Let’s check in with former Fed Vice-Chair Alan Blinder and his soft landing thesis. 
“The Fed has Already Achieved a Soft Landing”
Please consider Stop Fretting About the Federal Reserve’s ‘Soft Landing’ by Alan Blinder.
There is much talk these days about whether the Federal Reserve can pull off the vaunted “soft landing,” reducing inflation to its 2% target without causing a recession. It isn’t easy.
Worrywarts fret over any uptick in the inflation rate, warning that the so-called last mile of inflation reduction could require tougher medicine than earlier ones. Growth worrywarts fret that the real federal-funds rate is rising automatically as inflation falls—and that a Fed that sticks stubbornly to a 5.5% nominal federal-funds rate for too long may produce a hard landing rather than a soft one.
Lost in this debate is something nearly everyone seems to be missing: The Fed has already achieved a soft landing. Something could go wrong in the future, but we’re already safely on the ground.
I was vice chairman of the Fed when we pulled off the celebrated “perfect” soft landing in 1994-95. What the Fed has achieved this time is more impressive considering where it started and the events since. This episode isn’t over. Things could still go wrong, and achieving a “soft landing” doesn’t mean that the plane never flies again. But we shouldn’t overlook the resounding success before us: that the U.S. economy has in fact already touched down softly.
CPI Month-Over-Month
CPI Year-Over-Year
Forgive me for pointing out Another Hotter Than Expected CPI Led by Shelter, Up Another 0.6 Percent
For the 29th consecutive month rent was up at least 0.4 percent. Shelter, a broader category, rose 0.6 percent. Food rose 0.4 percent.
New Definition of “Safely on the Ground”
The new definition of safely on the ground has core CPI running at 3.9 percent from a year ago.
I was wondering where Blinder’s Rah Rah Sis Cum Bah was coming from and if politics was somehow in play. Here are my fact check notes.
Alan Blinder Notes
- Blinder served on President Bill Clinton’s Council of Economic Advisers from January 1993 to June 1994
- Blinder was an adviser to Al Gore and John Kerry during their respective presidential campaigns in 2000 and 2004.
- In July 2008, Blinder wrote an article in The New York Times advocating “Cash for Clunkers”, implemented by the Obama administration during the summer of 2009
It would be shocking if Blinder did not try to help Biden with soft landing nonsense even as major problems loom ahead.
60 Minute Interview
Please consider a few snips from Fed Chairman Tells 60 Minutes US Fiscal Path is Unsustainable
60 Minutes: Was the Fed too slow to recognize inflation in 2021?
Powell: So in hindsight, it would’ve been better to have tightened policy earlier. I’m happy to say that. Really, it was this. We saw what we thought was that this inflation, which seemed to be mostly limited to the goods sector and to the supply chain story. We thought that the economy was so dynamic that it would fix itself fairly quickly. And we thought that inflation would go away fairly quickly without an intervention by us.
Here’s a fitting Alan Blinder Quote that I fully endorse: “Economists have the most influence on policy where they know the least and disagree most vehemently.”
This helps explain how and why the Fed blows bubbles of increasing amplitude over time.
Toto, I Don’t Think This is 2003 Anymore
To paraphrase Dorothy “Toto, I don’t think this is 2003 anymore.”
For discussion, please see 2024 Inflation Outlook: How Much Inflation Is Baked in the Cake?
I also think Powell is very wrong about the strength of the jobs market.
For discussion, please see Jobs Soar but Full Time Employment Is Barely Changed Since May 2022
60 Minutes did not ask about Tariffs. Since that is fiscal policy, Powell may not have responded.
For my take, please see Help for the Heartland? Trump Tariffs Failed the Mission
Tariff policy is highly inflationary at the levels supported by Trump and Biden but there was no discussion of tariffs in the 60 Minutes interview.
Hello Toto (Alan Blinder and Jerome Powell)
The tools that worked in 2003 are not what the Fed can rely on here.
Global wage arbitrage is gone. Just in time manufacturing is gone. Union wage contracts are soaring.
Home prices are out of sight.
