The Incredible Shrinking Fed
As seems increasingly the case, I spent more time last week than hoped with airport personnel. In the course of the economic-inequality discussion that prompted my travels, I mentioned that I had little confidence in the general-public inflation expectation data in which economists put such stock. So, I asked my aide what she thought and was told that her biggest fear is the “rising price of the dollar” and whether she will thus be able to afford her apartment and get her kids ready for school. The airport was packed and she is turning down overtime, but she has to take care of her kids and day care costs are higher than even more pay can manage. Pressing on, I got only a blank stare following mention of the Federal Reserve but then heard a diatribe about useless politicians including those she no longer thinks care for anyone but themselves. I think this lady’s views are emblematic of lower-wage workers who once were active voters and thus also an important warning signs not only of how unequal economies work at odds with the Fed’s macro models, but also of the outcome of the election this year and, should things only get worse, then in 2024.