Open Letter: The Fed Needs to Provide the Public Some Perspective

To: Federal Reserve Chairman Jerome Powell

Dear Chairman Powell,

The Fed is in an unenviable position today having to contend with problematic inflation, the economy’s restoration, employment disruptions, and the rather unpredictable interactions of the COVID pandemic with all aspects of life and economics. The uniqueness of the situation cannot be easy if one considers there is no reason that the normal understanding, theories and tools which economists would apply to helping sustain and guide the nation’s economy along a viable path can have the intended impacts expected. Add to this situation the normal or even heightened level of different opinions and perspectives that you share with the other Board members, the increased opinions and views of other economists, the always well-informed politicians, and the astute coverage which the news media provides on economic matters; and given those unusual conditions what could possibly go astray. Though the Fed’s tasks are neither easy nor often appreciated or understood, those efforts may be more important now than in recent memory.

The Fed’s decision to advance its “tapering” and accelerate interest-rate increases is just a reflection of the rapid dynamics that the US’s COVID-Consumer Economy is producing.

The unusual and extraordinary circumstances are changing daily and may call out for something even more unusual than the events causing them. The US “Misery Index” is high even though most economic indicators are remarkably in good territory. Inflation of course being the pernicious outsider, and chief factor threatening the recovery and the economy.

Given the economic risks to the current situation, the nation and the public need more than a calm and measured hand(s) on the economic tiller. The country needs someone to provide a more informative context in which the public better comprehends and recognize how our behaviors and reactions in these conditions may not act in our own best interests. America desperately needs a little grounding in economics. If the public does not connect the reality of the economic situation to their daily lives, their individual actions and choices are not just likely to cause the nation to suffer worsening impacts simply because we do not recognize how they are contributing to it by “being part of the problem”.

In a Consumer heavy/dominated economy, the aggregate behaviors of the consumers can easily overpower any other force(s) attempting to move the economy. Archimedes’ apocryphal quote: “Give me a place to stand and I will move the world” doesn’t just provide a lesson on mechanics or some salient life-lesson about the influence you can have by being in the right place and acting to some purpose. His “moving of the world” perspective can also inform our understanding about what moves the world; and how it is moved intentionally or moved without recognizing our own contribution to the ‘push’ on the lever. Ending ‘tapering’, raising rates, and other moves by the Fed are prudent steps but those steps may not exert enough leverage in time to counter the effects of the “800-pound” Consumer pushing on the economy and Inflation. Perhaps the Fed should consider using a tool that it has ready access to but may not recognize or feel is theirs to use.

The Fed should talk to the public about the Economy. I don’t mean talk to the financial industry, the banks, the Market, our political leaders, or the media. The Fed already does that. I mean talk to the public. Talk to the people who are the economy. The Fed needs to “inform” the public about how people ‘are’ the economy; and about how if you don’t understand the rules you are playing by you suffer the consequences, whether you like them or not. Perhaps you / the Fed think this is not your place or job; but you may be missing the most powerful lever and place from which you can ‘move’ the economy in these aberrant times.

This ‘informing’ goal cannot be done by ‘teaching’ economics 101; rather, the economic conditions operating in the public’s daily lives needs to be used to connect economic “cause” to economic “effect’. The reasons the Fed needs to do this are many. You want to increase confidence in the US’s economy, increase public belief in the Fed’s efforts to counter the conditions threatening them and the economy, and instill confidence in their own ability to act to help themselves. There are probably other reasons, but the above should be sufficient to justify the Fed acting to serve and inform the public’s need to know. If they act out of ignorance or fear, we already know the likely outcome. The current obsession, concern and focus on Inflation alone is indicative of where the public would benefit from understanding how their actions are moving multiple levers, each of which move inflation in the wrong direction.

There’s another reason the Fed needs to improve the nation’s understanding of how the economy depends upon the public understanding the economy in their own terms. Just knowing that the economy acts on multiple timelines simultaneously would be helpful. Does the public understand the Fed can only act in advance of a concern that is projected or in reaction to an unforeseen crisis after it has occurred? These disconnects between the forces that constantly drive the economy based on its underlying processes and the delay required for Fed interventions to work helps demonstrate why acting now is a corrective and not an immediate solution. Enabling the public to participate in moving the economic levers within their reach can help adjust the processes effecting their concerns. This knowledge is key to building the public trust and reducing their fears.

The value to the Fed of engaging in this effort would be it aligns with their efforts for influencing the future of the economy. The Fed is more likely to succeed in achieving its objectives if the public is engaged in accomplishing those goals. Just as importantly, if the public has a better context to understand their own choices, hopefully they won’t be acting in ways that obstruct the Fed’s efforts or actually worsen inflationary factors.

Just like timing is critical to confronting economic crises, your decision to engage with the public more fully will affect how effectively the Fed’s actions can be in reacting to crises. The Fed can choose to just depend upon the tools it currently has at its disposal, or you can choose to enhance the toolkit by empowering and engaging more forces that can brought to bear to rein in Inflation or whatever economic crisis needs to be dealt with.

If this perspective only provides you something to think about for a minute or two, I wish the Fed success in its endeavors.

No! More Math? Yes, But It's Simple Addition - Rogue Thinking #3

 

If you recall from Rogue Thinking #2, there is presently an enormous difference between COVID infections, hospitalizations, and deaths between vaccinated versus unvaccinated individuals. The difference does not favor the unvaccinated. But besides being a generally expectable outcome, there is more to be learned from this difference.

