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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- 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.
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