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Jeff Snider, Head of Global Investment Research for Alhambra Investments with Emil Kalinowski, exempt from Murphy’s Law. Artwork by David “the right stuff” Parkins. Podcast intro/outro is “Sleeves” by Cushy at Epidemic Sound.
25.3 If You Have To Flatten Phillips You’re Trying Too Hard
The Federal Reserve worried whether ‘too much’ employment (?!?) caused too much inflation. Yet when the US economy ‘boomed’ and employment was ‘full’ inflation was meek. Might it be because there was no boom? No labor force participation? Nah! That would make technocrats look bad – and we can’t have that.

Last week, current and former Federal Reserve officials offered a mea culpa, saying the timing of the 2015-18 rate hikes may have curbed a potentially quicker recovery from 2008. Apparently, seven to ten years is not enough time.

Well then, if time is the problem your podcaster will take a page out of Hugh Hendry’s book. Recently the early-21st century Scottish philosopher suggested the Fed would be taken seriously at its attempt of irresponsibility if it was headed by the funny, mixed martial artist, media-sensation Joe Rogan. Why not then filmmaker Christopher Nolan? He offers Rogan-style pyrotechnics, plus he knows his way around time. In Memento he reversed it, telling the story from back to front. With Inception he slowed it down – allowing multiple realities to exist simultaneously. Interstellar showed him capable of harnessing no less than the gravity well of the black hole Gargantua to ‘steal’ decades of time. And in his latest opus – TeneT – Nolan folds all of these ideas into the same movie. Not just the same movie, but the same frames! Entire sequences are shown with characters and objects sharing the same space but not the same eddies of entropy.

Hopefully the point survives the exaggeration. A true, fundamental overhaul is long overdue and recently the Federal Reserve did perform just such a review at the end of which it announced a new, grand strategy. In this, the 25th episode of Making Sense, while we wait for Rogan, Nolan or Deus-forbid anyone with authority, Snider offers his review of the new, grand strategy.


00:05 What is the relationship between inflation and employment? What is the Phillips Curve?
02:46 Why didn’t inflation manifest when full employment was reached in 2015, 2017-18?
03:57 Why did the Phillips Curve allegedly flatten?
05:42 Explanations about the ‘Flat’ Phillips Curve and Great Moderation sound similar: “Hmm?”
06:58 What is the alternative to the ‘Flat’ Phillips Curve (i.e. no actual economic boom)?
08:56 What does the bond and stock market think of the new, grand monetary strategy?


Fat Chance, Flat Phillips: https://bit.ly/3hV2RXP
The Flattening of the Phillips Curve – Policy Implications Depend on the Cause: https://bit.ly/2Far5yE
Read Richard Clarida’s Speech: https://bit.ly/3lPo2wO
Watch Richard Clarida’s Speech: https://bit.ly/2QXB793
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7