a life well planned is a life well lived
The Captain’s Log Summer 2021
Recovery vs. Inflation Marching into the back half of 2021, we find ourselves uncomfortably sandwiched between the forces of good and evil. Economic Recovery vs. Inflation: can the two competing enigmas coexist in a reopening economy after a global pandemic or are these forces fighting to the finish for the Federal Reserve’s attention and ultimately calling the hand in the game of interest rate management? Our interest rates are set by the Federal Reserve who operates under a dual mandate objective driving all downstream decision making to include full employment and inflation control. In a utopian economy, the Federal Reserve will establish an interest rate policy that simultaneously encourages employers to expand their workforce without suffering the need for price increases on the goods and services they produce. This “borrowing cost sweet-spot” creates
an economic nirvana and exists only when both the workforce participation rate and workforce productivity rates rise together. In other words, the Federal Reserve expects a growing economy to bring more people into the workforce and expects those workers, using efficiencies and technology, to continuously produce more and more goods and services. A little over a year ago the global economy was shuttered by Covid-19. Businesses were closed, workers were sent home, and factories and assembly lines halted all production. Only the “essential” aspects of our economy were allowed to continue in full operations and in March of 2020 jobless claims peaked at six million new claims. Our 22 trillion-dollar annual economy had been completely dismembered, and no honest economist could (continued on page 3)