What we’re reading (8/28)
“The Ghost Of Arthur Burns Haunts A Complacent Federal Reserve That’s Pouring Fuel On The Fires Of Inflation” (MarketWatch). “The Fed poured fuel on the Great Inflation by allowing real interest rates to plunge into negative territory in the 1970s. Today, the federal funds rate is currently more than 2.5 percentage points below the inflation rate. Now, add open-ended quantitative easing—some $120 billion per month injected into frothy financial markets—and the largest fiscal stimulus in post-World War II history. All of this is occurring precisely when a post-pandemic boom is absorbing slack capacity at an unprecedented rate. This policy gambit is in a league of its own.”
“Crypto Firms Want Fed Payment Systems Access—And Banks Are Resisting” (Wall Street Journal). “Cryptocurrency companies want to tap into the Federal Reserve payments systems that traditional banks use to move money around quickly. The banks are pushing back. The companies include Avanti Bank, which aims to provide custody services for institutional investors in cryptocurrencies, and Kraken, a cryptocurrency exchange platform. They say direct access to the Fed’s payment systems would allow them to more quickly and cheaply process orders from customers buying and selling digital assets. Currently they must partner with traditional banks that have accounts with the Fed.”
“Small Manufacturers Are The Most Optimistic” (Axios). “More small businesses in the manufacturing sector expect to see higher sales next quarter, relative to operators in other industries…[a] National Federation of Independent Business quarterly report released Thursday shows that a net positive 9% of small manufacturers said in July that they expected sales growth in the next 3 months.”
“We’re Burying Our Kids In Debt (Just Not The Way You Think)” (New York Times). “To keep the lights on, the School District of Philadelphia — like thousands of districts across the country — has increasingly turned to debt financing: They issue bonds to borrow money from financial markets, either with their own bonding authority or through municipal governments. Investment funds purchase these bonds, thus lending the funds to local governments or school districts, who promise to repay the loans, plus interest and issuance fees. Debt-financing public education has not only failed to provide schools with sufficient funds; it has also imposed long-term costs. What seems like a fix for school districts’ strapped budgets has actually trapped them in cycles of austerity, exacerbating the very inequalities public education is designed to address.”
“The Simple Tricks That Turned One Investor’s $70,000 Retirement Account Into A $264 Million Fortune” (Washington Post). “You can sometimes find fascinating information in footnotes — and that’s where I discovered the amazing investment returns of Ted Weschler, 60, a relatively low-profile money manager based in Charlottesville whose retirement account has outperformed the S&P 500 by hundreds to 1. Weschler, who operates out of a two-person shop located above a bookstore, has been one of Warren Buffett’s deputies at Berkshire Hathaway since 2012, where he manages billions of Berkshire bucks.”
