One week from now, the holiday shopping season fires up in a big way. Predictions for how good or bad it will be have been all over the place, ranging from a net drop in spending according to Morgan Stanley to a record-bursting rise if you believe accounting firm Deloitte. It’s been impossible to figure which was more likely, although Barataria staked a claim to the stronger end before anyone else. We’re starting to get some data in and it looks like the optimists were right. This might be a good year after all.
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The Year Everything Changes
2017 is still over three years away, but we can already say a lot about it. We know that there will be a new President, although it’s not clear yet which party has the edge this far out. It’s likely that whoever is elected she (as it well could be) will try very hard to take the partisan edge off of Washington and get things done. There may even be a new Congress by then with a completely different configuration. But as big as the political changes are likely to be, the real change will be away from Washingtoon.
That will be the year that the peak Baby Boomers, born from 1952-1959, hit 65 years old and start to retire. Ahead of them are at least 15 million Boomers who will have passed that threshold, with probably 10M or more retiring. With slow growth inflation should still be low and unemployment will suddenly and sharply decline. The Millenial Generation will hit the workforce (and the electorate) in a big way. Combine that with the rising optimism coming on slowly and the boom should fire up.
Good, Evil, Puzzling, & Stupid
Every once in a while Barataria has to take a pause from deep economic rumination. It’s time rundown the odd stories that may not have received enough attention elsewhere. There is a lot of news in these chaotic times that smells like it may be important one day but hasn’t quite bubbled up to the level where it hits the mainstream yet. This is just one of those days.
The “Facts” are Failing
Back in the 1950s, people who studied complex things like economies felt they were making real progress. The general belief was that by understanding how it all worked we could even things out and usher in a new era of continuous prosperity that would benefit everyone.
Some of the underlying “facts” that were identified at this time have been accepted as simple truths. Growth is always good, and economic growth always flows to workers, making their lives better generation by generation. There’s only one problem lately – some of the “facts” appear to not be as true as they used to be. That means that the underpinnings of modern economic theory are all being questioned and, perhaps, if we don’t keep our eyes open the new era of prosperity will be far more elusive than anyone thought.
Fed Funds Future Foggy, Fudgy
The stock market is surging on solid corporate profits. Jobs are being created, if a bit slowly. Should the Federal Reserve continue its policy of Quantitative Easing? The short answer is probably not. But the policy of buying $85B in mortgage backed securities is continuing, at least for the foreseeable future. And with Janet Yellen, the Fed Vice Chair, slated to replace Ben Bernanke in January we have every reason to believe that the policy will continue.
It’s time to examine how the Fed sets their benchmark interest rate, the Fed Funds Rate, and what we can reasonable expect them to do with it in the near future. It shows just how much the Fed is really in charge of the economy – absent a Federal Government that is doing what needs to be done.
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