Demographics require more spending on healthcare with fewer workers contributing to Medicare and Social Security.
And that does not address the Fiscal Cliff that Powell Sees but Blinder doesn’t.
Hello Mr. Blinder, the plane has not landed and it does not even have wheels. This is not 2003, we are not in Munchkinland or Oz, and we are not somewhere over the rainbow.
More like spreading those cheeks slowly
Durable goods in January, down three of the last four months, decreased. $18.0 billion or 6.1 percent to $276.7 billion worse than covid lock down year over year -0.8 percent worse since Aug 2020. Market went up
Rut roh, looks like all the right wing bloggers who want this admin to fail regardless of who gets hurt might not get the recession they’ve been verbally nurturing……
It’s a really sad time when America has become so divided that some would encourage pain, even on themselves, to win.
.
Mr. Blinder has an appropriate name for an economics advisor. If he has two sons they could establish a firm: ‘Blinder, Blinder and Blinder.’
Who was the moron who said Krugman couldn’t get It done so lets roll out Alan Binder?
Who the heck is Alan Binder anyway? Oh, he worked for Clinton, Kerry and Gore. Say no more!
Hezbollah struck Mt Meiron radar again possibly in preparation for Oct 7 #2. Stage #2 might start on Mar 11 during Ramadan.
Inflation is already well below 2% and has been for several months. We actually had deflation for a few of those months per the CPI-W 1984. The “below 2%” narrative is already in place in the official figures.
The tricky part is, how to get people to believe the narrative when their insurance (health, home, auto) is going up by double digits and everything else they buy still seems to be going up in price including houses and rent.
The answer is you ease them into the “reality” by feeding them bogus “seasonally adjusted” CPI figures which affirms their experience that prices are still going up. The rug gets pulled out later this year when they announce seniors are getting a 1% COLA because that’s what the figures say.
SS will announce the 2025 COLA on 10/10/24. Optimistic projections now predict 1.75%. We’ll see if I’m closer.
The overextended CPI : [primary rent + 4 OER]. The real CPI is lower.
Covid: stopping action #1 : two million expired within two weeks instead of twenty years. A slower distribution started when boomers reached ages between 70Y and 80Y. The silent Gen market cap is small. The boomers market cap is the highesr. Both assets will be taxed. The prime age nominal wages are rising. They are paying more taxes. Transfer payments are down.
The middle class can easily cut : traveling, new furniture, eating out and flexible items.
The hyperinflation and unrealized promises are not sticky, they are flexible.
NatGas:SPX flipped to nadir.
Mish,
I think your analysis of tarrifs and free trade do not account for the unseen. As Bastiat mentions in his famous pamphlet, one can reach all sorts of erroneous conclusions when one doesn’t account for the unseen effects of a policy. The US trade imbalance can’t go on forever, and correcting it will make us poorer in the short run. That’s the reality. The inflation effect you point to is just one manifestation of that reality.
Fed Chairman Tells 60 Minutes US Fiscal Path is Unsustainable. Yellen was the one who said don’t worry about debt, interest rates are low government should spend big. Then oops we underestimated
Inflation has reversed. The yield on the 10yr is up.
Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis (DGS10) | FRED | St. Louis Fed (stlouisfed.org)
And it will continue without a credit event or an operation twist.
What is the Fed supposed to do if CONgress continues to borrow and Biden continues to use EO’s to send money anywhere he chooses? Mr. Market (Invisible Hand) will crimp the hose soon enough, when the buyers of corrupt debt dries up (China has already dropped from owning 30% of our debt to 10%).
“What is the Fed supposed to do if CONgress continues to borrow and Biden continues to use EO’s to send money anywhere he chooses?”
The Fed should do what they always should have done.
1)Ideally, cease to exists. A legitimate USD will always be 1/20/oz of Gold. Debasement theft,which is never ANY different from any other form of theft, is NEVER a benefit.
