’s economies. Consider just a few of the absurdities:
- Just a couple of weeks ago, most experts were predicting that the Fed would raise interest rates at the June meeting or in July at the latest. The Fed raised expectations when it announced that “it likely would be appropriate” to raise rates in June if the economy showed clear signs of a rebound. To the surprise of virtually no one, Ms. Yellen made it clear last week that the Fed is not ready to raise interest rates again anytime soon.
- Central bankers have been in charge of boosting economies throughout the world for more than seven years now. Seven years!!! In spite of miserably low economic growth in the U.S. and recession in many other parts of the world, the central bankers remain in charge, doing the same things that have not worked for that entire period. And media, politicians, economists and other pundits accept this as normal!
- For much of this period, the worse the economic news, the higher the stock market soared, falling only when the Fed hinted at a change in direction, ended quantitative easing or raised interest rates. The latest stall resulted in a drop in stock prices.
- The U.S. economy has been pretty wretched, but what does the Fed worry about? Inflation being too low. Higher inflation will reduce consumer buyer power. Yet the Fed wants consumers to spend more to spur economic growth. It does not compute.
- The Fed says inflation is too low, yet “most of Flyover Zone America has been hammered by the four horseman of household inflation — food, energy, housing and medical costs — to the tune of 3% or better for two decades running,” according to Contra Corner. Whether inflation is low or high, depends on how you measure it.
- Likewise, whether or not the unemployment rate is low depends on how you measure it. When nearly a half million people leave the workforce and the unemployment rate drops, you’re not using the right measure for unemployment.
- At a time when news has a half-life of about five minutes, the Fed issues minutes of its meetings about a month after they take place. When the minutes are released, they are treated as if they are big news.
After 90 months of ZIRP, we can at least be thankful that the Fed has not followed much of the world into NIRP (negative interest rate policy), which results in consumers and businesses paying banks for the privilege of holding their money.
But the absurdity continues. And we’re not expecting a curtain call anytime soon.