Is It Ever Different This Time?

As my colleague Joe Calhoun likes to point out, nothing is new, everything has happened before. We like to think that’s not the case, as the saying goes every generation thinks it has invented sex. What changes is the form, the format largely remains the same. Human beings in 2018 are the same as they were in 1918.

Quite recently, the stock market suffered a bout of liquidation. Whether or not that has concluded isn’t yet determined. The reasons for it, at least those given in the mainstream, tend to be related to how things are so good. Inflation is about to breakout, the economy booming with it, and so the Federal Reserve will be forced to move faster than its otherwise snail’s pace. This is bad for stocks apparently.

So, we get headlines like this – Inflation Fears Rattle Stocks. 

U.S. financial markets suffered severe losses Thursday after data hinted at rising inflation and sent investors running for the exits, fearing the Federal Reserve might live up to…recent warnings and raise interest rates before too long.

Sounds familiar enough, but it was written July 29, 1999. If you didn’t know when it was said, or that Alan Greenspan was the Fed Chair who said it, you would be forgiven for thinking it was Janet Yellen in 2017 or now Jay Powell in 2018. Greenspan’s actual words were:

Should productivity fail to continue to accelerate and demand growth persist or strengthen, the economy could overheat. That would engender inflationary pressures and put the sustainability of this unprecedented period of remarkable growth in jeopardy.

There were more rhetorical flourishes in Greenspan’s public vocabulary than has become custom for his successors in these later years, a very small silver lining within the black legacy of 2008. Still, the message was the same. Things are picking up and looking good, perhaps too good, so as to force the FOMC’s hand to act faster than they or anyone else might want.