2022-08-06

• I grew up in a world with highly stable monetary policy. And I’m not referring to the US economy here. I’m referring to my family. And the monetary policy was “we have no money.” Or more specifically, “the parents have some money, the kids get 25 cents a week.” This was a stable situation all the way up until high school. At this point, the adults running the Fed in my home lost their nerve and inflation began to creep in. My parents were fine with a restrictive monetary policy when it came to buying yet another pack of Yu-Gi-Oh cards. But when I asked for things like occasionally going to the movies with my high school friends, the restrictions felt more draconian than instructive. But, to my parents dismay, the number of reasonable-sounding loan requests seemed to keep increasing. One day I wanted to go to the movies, the next I wanted to grab a smoothie downtown. The inflationary pressure was starting to get out of control. So, my parents, in a master stroke, simulatneously injected liquidity into the system AND raised rates. For historical reference, Greenspan never had the balls for this kind of move. And don’t even get me started on Yellen and Powell, pfft. More specifically, my parents offered to increase my allowance from the 25 cent pittance that had held for almost 15 years, to, I shit you not, 20 whole dollars. But there was a catch. The fed funds rate would go way up. If I took the 20 dollars a week, then I couldn’t come to them and ask for a bailout to go to the movies. If I had been really smart, I would have said “I’ll take the mostly unlimited free funds” over the fixed annuity plan. If I had even basic common sense, I would have negotiated for a higher rate. But I was young and stupid. My eyes bugged out of my skull at the thought of what I could do with 20 whole dollars, and I immediately accepted, believing I had outsmarted the Fed without even trying. Of course, I came to realize that the austerity was real, and the movies cost a lot more when the money doesn’t come from a bailout. Ok ok, that’s all well and good. Why is this coming up now? Well, taking it back all the way to the beginning: I grew up in a world with a highly stable monetary policy. What if that hadn’t been the case? What if my parents had engaged in encouraging greater boom/bust cycles in my financial experience as a youth? I feel like there were probably some good financial lessons I could have learned from those cycles. Maybe would be fun/interesting to explore that space with the next generation, when I am in charge of the Fed.

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