107 Barron’s – The Economy Money Can’t Fix

In this Barron’s episode, we’ll discuss fixing the economy. What’s wrong? What are the solutions? Tune in to find out.

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fixing the economy

Overview

  • When you have a hammer, everything is a nail.
  • With Central Bankers, their tool is money and it’s becoming apparent their trillions can’t fix everything; but that doesn’t stop them from trying.
  • Fed Chair Janet Yellen suggested recently that creating a “high pressure economy” could help with the sluggish recovery, most notably the unprecedented number of Americans who not only aren’t working, but aren’t even in the labor force.
  • In a speech at the Boston Fed, Yellen said that pushing economic growth could counter the lingering effects of the great recession.
  • The backdrop is the widely anticipated .25% Fed rate hike in Dec of this year.
  • Yellen offered a defense for going slow with the rate hikes saying it has been in order to keep the pressure on the economy.
  • This stronger economic growth would motivate businesses to invest more in expansion, especially if they could be more confident in the future.
  • This could spur more R&D and faster growing start-ups.
  • If you’re not in the labor market (aka looking for a job), then you’re not officially unemployed.
  • The participation rate is currently at 62.4% of the adult population, lowest since 1978 (before women were fully integrated in workforce).
  • Alan Krueger from Princeton has found that there has been little improvement in the labor force participation rate, even as the jobless rate has declined to 5%.
    • In other words: the idea that many labor force dropouts are returning to the labor force is unsupported by the data.
  • The reasons for this seem unrelated to economics.
  • Among younger men (21-30) the labor force participation rate fell 7.6% from 89.9 to 82.3% from 2004-2014.

I hope you enjoy this episode.

Best,
Brian

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107 Barron’s Fixing the Economy – The Economy Money Can’t Fix

fixing the economy

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