Things will be different this summer. But, also, I’m afraid, the same.
About 12 months ago, Wall Street was convinced that the Federal Reserve would start to reduce the dosage of its evil quantitative easing (QE) by September. The Fed would begin — you could say — easing up the easing.
The reasoning back then was simple: The economy in the spring of 2013 had looked better and the Fed under Ben Bernanke was anxious to slow down QE — a dangerous program under which the Federal Reserve prints money so that the government can act as a shill buyer during bond auctions.
The Fed board meeting that was taking place in September 2013 seemed like a good time for the QE curtailment to start.
Everyone — except me — agreed that this would happen. I predicted that the economy would slow in the 2013 summer and the Fed would have to hang onto QE for a little longer.
And that’s exactly what happened. Wall Street was shocked — and also thrilled because stocks rallied — when the Fed decided not to curtail QE at that September meeting. The reductions instead began last December as Bernanke was turning over control to Janet Yellen.
Now Yellen has to deal with the peculiar summer economy. And she will have to decide whether the Fed should stay on pace with dismantling QE or slow down its demise.
Because I’m on a roll, I’m going to take another stab at what the Fed will do. My prediction: By the end of the summer, Yellen and her very nervous colleagues will again have second thoughts about continuing to curtail QE.
Why? Because in the months ahead, the Fed will become more concerned about the economy — just like last summer.
When the horrible first-quarter GDP was announced, the experts insisted that the second three months of 2014 would be better. The only problem is, the second-quarter estimates of 3 percent or greater growth are already turning out to be wishful thinking.
Recently announced April trade data, in particular, and some other disappointing statistics are already causing experts to rein in the optimism for the second quarter.
Does the Fed think that extended QE will help the economy? All but the craziest optimist has probably given up on that after six years of trying. But the Fed is concerned that the stock market might react very badly if QE is pulled when the economy is putting on one of its glum faces.
Minneapolis Fed president Narayana Kocherlakota spilled the beans in a speech recently to Boston College’s Carroll School of Management when he said rates should be kept low — which QE is helping to do — even if this policy leads to unusually high prices of assets like stocks.
In other words, the Fed’s QE policy is all about Wall Street. And I doubt Wall Street is going to like the pace of QE’s demise if the economy looks any worse than it now does.
Dear John: How about the acronym Performance Influencing Statistical Stunts — P.I.S.S.? R.A. Biggar.
Dear Mr. Biggar (if you really are):
This all started when I came up with the acronym P.E.E. — for Performance Enhancing Estimates. That, of course, is a play on the idea of P.E.D.s, which stands for the Performance Enhancing Drugs that have been banned in sports.
My acronym, I hope you’d agree, is mildly amusing in its irony because lots of players today have to pee — the real thing — in a cup because of P.E.D.s.
Anyway, P.E.E. is allowed in economics, as we see in just about every report. In fact, politicians love when P.E.E. is applied to bad economic numbers to make them look stronger. P.E.E. even tricked some newspapers and analysts into thinking Friday’s employment report was a lot stronger than it actually was.
But, Mr. Biggar, this is no game. You have to be a professional to come up with something like P.E.E.
And using the acronym P.I.S.S. might get you barred in lots of newspapers. (Fortunately, not this one.) So, please, cease and desist unless you are willing to accept the consequences — mainly, putting pressure on yourself to come up with clever word plays for the rest of your life.
But because I like to encourage creativity among my readers, I’m going to try something different — the Create Real Acronyms Program, C.R.A.P. for short. If anyone has a good acronym that won’t get me fired, please send it before I get B.O.R.E.D., which stands for — well — bored.
This will be the very last item I will run on how the frigid, frozen, freakin’ winter weather messed up our economy this past winter.
The NPD Group, which does restaurant research, says the extreme cold weather caused a double-digit increase in sales of hot tea, hot chocolate (no surprise there) and — get this — “frozen/slushy coffee servings.” Huh, the first two I see. But who was trudging through the snow just to buy slush in a cup?
Quick serve coffee, donut and bagel joints also saw healthy increases. People were, however, less inclined to visit a restaurant in the bad weather.