Tweaking Interest Rates Is A Fool’s Errand

For once there was some useful information in today’s jobs report, albeit not of the kind Wall Street slobbers over. We are referring to the information in the chart below showing that fully 43% of the 4.3 million jobs allegedly created since March 2022 were made-up from whole cloth by the green eyeshades at the BLS. Just plain finger in the air stuff.

That’s right. The birth-death model has added 1.84 million jobs since last March, meaning that almost half of all “job gains” in the past year were generated not by real world employers, but by an excel spreadsheet.

Our purpose here is not to nitpick the dubious nature of the birth-death model. Of course, after the violent whip-sawing of the US economy by the Covid Lockdowns and $6 trillion of stimmies and the recent utter collapse of job-generating VC investments it does stand to reason that these history-based BLS guesstimates about the level of newly formed companies and their hiring rates are even more suspect than usual.

Actually, however, our real point is that the monetary politburo in the Eccles Building has a giant information deficiency problem. That is, they endeavor to micro-manage on a monthly basis a $26 trillion economy and the employment and inflation impulses which emanate from its vast complexity and multitudinous feedback loops based on incoming data that is barely worth the paper it is printed on.

That’s why we said yesterday that the Eccles Building shouldn’t be in the rate setting business—up, down or sideways— in the first place. After all, economic central planning—which is what they actually do—presumes that the planners actually know in detail and in real time what is happening out there in the blooming., buzzing mass of activity which comprises the macro-economy.

Stated differently, market capitalism doesn’t work if financial asset prices are being pegged artificially and falsely by a 12-man monetary politburo rather than the vast throng of suppliers and users of funds in the global marketplace; and that’s true in spades if they are tweaking the interest rate policy dials based on noise-ridden spread sheets.