2) If1) is politically, and/or kangaroo-court-legally, impossible in an idiotocracy built by and for a population sufficiently stupid, illiterate and indoctrinated: The Fed should do what originally sold as their mandate. IOW: If they had to “lend freely”, they should only ever do so at high, very high, straight up extortionate, rates. Meaning: Rates of the “noone involved in getting to the point of needing Fed support, is getting out of it in any other state than utterly destitute. Before third parties take a single dime of losses, every shareholder, principal, bond holder, depositor, contractor and other potential beneficiary, should first be completely, 100% stripped of any possible upside, ever. Never, never, never, should any third party; whether by fiscal/tax nor monetary/printing means; be left worse off, while some party to the failures should walk out of there not stripped utterly barren. Ideally all the way down to the absolute minimum internal organs required to minimally sustain some form of life.
ANY time this is not observed strictly and dogmatically and without any possible exception; you’ve opened a backchannel by which those with the right connections can suck productive people dry: First slowly, then ever faster as precedents for more and more bailouts are established. Until you end up where we are today: Where 95+% of all wealth owned, has been obtained by no other means whatsoever, than sitting there while The Fed, Junta and Ambulance Chasing Kangaroos rob productive people ever harder on useless, connected leeches’ behalf. There can be NO exceptions to this.
“I was vice chairman of the Fed when we pulled off the celebrated “perfect” soft landing in 1994-95.”
There was a mild recession in 1991, which the economy was coming out of in 1992 when Clinton said “it’s the economy, stupid.” Mild recession, mild recovery. Greenspan then raised rates, bankrupting Orange County government. Making a bad bet, they didn’t get a soft landing. Greenspan cut the rate a notch and was complaining of irrational exuberance in the stock market in 1996.
The DIDMCA of March 31st, 1980, turned the thrifts into banks. It destroyed the S&L industry, eliminating 3,400 S&Ls. There were 6,835 thrifts in 1960.
Dr. Lawrence H. White, a senior fellow at the Cato Institution wrote about duration risk in the borrow short to lend longer, savings-investment paradigm: “in 1979-1981 it rendered insolvent about two-thirds of US thrift institutions (FSLIC, NCUSIF, insured), who were financing 30-year fixed-rate mortgages with 1- and 2-year deposits”.
Greenspan countered the recession by dropping legal reserves by 40%, causing the boom/bust in real estate.
And many of the S&L managers and owners went to jail for fraud. In 2008 I expected to see the same thing but there was another President of the US and another president of the Fed who worked hand in hand to protect the perpetrators.
Do you have a source you can point to for support of your claim? A brief search led to the round approximation of 1,000 convictions, but that is less than the number of failures and I saw no mention of what number was actually incarcerated (nor for how long any of those sentences were). It’s a wonder that Saint McCain was able to skate away from his culpability while poor Mr. Keating was sent up the metaphorical river!
Presumably one difference between that scandal and 2008 is the TBTF players weren’t the source of the trouble during S&L times, so there was less resistance to prosecution. Oh, and actually investigating and prosecuting fraudulant activity appears to have been more important then versus the Bush-lite and Obama days.
Why Only One Top Banker Went to Jail for the Financial Crisis – The New York Times (nytimes.com)
From the article:
839 people were convicted in the S and L crisis of the 1980’s. Only one was for 2008.It’s a long article and worth the read.
Thanks for the link. I was unable to see the whole article, but the start is roughly in line with numbers elsewhere. 839 is smaller than the rough numbers I saw elsewhere and less than 1 per “bank” failure.
Although 839 is the number of convictions I still wonder about how many were actually imprisioned (rather than house arrest or probation) and for how long. I imagine none of those convicts reached the level of importance of a Corzine, Mozilo, or any of the Wells Fargo execs who came up with the ‘Linda Green’ mortgage scam.
I’ll offer this to you – The FT would like the NYT to stop spreading untruths — almost 4 dozen went to jail! Darn those crafty Icelanders. The sacrificial lamb in the U.S. happened to be a foreigner too.
link to ig.ft.com
Orange county went bankrupt because they had a stupid portfolio manager managing their money and not because of the Fed raising rates. Just like SVB went bankrupt because it was run by stupid people and not because of the Fed raising rates.
