I swear sometimes that Bloomberg, Reuters, and Yahoo! Finance are nothing but mouthpieces for the Federal Reserve System. During my brief stint as an analyst/editor with Telecommunications Reports, a standard mode for gathering intel on regulatory agencies was to sit next to the fax machine waiting for a press release. We would then confirm the information, get a couple quotes from an industry spokesman, and then write a report for client consumption.
I suspect generally the same approach by the major narrative gathering outlets that refer to themselves as media. This observation may tick off its members, but their job is to spread State narrative in the form of allegedly “objective” information and that form is increasingly flimsy as the years go by.
The Fed is that tree that consistently provides low hanging fruit for media consumption. So drunken have we become on the glucose from the low hanging fruit that we don’t hold the media accountable for pushing back on Federal Reserve narrative. One such narrative is the Federal Reserve’s dual mandate of stable prices and maximum employment. The media has severely shrunk the interpretation of the dual mandate down to stable consumer prices and maximum labor employment. I understand that there is a need for efficiency and simplicity when serving up news to the general public. Monetary policy is complex and the public sees itself as too busy to interpret the economic climate and prefers to settle on the headlines.
But the dual mandate is, in my opinion, more refined than that and the politics of the economy is fueling the dilution of the mandate and adding to the public’s misconception as to what the Federal Reserve System does.
Market transactions gain and transmit value when capital, through the price mechanism, identifies the transactions that provide the highest returns. Not only might this result in stable labor employment, but also in stable employment of other factors including technology, land, and other resources. As we may see with the increased proliferation of artificial intelligence, some of these factors i.e., labor, may see a decrease in their use while others, i.e., technology, see an increase.
As markets for labor, technology, land, etc., predict potential returns from these factors, the cost of capital introduced into these markets will fluctuate with expected returns. The Federal Reserve has no role in these capital allocation strategies or decisions. The media should stay away from narratives that give the public that impression. Such an impression is misleading for traders of deposit or other investment accounts because the impression may direct the traders of these accounts to focus on the wrong market moving agents.
In fairness to the Federal Reserve, it has been clearer than the media via its own printed messaging as to what its monetary policy goals are. What traders have to identify and parse through are the philosophies and narratives of the Federal Reserve. Those philosophies and narratives are not so clearly stated and the media with all its focus on the Federal Reserve’s fed funds rate and Jerome Powell’s press conferences, seems either reluctant to discuss the philosophies and true narrative or may simply lack the capacity to discern them.
Next time, my advice to the Federal Reserve regarding how to play the media’s shortcomings.
Alton Drew
22 March 2024
For more on my take on the American political economy, you can my book on amazon.com/author/altondrew.
Alton Drew 