Every morning, we run The Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some chord that has been struck in Narrative-world. And whenever we think there’s a story behind the narrative connectivity of an article … we write about it. That’s The Zeitgeist. Our narrative analysis of the day’s financial media in bite-size form.
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“They’ve built their own prison, so they exist in a state of schizophrenia. They’re both guards and prisoners, and as a result they no longer have – having been lobotomized – the capacity to leave the prison they’ve made, or to even see it as a prison.”My Dinner With Andre (1981)
“The global economy is slowing, US business investment has stalled and the yield curve, which reflects market expectations of future interest rates, has inverted — a quirk that preceded previous recessions. How should monetary policy respond?
The Federal Open Market Committee, of which I am a participant, will consider this question at our September meeting. Absent some surprise reversal in these economic developments, I will argue that we should not only cut the federal funds rate, but that we should also use forward guidance to provide even more of a boost to the economy than a rate cut alone can deliver. ”Neel Kashkari, President of the Minneapolis Federal Reserve Bank
I haven’t been very nice to Neel Kashkari.
He is my poster child for the concept of the stalking horse, and here’s a sample of what I’ve written about him in the past.
And okay, I’ll admit it. This FT opinion piece that he wrote the other day absolutely triggered me. It’s just so … Neelish … with rare gems like this:
“If the Fed had made a firm commitment to keep overnight rates at zero for the next 10 years, the 10-year treasury rate would likely have been close to zero.”
This is what passes for deep thought on the pages of the FT these days.
As the kids would say, I can’t even.
How does the Fed of today bind the Fed of ten years from now, Neel? How does that work, when it won’t be the same people and you meet every six weeks or so to set new policy on a purely discretionary basis?
So triggered as I was, I leapt to Twitter to register my displeasure and begin a rage engagement.
I know, I know … not very nice. Maybe even “nasty” as our President would put it if I were the Danish prime minister.
But then the weirdest thing happened. No, @neelkashkari did not reply to my mean tweet. But he DID reply to one of the people who replied to my tweet. So I replied to that.
Now I figured that would be the end of that. In fact, I took this screenshot and tweeted:
“I mean, there’s not a chance in hell that Kashkari engages with this seriously, but since he asked …”
And then a miracle happened. We started a conversation.
You’ll notice that Neel is a fan of the strawman argument, where he will say that you are arguing for something (higher rates) that you aren’t. More on this later.
And here I thought we were done for sure. BTW, here’s the link to my note on risk-taking by corporations and why zero or near-zero interest rates kill that:
But no! We had one more strawman question.
NARRATOR: Neel was not genuinely interested.
There I go, being mean again. But I say that he wasn’t genuinely interested because these are the stock questions that Kashkari asks to intimidate people into submission: how do you get stronger labor results with higher rates and what specific announcement would you have made in year xxxx? Every town hall and every twitter exchange … these are the questions he asks to demonstrate some form of dominance over puzzled questioners.
So I said my piece and got it out there. But it wasn’t a real conversation. It was me talking to a wall.
And who knows, maybe one day I’ll get to have a genuine conversation with Neel or Jim or Jay or Lael or Richard or one of the gang. But I doubt it.
We can’t have a real conversation with central bankers because they are both guards and prisoners of the island of policy and thought that they’ve created.
They are Number Two in the classic TV series The Prisoner.
Yes, they are there to maintain order on the island and break the spirit of Number Six, but it’s not an accident that pretty much every episode has a new Number Two “in charge” of the island. Number Two answers to Number One. They are ALL stalking horses. They are ALL prisoners.
And sure, I’m a prisoner, too.
And sure, they’ve got that giant white ball following me everywhere in the form of their stock questions and press conferences and fake dialogues.
But I’d rather be in my shoes than Neel’s shoes.
Because I am not a number. I am a free man.
Be seeing you.