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The Goldilocks Zone
Robert Aro

The latest meeting minutes of the Federal Open Market Committee (FOMC) offers valuable insights into the make-believe nature of monetary policy. While the true motives of the Fed's inner circle may forever remain a mystery, it is evident their narrative revolves around the quest for an ideal economic state or finding a Goldilocks Zone of economic data. Only when the data aligns perfectly will the Fed’s mission be complete and the battle against inflation be won.

Let’s examine their perspective on the unemployment rate. In their own words:

The unemployment rate edged up, on net, but was still at a low level of 3.7 percent in May. On balance, the unemployment rate for African Americans moved up to 5.6 percent, while the jobless rate for Hispanics moved down to 4.0 percent.

Perhaps some find unemployment statistics intriguing. But the practical application of this data can hardly be explained and its conclusions are offensive. If African Americans are at 5.6 percent and Hispanics at 4.0 percent, it suggests that somewhere in America exists a team of technocrats tasked with answering the question: How many minorities should be in the workforce?

Average hourly earnings are given similar treatment:

Over the 12 months ending in May, average hourly earnings for all employees increased 4.3 percent, below its peak of 5.9 percent early last year.

Even if we overlook the issues of arriving at a national average for hourly earnings, the problem persists in what the preferred hourly pay should be.

Mainstream economic news outlets like CBS perpetuate the Goldilocks idea:

Some economists expect the Fed to raise rates at every other meeting as it seeks to pull off a difficult maneuver: Raising borrowing costs high enough to cool the economy and tame inflation yet not so high as to cause a deep recession.

Should anyone believe these economists, they’d have to believe the Fed can do the impossible; in this version, finding the interest rate that ensures the economy runs neither too hot, nor too cold so that prices continually rise by just the right amount, guaranteeing prosperity…

Of course, this quote is entirely fallacious, and even encompasses the idea that (price) inflation equates to economic growth.

Yet, the Fed shows no sign of reservation, going so far as saying:

Over the intermeeting period, market participants appeared to interpret incoming data as signaling, on balance, more resilience in economic activity than previously assumed ... As a result, Treasury yields and the expected future path for the federal funds rate shifted upward significantly.

Concluding, based on the data:

All members affirmed that they are strongly committed to returning inflation to their 2 percent objective.

The Fed, backed by mainstream economists and the mainstream media, perpetuates a game presented to the public as economic policy. They pursue an interest rate that would magically result in ideal consumer prices and widespread economic prosperity. But if such a rate exists, it would have been both communicated and achieved by now. All of their other data, whether unemployment statistics or hourly earnings, is just noise in an already crowded arena of barely useful economic data, serving little purpose other than maintaining the illusion of control.



Robert Aro is a chartered professional accountant (CPA, CA) from Toronto who writes for the Mises Power and Market blog on issues surrounding the Federal Reserve and central banking. He is currently enrolled in the Mises Institute’s graduate school, working toward his master of arts in Austrian economics. In 2021, Robert placed third in the Free Private Cities short story contest with "Express to City Center ONE," which explores the endless possibilities a stateless society can offer the world. Passionate about writing and economics, he intends to publish in the future.

You can follow Robert under the name Econ Circus on Twitter.

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