We have an energy crisis. The Fed can’t fix this.
The Fed’s dual mandate does include gas prices (not really but kind of) which is ridiculous because they can’t really do anything besides nudge nudge things.
Conversation
Corporations are starting to feel the pain (have been feeling the pain?) which doesn’t bode well for the economic dominoes
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The Fed influences financial conditions - so the stock market, crypto, housing market etc.
The housing market is wild - Powell said there would have to be some sort of reset, but higher rates doesn’t fix the problem of undersupply of homes.
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Thats the big thing. The Fed cant fix a lot of stuff alone. Energy and housing are the same. We need more of it. Sustainably.
Stemming demand in the short term is not a solution to a systemic long-term issue of 1) not enough available housing & 2) not enough energy production
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The Fed exists to influence expectations. That is the most important thing to know about them.
That’s why they came out swinging with 75bps - because they were losing control of the narrative.
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Everyone is just kind of guessing. That’s what monetary policy is. Vibes. As Kashkari wrote
“I know of no theoretical framework that can tell us how much we will need to tighten long real rates to get inflation back to target in a reasonable time frame.”
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Our expectations might have to shift. The Fed alone can’t solve this- we need fiscal tools and support for innovation.
But there are policy tools we can implement to realign what we could achieve (*not* 15 minute grocery delivery) with reality.
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Youtube and podcast up soon!
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also here is the matrix in picture form - consumers!
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