The Fed Is Never “Done”

The rate cut today was a good start, but we need another 50 basis points at next week’s meeting. At a minimum, the Fed needs to un-invert the yield curve ASAP. A new communication strategy (say level targeting or average inflation targeting) would be even more helpful.

Sometimes I worry that policymakers think in terms of being “done”. “Oh God, here’s the market asking for another rate cut again. OK, here you go—are we done now?”

Imagine a lazy truck driver“. Oh God, another turn in this damn highway. OK, I’ll turn the steering wheel one more time. Are we done now?”

The market reacted to this rate cut last Friday; from now on it’s reacting to signals of future Fed policy.

BTW, David Beckworth directed me to an excellent post by Julius Probst.

Off-topic, file the following under misleading statistics. Did you know that the total number of people with the coronavirus has been steadily declining over the past two weeks (due to recoveries exceeding new cases?)

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Yes, the exponential growth in “other locations” will soon change this, but nonetheless it’s a surprising fact.

PS. People interested in the epidemic might want to read mbka’s excellent comment, which discusses the situation in Singapore. I found it informative on several different levels.

PPS. Some commenters are peddling the theory that recent market actions are partly explained by the changing fortunes of the Sanders campaign. Maybe one or two percent of the recent market action, at best.

PPPS. I like this comment from Scott Alexander:

I already own a P100 respirator. I bought it during fire season last year, aka the-air-is-unbreathable season. Living in California is full of excitement, and after a couple of years you end up prepared for lots of stuff. And the other day, I wore it on the BART – a densely-packed subway full of people who are constantly breathing in your face. And my friends told me – haven’t you heard that the government says masks don’t work?

An N, P, or R rated respirator, worn properly, in specific high risk situations, can be an appropriate part of a safety strategy. I think an accurate treatment of the topic would admit this, while also stressing the reasons most masks might not appropriate for most people in most situations. The statements and articles I’ve read don’t seem up to this level of subtlety. Instead, they seem focused on getting people to do what they consider the right thing (not hoard masks and panic) at the cost of oversimplifying the situation, sometimes up to the point of mistruth.

Their goal is understandable, and maybe this kind of simple messaging is the right choice during a pandemic. But the thing is, I doubt any government preparedness czar called up the major media companies and started their pitch with “I’m going to ask you to make an unprecedented sacrifice today”. I doubt there were hours of soul-searching in newrooms and government PR departments as people considered whether to take this step. I think this happened instantly and seamlessly because it’s what everybody has been doing all the time for years.

So no, don’t use masks or respirators unless you know what you’re doing and are sure it isn’t inconveniencing anyone else. But also, try to pay attention to the forces shaping your informational environment.

I probably won’t wear a mask, but I like the final sentence.

Update: With Biden’s chances improving, here’s a fun fact. In 2008, roughly 69.5 million people voted for Joe Biden for Vice President of the United States. By 2016, the US population had increased by nearly 20 million over the 2008 level. So how many in this vastly more populous country voted for Trump? Less than 63 million.

And yet, I somehow still expect Trump to win. There’ll be an “October surprise”. (Russia won’t let Trump lose.)

Update#2: I never thought I’d be rooting for traffic jams in Beijing. Yay!!

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