I think after bailouts were institutionalized there will be no crash allowed.
No crash, just hyperinflation Venezuela style.
The successful “spinning” of the China Flu has established a new way of doing business – be it stock spinning (NVDA) – channel stuffing=sales, Gov. Data reports (Jobs regained = new added}, Politics: 17,000,000 illegals (+ or – a million) = no border invasion!. And a real corker – “Ukraine is winning – with no help from us, (other than a few bucks) – honest! Time for a T.V. mini series – The collapse of the once great, now late, “Roman Empire”…….
Please stop referring to Medicare and Social Security as a single amalgamated government program. They have very different funding and solvency profiles. Medicare is unfixable. Social Security could be made solvent, long term, in five or less years.
“Social Security could be made solvent, long term, in five or less years.”
if that solution involves raising taxes or lifting caps, no thanks. I pay enough for leeches now to the tune of $1000/month and I don’t want that to turn into $2000/month.
if the solution is cuts then yes please.
Last serious debate on the topic –
link to m.youtube.com
George Bush 2004. “we must deal with this problem now” referring to social security.
link to c-span.org
Mentions too many baby boomers. Everyone knew it would go bankrupt back in 2004 and even before that but nothing done.
Someone earning $100,000/year would have to pay an extra $67/month in taxes to get a full payout every month over their entire benefit lifetime. The return on the $67/month investment would likely be well over 100%. The alternative is to take a 23% benefit cut. Quoting Dirty Harry,”you’ve gotta ask yourself a question: ‘Do I feel lucky?‘ Well, do ya, punk?“
Come on. it’s $75/month today then next year it’ll be just an extra $50/month or $100/month after that because “inflation is so high and poor seniors are having to eat cat food” or something like that.
There is no way to satiate a beast with a bottomless stomach for free money.
You’re wrong. That’s not how inflation works. You would earn 0.8% less wage increase for *one year* to account for the necessary payroll tax adjustment, period. It is a one time “base effect” that carries forward through your lifetime. After that one time hit, you would receive wage increases, as normal.
More direct explanation: if you are accustomed to a 3% wage increase each year, then taking a reduced 2.2% wage increase for just one year would give you full retirement benefits for the rest of your life. The alternative is a 23% reduction in benefits for your entire retirement lifetime. The cost/benefit analysis here says to take the one time hit. The older you are, the dumber you are for not agreeing to the one time adjustment.
There are only two ways out of the debt mess we have gotten ourselves into: debt deflation and inflation. The powers that be and the Fed want inflation so they are perfectly happy with 3% or 4% inflation. Some have even said this much. The government has its eye on the lifetime savings of the Boomers and their pensions. They are planning to steal it. Their desire is to keep inflation at a level that will high but below the level that will cause political instability. All the rest is pretense meant to divert and deflect the ire their policies are generating. They will blame this and that as they do their stealing.
Question to Mish on tarrifs. Do you think our large trade imbalances has anything to do with our large national debt?
Here’s another fitting video for your thesis. It also includes a possible solution!
link to youtu.be
Alan Blinder was always the one guy I could count on to be more wrong than Paul Krugman on economics, and that’s quite a statement right there.
I can understand that most people on this site are disappointed about the fact that the economy is performing much better than everybody expected. Even worse, Biden might get credit for the economy come November. Sorry for that. The Fed did indeed a good job after screwing up in 2020-21, and the economy doesn’t care about partisan warfare. That said, US fiscal policy is a bipartisan mess. The fact that we are in an election year and literally no politician of note even mentions fiscal policy suggests we have become a nation of dupes.
Poor baby. Wants others to share his delusions. I guess you’re one of those people think debt doesn’t matter and believes in government statistics.
It’s not me who needs to get educated about public debt and government statistics.
Yeah, this post is a bit of a jumble. The Fed, whatever you think of them in general, did what they set out to, at least mostly – they got at least something of a handle on inflation and didn’t cause a recession. Nobody here (myself included) would have believed that was possible a year ago.
