Have you ever seen former New England Patriots star Julian Edelman’s incredible catch as part of the team’s 25-point comeback in Super Bowl 51? It undoubtedly took “a lot of skill” and “good luck” – thanks, in large part, to his years of practice and determination.
Unfortunately for the US economy, the Federal Reserve is also going to need the same level of preparedness and serendipity to avoid economic ruin, and US Treasury Secretary Janet Yellen is no Julian Edelman.
On Sunday, Yellen told CNN, “The Fed is going to need a lot of skill and also good luck to pull off what we sometimes call a soft landing.”
Specifically, it refers to an economy where inflation falls below 2% and unemployment remains low. If the US economy fails to achieve this “soft landing”, we are likely to be plunged into a recession after a hard landing.
While Yellen may seem confident that America can avoid such economic hardship, Fed Chairman Jerome Powell appears to disagree. Since the spring, the Fed has tried to lead America to economic success by raising interest rates.
Still, Powell argues that not raising rates would cause more “pain”.
“While higher interest rates, slower growth and looser labor market conditions will reduce inflation, they will also hurt households and businesses,” Powell said during the annual policy address at Jackson Hole, Wyoming. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.
The Fed is expected to announce another round of rate hikes, which tech billionaire Elon Musk warns could cause deflation. Musk holds such dire predictions because he, alongside economist David Branchflower, believes inflation has peaked.
Branchflower recently wrote in Politico that “policymakers are forgetting their history, and now they don’t care” and risk raising rates when inflation is already falling.
Other economists, like Tim Moe of Goldman Sachs, argue that more effort is needed to close the gap in the labor market.
“The real sticky part of inflation is, of course, in the labor market, and that’s where progress has been made. But there’s still a lot to do,” Moe told Business Insider.
“One of the issues or indicators that we’re looking at is the gap between job vacancies and the labor force,” Moe said. “It’s going down. And that’s actually the key to a soft landing.
Still, according to Fed Vice Chairman Lael Brainard, the board’s main concern remains inflation and they have confidence in the labor market.
“Monetary policy will need to be tight for some time to provide confidence that inflation is moving closer to target,” she said recently. “The economic environment is very uncertain and the policy path will depend on the data,” she added.
So, according to some of the smartest people in the room — at least according to popular opinion — America’s options are either a hard landing and a recession, deflation, or throwing our hopes on a wing and a prayer.
At this point in the column, readers might feel quite uneasy about the ability of our nation’s experts to solve inflation.
When the Treasury Secretary incorporates “good luck” and “great skill” into her economic remedies to avoid a hard landing or deflation, this unease is entirely reasonable.
Just a reminder, here’s a metaphor for what it looks like:
I still don’t know how Julian Edelman did that take. An all-time great catch to help complete the biggest comeback in NFL history…legendary stuff.
—Pats Buzz (@PatsBuzz) August 13, 2020
The opinions expressed in this article are those of the author and do not necessarily represent those of The Daily Wire.
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