Nothing much will change in 2020 for Neel Kashkari of the Minneapolis Federal Reserve Bank when he once again votes on the Federal Reserve’s powerful policy committee. He will sit in the same assigned chair, making his policy arguments as before. Only the last few minutes will be different.
Voting members draw more attention, though, particularly if they vote against the consensus. If Kashkari does that, he will get blasted on Twitter, almost certainly by the same folks who have been sniping at him for years.
Kashkari thinks he attracts critics mostly because he’s both active and open to mixing it up a little himself on Twitter. He has a point, as he might be the only good candidate to follow among the Fed universe.
Fed Chairman Jay Powell says nothing on Twitter. The Fed’s institutional Twitter account makes the Bank of England’s look interesting.
Twitter caps posts at just 280 characters, although you can argue on it (with anyone who cares following) all day if you want. It doesn’t seem like a great tool for coolheaded monetary policy discussion, yet Kashkari’s been on Twitter since before he took over as president of our regional Federal Reserve Bank four years ago.
“It’s a way of enhancing transparency, engaging with people and showing them that we have nothing to hide,” Kashkari said on a recent Friday afternoon. “Why do we livestream all of our town halls as I go around, and have them open to everybody? It’s another way to engage with the public.”
He also has conducted open Q-and-A sessions on Twitter. Those are times he will almost certainly hear from his critics.
It’s risky to generalize about any group of people, but Kashkari’s critics seem to be well represented by gold bugs, Bitcoiners, hard money die-hards, Austrian school economic enthusiasts and the like. They might not have the same views, but it is possible to tease out one general complaint: that the Federal Reserve has pursued a ruinous policy of easy money. That policy, they say, has distorted the capital markets, puffed up asset prices and set the stage for an inevitable economic tragedy. Kashkari either knows this and doesn’t care or he doesn’t realize it. Hard to say which is worse.
When Kashkari in November tweeted about wanting to hear it explained how higher interest rates can possibly help low-income families, this response seemed to be a thoughtful and measured form of what’s often aimed at him: “Financial economics is very clear that low interest rates aren’t always beneficial,” wrote Twitter user John L. Harris. “If you have to explain why to a member of the Fed, it’s absurd to have this person serving in any capacity involving monetary policy.”
Financial bloggers at a site called Zero Hedge have been a persistent thorn in his side. Zero Hedge is mostly written under pseudonyms, but his critics generally seem like real people. “If I am at the airport waiting for a flight, or they just happen to catch me in the right mood, I might go back and forth with one of them,” Kashkari said. Kashkari knows he’s unlikely to persuade people who have gold buried in the backyard, but he hopes others find his comments valuable. He tries to remain calm and constructive and even show a sense of humor. Going back and forth also helps him refine his own arguments.
For example, there’s persistent criticism that the Fed’s monetary policy has fueled a long bull market in stocks, making the problem of American wealth inequality even worse. Kashkari has advocated low rates to boost job growth and knows the data as well as anyone, that the vast bulk of stock market wealth is owned by the richest 10% of Americans.
Kashkari has decided even a house isn’t the most valuable asset for lower-income families. It’s a job. On a spreadsheet, the value today of future paychecks can be easily calculated, an asset value worth building.
While not exactly conventionally Fed in his communications style, he’s not attracting flak because his views are out of the mainstream. He’s also been so consistent that it’s becoming boring.
The long economic expansion, now in its 11th year, has turned into kind of a bore, too. The streak of jobs growth stands at 110 straight months. This growth produces a line on a chart so straight that it has become one of the most fascinating things to watch in the economy.
As the unemployment rate steadily drifted down from its 2009 peak, it didn’t take long for Fed officials to start wondering if the economy was approaching full employment, meaning more jobs would ignite inflation. But the job-growth streak just kept going, through the end of the Obama years and into the Trump administration. The unemployment rate has drifted down to about 3.5%.
Yet University of Minnesota economist Aaron Sojourner, who comments regularly on the labor market, noted after the latest jobs report that there are “still millions of Americans needing work.”
About 4.3 million are part-timers who would like more hours. More than 1 million people are considered long-term unemployed. Wage growth also has been weaker lately than it was 10 or 11 months ago.
This is the kind of data that shape Kashkari’s views. If people who weren’t even in the workforce a few months ago are now getting jobs — and wages haven’t sharply increased — how can we conclude there’s no unused capacity in our labor market?
Kashkari has fielded some questions so often that he started answering one almost before I had finished asking: the contention that by keeping interest rates low during a long economic expansion, the Fed has left itself no room to do much if the economy goes south. What sense does it make to raise interest rates, he asked, just so there’s an opportunity to cut them later? “Or maybe I should punch myself in the face,” he said, “so I can stop punching myself in the face and then feel better.”
He said one of the things that won’t change as he starts voting on the Fed’s policy committee again is his use of Twitter. His critics should be happy about that.
Even his harmless jokes on Twitter can draw a response, as he proved with one he described as his all-time favorite tweet.
This one takes a little explanation, as an odd quirk in the culture of finance has turned St. Valentine’s Day into a holiday for our central bank, too. This past Feb. 14, Kashkari posted a tweet that months later still made him smile: “Roses are red … Blah blah blah blah ... Blah blah blah blah … There’s still slack in the labor market.”
Inspired by a “Saturday Night Live” sketch Kashkari remembered from his youth, this tweet drew 558 “likes,” more than 100 retweets and quite a few responses, including this one from a Twitter user called Alice in Finance.
“Roses are red, Violets are blue, President of Minneapolis Fed, Does not have a clue.”