The fiscal path we’re on is a disaster, of course. But that’s a separate issue. The folks at the Fed would love to see some kind of rational budget process happen in Congress I’m sure, but they have no levers to pull to make that happen.
The last guy screwed it up so badly that things look better on a relative basis. But 2025 won’t be pretty for whomever wins. Mark this post.
True, it’s not going to be pretty. But Trump guarantees there will be MAPA (Make America Poor Again).
This soft landing is like setting a plane down on a runway of quicksand.
“The good news is, we’ll be landing immediately. The bad news is, we’re crash-landing.” – Madagascar 2
Of the hundreds of people I know only two are unemployed but they spent their professional lives as contractors anyway so not sure if they count, both were happy to take breaks.
As for demographics, I really wish you’d spend more time on analysis in this area overall.
Social Security recipients
January 2019 – 68,050,000
January 2024 – 71,725,000
Growth 5.4%
Cost
January 2019 – $ 84,755/month
January 2024 – $118,966/month
Growth 40.4%
Try to extrapolate where we’ll be in 5 years with these numbers.
source: link to ssa.gov
The cost you listed is in millions of dollars and is the total cost for all recipients. Thus the 2019 figure is a $84 Billion/month outlay. No big surprises here. Pyramid schemes have a tendency to do this.
And I have yet to see a single person make the connection between inflation and handing out $120b/month in free money. The complaint is that immigrants, with little to no money, are driving inflation and not all of this free money.
And I’m not even including medicare, that’s a whole lot of more free/subsidized healthcare costing billions per month that is also driving inflation. And we don’t have enough health care workers for both the old and the young.
“It’s turtles all the way down and inflation all the way up!”
SS is not handing out free money. It’s people getting back the money they paid in long ago in the form of an annuity with a fixed rate of return on their money.
Free money giveaways are things like Welfare / Food stamps where people who did no work at all are getting something.
Healthcare is an entirely different animal. It’s the elephant in the room that’s growing faster cost wise than anything else and that’s going to have to be reigned in sooner than anything else.
This past weekend, I filled up my wife’s car with gas and had to pay $0.50/gallon tax. By your logic, because I paid for a gas tax I am entitled to drive on roads and bridges in perpetuity all across America forever until I die.
I don’t dispute people paid into social security but it’s a tax the same way there is a gas tax. And as I have frequently pointed out, the goal posts keep moving. Whatever was paid in the past did not include the current generous payouts now with COLA.
Mish provides endless proof when he points out that wages have been stagnant the past 30 years meaning that ss taxes were low back then. Now we have high inflation and high COLAs for SS at a time we have dwindling labor force.
So no, they “didn’t pay for it” at least not at scale to what is being handed out. That extra COLA kick is what I refer to as free money. I expect inflation to be high for the next 10 years so COLAs will be high and I’m sure some politician will offer extra money along the way because “times are tough” for the elderly.
It all needs reform or it’s 25% cuts across the board. The clock is ticking and time is running out. 2034 is the deadline, 8 years away and that assumes no deep recession.
Under this logic no one is entitled to the equity in their home beyond purchase price, either.
Should housing be made affordable, crushing inflation, by mandating people sell their homes for no more than the price they paid when they bought?
“Under this logic no one is entitled to the equity in their home beyond purchase price, either.”
Correct.
The “free money” (of course no such thing exists; neither wrt SS nor monetary-appreciation-for-obviously-depreciating-assets rackets: All the gains are simply stolen from more useful and productive people and organizations) handed out via SS, Medicwhatever and other fiscal means; have been completely dwarfed by the equally “free money” handed out via the debasement-theft-via-asset-pumping rackets since the ’71.
The latter is what has turned America into nothing more than a Banana republic. Even though fiscal-channel redistribution surely has not helped; it is; far and away; the monetary-channel redistribution which has, and is, the biggest. At least an order of magnitude greater than SS, MedicX and the rest combined.
