A morally odious theory is empirically unsupportable and increasingly questioned by a younger generation of central bankers. Expect politicians to make more noise about the Fed’s controversial choices after Yellen is gone.
Just more than three years ago, Janet Yellen gave the Michel Camdessus lecture at the IMF, titled Monetary Policy and Financial Stability. The thrust of the speech was that “monetary policy faces significant limitations as a tool to promote financial stability”. As Yellen summarised the point then:
The bad news about America’s news business is relentless, so we were glad to find a sign of hope buried in the national accounts. But does it stand up to scrutiny?
A new report from the US Council of Economic Advisors doesn’t solve any of the mysteries about the steep decline in the share of prime-age men (ages 25-54) who are either working or looking for work. But it does usefully describe the trend in detail and convincingly rules out some commonly cited but unsupported factors. The report’s main conclusion is that “reductions in the demand for labor, especially for lower-skilled men, appear to be an important component of the decline in prime-age male labor force participation”. And this reduction in demand “could reflect the broader evolution of technology, automation, and globalization in the US economy”.
The newly expanded crew of FT Alphaville’s team in New York will be hosting a special edition of Macro Live this afternoon starting at 1:50pm EST (6:50pm London time). You’ll find us at the usual place. Matt Klein and I will be joined by Alex Scaggs, a recent addition to the Alphaville team, to cover the release of the FOMC statement and the Summary of Economic Projections, after which we’ll follow the presser at 2:30pm.
Mike Ashley faces Sports Direct questions from MPs on Tuesday, Janet Yellen makes a speech this evening, lobsters are on a luxury journey to restaurant tables. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.
- Our chat with Sebastian Mallaby on Alan Greenspan
- Our long chat with Paul Volcker (plus transcript and highlights)
- Brad DeLong on Hamiltonian economics and US economic history
- Inside the Washington Post: a chat with Marty Baron and Shailesh Prakash (plus transcript)
- Clay Shirky and Emily Parker on Xiaomi, technology and information flows in China (updated with transcript)
- Simon Kuper’s panel on the cultural forces of football
- Claudia Goldin on the history of women in the workplace (updated with transcript)
- Our podcast chat with Reihan Salam
- Our chat with Esther Duflo — now with transcript
- Our chat with Esther Duflo
- Our podcast chat with Angus Deaton (updated with transcript)
- Our chat with Angus Deaton
- A chat with Greg Ip about “Foolproof” (and the transcript)
- A wonky chat with Martin Wolf (plus the transcript)
Alphachatterbox is available on Acast, iTunes, and Stitcher.
The PRA is concerned about buy-to-let lending standards, the Bank of England will publish new stress test scenarios, AG Barr says its soft drinks can survive the sugar tax. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.
We’ve recently looked at a famously wrong economic prediction based on an accurate demographic forecast, Japan’s experience with rapid aging, and the dangers of relating household demographics to asset price valuations. Suppose, even after reading those posts, you still agree with Alan Greenspan (and Toby Nangle, Charles Goodhart, etc) that slowing growth in the world’s working-age population necessarily implies a bigger share of output headed to workers and faster rates of inflation. Don’t worry. There are even more reasons for scepticism.