Animal Spirits Podcast Peak Pessimism (EP.262)
Jun 22, 2022
The discussion dives into the wild market fluctuations of the past three years and the Fed's tricky balancing act amid inflation. They analyze the plight of struggling home builders and explore intriguing patterns in the stock and bond markets. The hosts also tackle challenges in the housing market for new buyers, while whimsically debating the most rewatchable movie of all time. Plus, there are reflections on personal experiences like health struggles and the ups and downs of air travel!
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Market Volatility and the Fed
- The current market volatility, including meme stocks and crypto craze, stems from the pandemic and the Fed's response.
- The immense pressure on Jerome Powell is immense, given his responsibility for navigating this complex situation.
Inflation vs. Unemployment
- Larry Summers suggests a sustained unemployment rate above 5% is needed to control inflation.
- This poses a difficult balancing act for the Fed, given its dual mandate of price stability and employment.
Impact of Inflation vs. Recession
- Widespread inflation impacts everyone, unlike recessions that primarily affect those who lose jobs.
- This explains the currently negative sentiment, as 100% of the population feels the effects of rising prices.