Even idiots dumb enough to believe being “data-driven” is some sort of good thing wrt economics; would have to be unusually illiterate; not to mention straight up unintelligent; not to notice: Old people who are rich, did not get that way by way of SS. But instead almost exclusively by way of The Fed transferring more productive people’s value add to them, by way of asset pumping. That’s how “money” is so-called “made” in America these days (including most of mine…): By way of The Fed stealing it from competent and productive people.
The gas tax is functioning in the same way a toll does (it’s supposed to be used to pay for road maintenance). It’s not conferring ownership or right of use.
It’s not an annuity with a fixed rate of return. It has a COLA.
And you’re not “getting back” money paid in long ago – that money was already spent on prior beneficiaries. You’re getting payments from today’s workers. That’s the only way it can keep up with inflation. To see this, just ask yourself one question: if we decided to phase out the system by stopping the SS payroll tax and freezing all benefits at current levels, how long would current beneficiaries continue to receive their SS checks?
Yes, SS is pay as you go (current workers pay retirees).
But the money you pay in is held in special SS bonds that DO have a published rate of return (~3% right now). That rate of return is meant to match the inflation rate so that in theory the $1000 you contribute today is worth $1000 20 or 30 or 40 years from now.
That’s why I said SS functions as an annuity rather than as a 401K or IRA.
Adjusted for inflation the 84,755 is 103,848. The real growth rate is 14.6%.
That said, FRA for those born in 1958 is 66 and 8 months, so this August to next August will see the peak. The peak for the 1957 cohort started last July and will end this July.
After that the number of remaining boomers reaching FRA drops quickly, and few people wait until 70 to file. (I certainly won’t be waiting.)
In 2008, they believed ss would be fine through 2041.
link to npr.org
Today it’s 2034 and that’s with trillions of fake money pumped into the economy. Do what you will with this information.
SS in 2041 would have been fine if your generation had decided to have kids but you didn’t so your SS is pretty much screwed but the fault lies on your generation and not on anyone else’s.
Unfortunately, perhaps, for the progressively indoctrinated: “Generations” neither are fertile, nor are decision making entities (special case of the more general: There Are No We.)
People who have lots of kids have almost always had rather secure older years. The idiocy; hardwired into progressive, collectivist schemes like Social Security; that people who did not have lots of kids should somehow be granted carte-blanche license to rob those who did, will forever and ever prevent any such scheme from ever being “fine.” Instead, it is; like all of progressivism; no more than the thinnest of covers for nothing other than pure, crass theft. No geezer magically has some “right” to any part of the income of someone else’s kid.
That the geezer at some point handed over money; voluntarily or not; to a gaggle of conmen and robbers who then spent it on bombing Iraq; or Germany; or Japan; doesn’t change that one iota. If the money had been paid “Into” something; it would be sitting somewhere he could take it “Out of.” With no other people’s kids required. It doesn’t. Becasue he did not pay _into_. He just paid. To conmen and robbers. Which arguably sucks. But Me being conned by You; does not magically entitle me to rob Mish’ kids to make up for my “loss.”
I ran a sales department: WE WERE PAID UPON DELIVERY.
The FED wants to be paid upon the delivery of promises that fly in the face of reason. This guy simply wants us to MEASURE their results as if the results were delivered and they were NOT delivered!
It would be like if I had PROMISED to deliver Client Contracts but did not deliver but still expected my very generous bonuses. I would have been FIRED had I bull-shitted my Bosses/Partners about my Secured Contracts and Deals.
The difference here is that the FED CAN BULLSHIT all they want and they get to KEEP THEIR JOBS.
Of course, their Department is in the airy and cloudy DREAM WORLD and my job was on the Ground, hammering on my Sales team.
RESULTS MATTERED TO US working blokes….but, they do not MATTER TO THE FED.
The Fed is a HOT AIR MACHINE.
We never paid our salesmen on delivery but at the end of the month. In fact very few furnishers of goods and services are paid on delivery but almost always have a delay that depends on several factors. What product or service did you sell where the salesmen were paid on delivering the goods?
25% cumulative inflation and millions of part-time jobs created for illegals and the underclass, while what remains of the real economy is vaporizing. This isn’t a soft landing; it’s treason of the highest order….#EndTheFed