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S1: This ad free podcast is part of your Slate plus membership.

S2: Hello. Welcome to the Rolling Dice edition of Slate Money, your guide to the business and Finance News of the Week.

S1: I’m Felix Salmon of Axios. I’m here with Emily Peck of Huff Post. Hello. I’m here with Alicia Manski of Breakingviews. Hello. And boy, did we have big news this week. The entire system of monetary policy for the United States of America was unexpectedly transformed. It’s a big deal, people. So we are going to talk about that. We are going to talk about direct listings on the stock market, which are a new and fabulous thing that I think are going to become much more popular. And yes, we are going to talk about rolling dice. We’re going to talk about all of the answers that you guys sent in to the question I posed last week. Thank you so much for sending in your answers. We’re going to talk a lot more about that. I am going to do all of this. I have to mention from the glorious studio is a seaplane armada, the Jessamine Mali multinational organization, which is soon to go public in a direct listing on the New York Stock Exchange. Fill your boots. It’s an exciting show. Stay tuned. It’s all coming up on sleep money. OK, this is a huge week, I mean, we’re in August and nothing happens in August except a bunch of central bankers disappear off to Jackson Hole and go fly fishing. This is, by the way, exactly why it happens. Jackson Hole, it is because Paul Volcker was a big fan of fly fishing. And the only way they could get Paul Volcker to come to this conference is by doing it in Jackson Hole. Now, of course, it’s all virtual, but for the first time that I can ever remember, Jackson Hole has actually committed like major news. Jackson Hole is now like more of a news. Place than Davos ever has been.

S3: Well, most things are a bigger news place than Davos has ever been.

S1: This is true. But yeah, this is the first time ever that, like some boondoggle conferences, committed news. And that is because the Fed came out Jackson Hole and dumped a huge pile of speeches and white papers and press releases and everything, all in support of what seems to me at least to be a very, very big change in the whole conception of how they’re going to do monetary policy going forwards. You are nodding. You agree with me? I can’t believe we agree on something.

S3: Well, thus far we agree. I feel at some point probably not so much. So the Fed has been working for a long time on what was called this framework review, where they were going to figure out if they needed to make some changes in terms of how they conducted monetary policy and their dual mandate. So a lot of people expected there to be announcements at this at this meeting. And if you looked at the name of Jerome Powell speech, it was very clear he was going to be talking about this framework. And he, I think, said more than even people thought. So I would say the two biggest takeaways, one is the move towards average inflation targeting. And basically that just means that if you’ve undershot the inflation target for a while, you can overshoot it for a while. And you don’t have to like the minute it gets to two percent, immediately start hiking rates.

S1: And to be clear, we have undershot the inflation target for a while, quite consistently for years, ever since we’ve had a two percent target, we have, in fact, undershot. And so and we’ve had inflation for many years. I mean, we’ve undershot two percent for many years, which means that. According to this new framework, just to be symmetrical about things, we should at some point overshoot two percent for many years and they will be fine.

S3: But with that well, though, this probably brings up the biggest question about this announcement. The Fed has been incapable of creating two percent inflation. Why does anyone think they’re going to be capable of creating three or four percent inflation?

S1: So. Right. So we have a very different way of doing monetary policy. We just don’t know whether they’re going to be any more successful at this new way of doing monetary policy than they were the old way of doing monetary policy. Their intention has changed, but the outcome obviously is yet to be seen. Let’s just finish the thought that you started, though. You said there were two things that were very big. The first one is average inflation targeting. And the second one, I’m going to assume, is about the second part of the dual mandate, which is employment rate.

S3: And so the idea here is that they’re going to be looking at the how they deal with full employment is not going to be symmetrical. So if the unemployment rate is lower than anticipated, that doesn’t mean they then need to act to increase rates. The goal is going to be having a floor unemployment, not necessarily being too concerned about unemployment getting too low. Right.

S1: They have this idea of maximum employment, which is still in there. But if they exceed maximum employment, if employment is at more than Max, as it were, then that’s not going to worry them. There are going to be members of the FOMC, I’m sure, who still believe in the Phillips curve, which if you don’t know what the Phillips curve is, I’m jealous of you and I’m not going to explain. But some of these members of the FOMC are going to believe that if you if employment is, quote unquote too high, then that will cause inflation, which may or may not be true. But the point about this new framework is that the Fed is going to wait and see if and when that inflation occurs to raise interest rates rather than raising interest rates in order to stop it from happening.

S3: Yes. What we’re really seeing here, if you kind of look at the history of the Fed in the history of monetary policy after the Fed becomes independent in nineteen fifty one, you have this period where there is a focus on inflation and price stability. But then in the 1960s, that really changes and the focus starts to become much more on employment. And there’s this idea that you can run the economy a bit hotter because you can accept a little bit more inflation. That’s fine. But then the problem is that that didn’t work. You ended up creating a ton of inflation and in the 1970s, at the same time, you had a weak economy and then there became this big concern about inflation. So then you have the shift in monetary policy, which is obviously people think about Volcker, this idea of massively increasing rates to fight inflation. And so since then, the focus of the Fed, the focus of policy has really been on inflation. And over the past few years, there’s been a lot of pushback on that because the ideas like, look, we have an inflation for how many years yet we’ve had a very, very tepid growth. And so why are we focusing so much on inflation and why aren’t we looking more at the growth side of it?

S4: I obviously love this because I, I want the Fed to be focused on human beings getting jobs. And I like the idea that I’ve never really been a fan of the idea that you can have too much employment, though I understand the theoretical underpinnings there. I want people to have jobs. And the problem for for so long now has been wage stagnation. And unemployment is really low. Theoretically, wages are supposed to go up. And that was only barely starting to happen back in the before times. And Powell, you know, started raising rates pretty quickly. And it was like, but can’t we have a chance to get people more of the of the moneys before we do other stuff? So I really like and I think a lot of liberals like me maybe like putting more of a focus on employment and saying, like, there is no limit to how we want people to have jobs, we want employment. So that just seems like good on its face, especially since we haven’t had much inflation and a very, very, very, super long time.