"What Jerome Didn't Say"
Proposed editorial amendments to
Mr. Powell's speech in Jackson Hole
by Joel Bowman
Buenos Aires, Argentina - "Jerome Hayden Powell took just 8 minutes to deliver his remarks at the Fed’s colloquium in Jackson Hole on Friday, one of the shortest speeches there on record. Word for word, these may well have been the most expensive utterances of Mr. Powell’s career thus far. The key passage: “There will very likely be some softening of labor market conditions, while higher interest rates, slower growth, and softer labor market conditions will bring down inflation. They will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation.”
On hearing the words “slow,” “soft” and “pain,” investors promptly began panicking…Fox News called the chairman’s remarks a “sobering prediction.” “The Stock Market Finally Heard Powell’s Message Loud and Clear,” came the headline in Barron’s. “It Wasn’t Pretty.”
Bloomberg, meanwhile, ran with the billionaire angle..."Powell’s 8-Minute Speech Erases $78 Billion From Richest Americans." This last story went on to relay, with ill-disguised glee, how Elon Musk’s paper wealth fell by $5.5 billion on the session... Jeff Bezos lost $6.8 billion... and messrs Buffet and Gates lost $2.7 and $2.2 billion, respectively. Our guess is that the above-named gentlemen will not be missing a steak dinner anytime soon. So let’s return to the realm of the every-investor.
By the close of the session, the Dow Jones Industrial Average was down 1,008 points (3%)... the S&P 500 was lower by 147 points (3.4%)... and the Nasdaq was off by 497 points (almost 4%). Ouch!
Between the Lines: Mr. Powell, by all accounts an affable fellow with an undeniably solid sartorial sense, might have nonetheless taken a few extra seconds to expand upon his pithy remarks, if only to reduce their cost per word. Now, it goes without saying that nobody asked us here at Bonner Private Research for any input. (Probably a wise move.) Even so, in the spirit of clarity and honesty due the long-suffering American worker, we offer some unsolicited editorial suggestions just the same.
To the “some softening of labor market conditions” line, for example, Mr. Powell might have added, “which will disproportionately impact middle and low income Americans, many of whom have been forced to take second and/or part time jobs to make ends meet. And here, I’ll level with you a bit...
[Pause for effect]
You see, behind the ‘528 thousand jobs added in July’ headline, some 385 thousand of those fell into the ‘second’ or ‘part time’ designation. Hardly a sign of a robust economy. In fact, the labor force participation rate is back to where it was in April... of 1977! Moreover, adjusted for inflation - which I’ll come back to in a second - workers’ real wages are actually going backwards... so no matter how many extra jobs the common laborer or blue collar worker takes on, he’s unlikely to find enough hours in the day to keep his head above water. Okay, moving on...”
Here Mr. Powell might have paused once more, letting the gravity of his words sink into the collective consciousness of a nation already deep in recession. A prolonged, steely-eyed gaze over the distant mountains ought to add some faux pathos to his performance.
High on the Hog: Onto the “some pain to households and businesses” line, here Mr Powell might have elaborated a little further, too... “Of course, such pain won’t be felt by the billionaires you read about in the newspapers. Messrs Musk, Bezos, Gates, et al. are doing just fine. Matter of fact, thanks to our easy money policies at the Federal Reserve - and here I give a special shout out to my dear partners in cri... ahem, ‘colleagues,’ Janet, Benny and Al - the billionaire class has never had it so good in this country.
Able to borrow cheap money at ultra low, even negative rates, meant cash in their corporate coffers even as working and middle class families were mostly treading water. Throw in stock buybacks and no end of handouts, corporate subsidies, green initiatives and various other state-sponsored loopholes and shenanigans, which enjoy largely bipartisan support from our friends over in congress, and the rich have lived plenty high on the Fed’s hog, thank you very much. Sadly, nothing in this world is free, not even the Fed’s funny money. Somehow, some day, someone has to pay. Which brings me back to everyday, working Americans...”
At this point, Mr. Powell might have rolled up his sleeves, as politicians sometimes do, to affect some solidarity with the folks on the factory floor. To the “unfortunate cost of reducing inflation,” the head of the world’s most powerful central banking system might have appended “that we, as central bankers who flatly refused to see what was obvious to any non-wonk in the land, had a heavy hand in causing. You’ll recall we assured you there was nothing to be concerned over here, that inflation, if we ever did manage to conjure such a thing, would only be ‘transitory.’ Well, as I said before, the word ‘transitory’ means different things to different people. So that ought to be the end of that. And now, as you can see from my rolled-up sleeves, we now have the matter firmly in hand going forward. You can, as always, trust us to guide the ship from here on out.
[Final pause]
Lastly, I should mention the good and, it must be said, rather handsome gentlemen over at Bonner Private Research, who sent over some notes regarding my prepared remarks today. They tell me they’ve got a newsletter on Substack you can sign up for that will help you make sense of anything my colleagues and I say from this podium going forward. I’ll see you all at the bar afterwards for cocktails and hors d'oeuvres. Good day.”
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