Warsh’s Death March Hiking Trip
Welcome back to Friday! The world’s most important mountainside monetary policy conference began today, capping off another week of news focused on bond markets, interest rates, and Fed policy.
We wish we could tell you that we were writing this with a fishing pole in hand while we wait for the Teton trout to take our flies. Sadly, we’re out on the coasts—Alex is west, and John is east. That has not stopped us, however, from launching a video edition of Breitbart Business Digest, which you should definitely check out.
Let’s go!
Warsh Is Talking About Hikes
On Friday, Fed Chairman Kevin Warsh gave his first address to the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. Ominously for monetary doves, Warsh began his speech by talking about hiking. In fact, he used the word “hike” three times in the first three paragraphs of his address.
So has Warsh given up his campaign to eradicate forward guidance? Of course not. He was talking about actually hiking. Like, up in the mountains around Jackson. He described hiking in the Tetons with former Fed Vice Chairman Don Kohn as “steely marathon death marches” and said that the most notable thing about them was his own survival.
Take that, trading algos!
The substance of Warsh’s speech was actually pretty hawkish. He described the state of the economy as strong in ways that Breitbart Business Digest readers will find familiar. Business capital expenditures are booming. Consumer spending is expanding at a healthy pace. We’re at full employment. All the borrowing to fund the AI buildout suggests that there’s not much restrictive about monetary policy today. Inflation, on the other hand, is “troubling.” It is too high and doesn’t seem to be making progress toward the Fed’s two percent target with any haste or hustle.
And he added, for good measure, that inflation is not “mean reverting.” If it’s going to go down, it needs the Fed’s hand pushing it down.
That, basically, is all you should need to know to forecast that the Fed’s probably going to be raising rates later this year. That doesn’t mean we’re going to set on a “steely marathon death march” cycle of higher rates. But rates are going higher sometime over the next couple of meetings.
Lake America
For decades, Americans have been instructed that we have to abandon our traditional names, spellings, and pronunciations of foreign places in favor of combinations that look wrong in English and don’t really sound correct to a native speaker of the American tongue. Bombay is Mumbai. Peking in Beijing. Kyiv is still spelled that way, but now we have to say Keev, and they took away the article from Ukraine for reasons no one understands. The main reason for this is that American elites like to baffle the rest of us and have decided that foreign preferences should outrank American preferences.
President Donald Trump is going the other way! We’re still renaming things, but we’re not making them fake and foreign anymore. First, he renamed the Gulf of Mexico the Gulf of America. This week, after trade talks with Canada fell apart, he decided that Lake Ontario should be called Lake America. We’re not quite sure why that particular one was changed. Why not Eerie or Huron? How about Lake Superior, which was named that by the French? Perhaps the reason is that there’s an entire Canadian province that is also called Ontario, and President Trump just got tired of the confusion.
It’s a fun and somewhat harmless new form of foreign policy. If a country crosses us, we’ll rename an adjacent body of water! You aren’t still calling it the Strait of Hormuz are you? You probably will not be for long. We suggest calling it the Strait of Karoline after the former White House Press Secretary.
Republicans Are Worried About the Economy
Consumer sentiment fell in August, led by a decline in sentiment among Republicans. The University of Michigan’s sentiment gauge fell from 88 to 82 among Republicans, with much smaller declines among Independents and Democrats. Earlier in the week, the Conference Board said the same thing happened with its measure of consumer confidence.
Why are Republicans getting sad about the economy? We suspect it is the looming midterms. The odds that Republicans keep control of both the House and the Senate are quite low, according to most opinion polls. And even though there’s still a couple of months until Election Day, early voting is starting very soon, and many voters have likely made up their minds about the condition of the country and which way they will vote. Democratic control of even one house of Congress will ensure endless investigations, impeachment campaigns, and no further progress on Trump’s economic agenda. So it’s not shocking that Republicans are getting worried about the economy.
The Red Phone
What invention was more important than the first telephone? The second telephone.
We were reminded of that classic dad joke by the impending arrival of one of the most important days in diplomatic telephony. On August 30, 1963, a direct hotline from the White House to the Kremlin was established. Coming less than a year after the Cuban Missile Crisis, the direct Washington-Moscow communications link was designed to reduce the possibility that delay or misunderstanding could turn a confrontation between nuclear powers into catastrophe.
As far as we know, the phone is still there! Our inquiries about whether it had been updated to accept text messages had not been returned at this time. We pressed for an answer but got a busy signal. Ha! We’re killing it today.
Read the full article here