Powell says jobs > inflation,and so the money will keep pumping

With everything that's been going on in this state and country, the economic news hasn't been getting a lot of attention. But if you are interested in the field, these comments by the Fed Chair yesterday were a big deal.

Federal Reserve Chair Jerome Powell unveiled a new approach to setting U.S. monetary policy, letting inflation and employment run higher in a shift that will likely keep interest rates low for years to come.

Following a more than year-long review, Powell said the Fed will seek inflation that averages 2% over time, a step that implies allowing for price pressures to overshoot after periods of weakness. It also adjusted its view of full employment to permit labor-market gains to reach more workers.

“Maximum employment is a broad-based and inclusive goal,” Powell said Thursday in a speech delivered virtually for the central bank’s annual policy symposium traditionally held in Jackson Hole, Wyoming. “This change reflects our appreciation for the benefits of a strong labor market, particularly for many in low- and moderate-income communities.”

The coked-up hedge funders took Powell's words and ran with it, ignoring the fact that 1 million more people filed new unemployment claims last week, continuing a rally that has had the DOW Jones jump more than 8% in the last month, and 12% since the end of June.

And while the total number of people getting unemployment fell a bit for the 3rd week of August, there are still around 25 million additional people getting unemployment compared to the start of March.

Those numbers help explain why Powell is planning to keep rates down for a long time.

In the new statement on longer-run goals, the Fed said its decisions would be informed by its assessment of “shortfalls of employment from its maximum level.” The previous version had referred to “deviations from its maximum level.” The change de-emphasizes previous concerns that low unemployment can cause excess inflation....

Calling the revised strategy “a robust updating,” Powell said that after periods when inflation has been running below 2%, monetary policy will likely aim to achieve inflation moderately above 2% for some time.

And I agree with Powell that we need to be concentrating on getting jobs back instead of caring about inflation at this point. Our nearly-$4 trillion budget deficit also isn't an economic problem by itself, because even with the recent bump up in longer-term rates, they're still absurdly low, still below 0.8% as of today.

Powell has said in the past that the Fed can only do so much to try to fight poverty beyond making interest rates lower (all the stock buying and related bailouts of corporations don't do a thing for those poorer Americans). And he has insisted that Congress and President Trump add more stimulus from the fiscal side if they want to drag us out of the economic pit that many of us are still in. But will Republicans, who desperately want to pretend things are "normal" actually do something to stop a double-dipper from happening? Current indicators say "No."

So while the low-interest rate Fed strategy is clearly causing the stock and housing markets to Bubble is nice if you have the money to invest in stocks and buy homes, it isn't so great if you're one of the millions of Americans facing eviction in the next week. And all of those people close to the edge are now losing their federal protections against eviction, and have had their unemployment benefits slashed in the month.

I keep wondering when the "hopium and free money" binge ends, our financial markets start to recognize that there's no real growth in most of the economy, and our Bubbles burst. But it hasn't happened yet, which will make the implosion all the larger, and lead to us falling further behind where we were at before COVID-19 broke out.