So we have to root against job growth. I hate that kind of situation. But Janet Yellen, rather than embracing the notion of the United States as the engine that could pull the rest of the world out of its slump, has chosen the course of higher-wages-mean-inflation and she seems willing to tip the balance of the world's narrative into a serious recession if necessary because we have added a couple of hundred thousand more jobs than we thought.
Yes, it is true that you would expect rates to be higher given the job growth. But we are in a global economy and we have to understand that our rates are now dramatically higher than the rest of the developed world, where there is an actual bond shortage given the horrendous rates of growth and the nasty slowdowns in so many regions.
This could be a savior moment for Yellen. She could say, "Let us not talk about higher rates. We need to sell our bonds in the open market to get rid of the Fed's vast hoard and allow that disposal to move rates up naturally."
Instead, the agenda is incredibly narrow-minded. I waffle between being angry for the Fed and just wanting to shake the members into a reality check of what's going on in the real economy.
I am mindful that Ben Bernanke, who did so much good, singled me out in his autobiography, The Courage to Act, as someone who was too critical of the Fed in what amounted to a disrespectful way when I did my rant about how it had to take action and take action now before a lot of firms went belly-up and the situation grew dire. I was just trying to get through to them.
So now let me do it in a more statesmanlike way. We are at a difficult crossroads. The texts that Yellen read when she was younger -- the same as I did -- point to a need to raise rates no matter what. You have to do it when employment is this low.
But those texts were written before Amazon (AMZN) and Wal-Mart (WMT) laid waste to higher-paying retail jobs, and digitization and offshoring became the way of the universe. They were written before NAFTA, which allows a Union Pacific (UNP) train to take goods up north from where they are being made with $5-an-hour labor, putting a permanent ceiling on our wages. They were written before the shared economy made it so people have to scrape by on multiple shifts. Lastly, the minimum-wage laws are what is moving up wages, not tight labor, and that's because the employees are so in surfeit, there is such a glut, that so many millions of people would work for less than minimum wage if they had to. (Amazon is part of TheStreet's Growth Seeker portfolio.)
It's not like the unions are winning big victories or anything. However, if Yellen stays on message, we have no choice but to hope that the loss of oil jobs bleeds into the numbers and that somehow the aerospace, housing and auto cycles really do top out. We aren't going to get anywhere with her noticing where the credit default swaps are for European banks or how the bubble bursting in oil will cause tremendous credit contraction. These things -- job increases and a radical decline in credit -- aren't supposed to be happening at once. They are, though, and that gives Yellen a chance to say, "Why not shoot for 3% unemployment and be the world's beacon? Let's shelve rate discussions for now."
No, this time around it's not that the Fed knows nothing. It just knows too much about the way things used to be and not enough about the way things are.