For one thing, the idea of ‘herd-immunity’ is shown to be more complicated than the simple notion of how a disease spread through a population until that population is either rendered self-protected, decimated, or extinct. COVID isn’t virulent enough to pose an extinction outcome as no totally lethal variant has emerged though that is always a risk. But even should one emerge, it would be highly unlikely to annihilate humanity but rather the current level of modern civilization. In essence, herd-immunity would be achieved by reducing our large civilization herds to small isolated pocket herds.

The COVID variants present today are following the more classic notion of how a disease spread through a population and reduces the herds numbers by some percentage. The way the disease spreads and the ease with which it is transmitted determines how quickly it reaches its herd-immunity state. The current phenomenon where COVID is producing the high differential outcomes between the vaccinated and unvaccinated might seem to be both obvious and puzzling at the same time.

On the obvious side is the basic expectation that vaccinated people either do not get ill when exposed due to their acquired immunity or their illness exhibits much lower severity of symptoms if any at all. Whereas the unvaccinated will results in outcomes expected from infections without any pre-infection acquired immunity. If you have a population evenly divided between vaccinated and unvaccinated that difference become apparent immediately. If you start with a totally unvaccinated population, you get the pandemic results that we saw with COVID. Once vaccines arrived, this created a new grouping within the population and the differentiated results begam emerging. From this ‘obvious’ perspective there is nothing unusual going on here. Except, there is more going on.

In your typical ‘herd’ there is just that transmission process operating according to laws of physics, biological activities, and laws of probability. The disease spreads, produces its ‘natural selection’ outcomes, and eventually creates the ‘herd-immunity’ end-state (of whatever type the particular disease creates). But that is not strictly true for COVID, or more precisely, the processes which are controlling the spread and results for the human herd.

In the US, COVID outcomes have diverged in concert with vaccinated versus unvaccinated as noted above. However, what are the “cause and effect” relationships which account for why someone is vaccinated or unvaccinated? If some people could not get access to vaccinations, then the question would be: “Why not?” But the evidence indicates the vast majority of unvaccinated people have self-selected to not be vaccinated. Is that self-selection just a random decision even distributed through the population? No. The data/evidence tells us that one of the most prevalent factors associated with this self-selection is political alignment. Given that the COVID virus is non-partisan, the connection of spread and outcomes to politics warrants some consideration regarding why.

It could just be that if you are unvaccinated that’s it. If vaccines are 95% effective, then viola! That would say that 1 out of 20 vaccinated people are not adequately protected, while all of the unvaccinated remain exposed. But that is just part of the obvious understanding of the situation and the simple math. Why are the bulk of the unvaccinated aligned with a conservative political party? This doesn’t mean that no conservatives are vaccinated or that no liberals are unvaccinated. It just means that there is numeric imbalance between those two orientations.  To explain the different outcomes, Occam’s razor would conclude that that is the simplest explanation. Your political alignment influences your self-selection choice, and that choice produces the predictable outcome based upon your party.

But there is much more that can be learned and that can be contributing to the excessive hospitalizations and deaths among conservative members of the population. For the simple math to explain it all, the disease must be spreading equally throughout the population which requires physical conditions to be the case. For example, the population of conservatives and liberals would uniformly distributed, the prevalence of the virus has to be uniformly present throughout the population, or method(s) of transmission has to be uniformly operating across the population. None of these conditions are or have been true. Consider how population density can be influential in where and how the virus spreads. Early in the disease it was most prevalent in high population density areas. What might influence key elements of transmission within the conservative population?

There are some very likely candidates. While no one candidate needs to be the ‘one’ that is causal, the aggregate affect may account for a significant part of the process producing the disparate results. Consider some of the following population attributes and factors:

·         Parents’ political party/alignment

·         Place of birth or where you were raised

·         Religious affiliation

·         Political orientation of friends, co-workers, neighborhood, community

·         Education: level, quality, region (urban, suburban, rural), economic status, major, …

·         Career / Employment

·         Economic status

·         Other factors which have some influence over your political alignment

Why do these attributes and factors matter in what political party you choose to align yourself with? Well, because each of them is part of the environment in which you grew into who you are. You learned from all the things that made up your environment and that presented you with the ‘facts’ and ‘knowledge’ about the world. If selecting your own political/ideological view were just something that you did and was not connected to these factors, math would say the data we see would be highly improbable. Children are much more likely to be/choose the same party as their parents. Your friends, neighbors, and community are more likely to be of your political alignment. If your religion is aligned to a political party, you are also likely to be. Much of this is due to your exposure to the ideas, values, rules, and behaviors that you experience as you grow from childhood to adulthood. To be a member of a family, a group, a community, or a region and be accepted by the other members puts a heavy burden on following the precepts of those entities. This doesn’t mean that there are no individual differences or rogue members but that there is a tendency toward a common perspective (a convergence toward the average). Being different is acceptable, as long as it is not too different and doesn’t violate an absolute behavior/belief of the ‘group’.

Conservatives (and liberals) are commonly found to live in communities/regions which are mostly concentrations of conservatives (or liberals). To paraphrase the “You are what you eat” concept, “You are where you grew up”. It is very human to be ‘tribal’.

What does all this have to do with COVID and the 20 to 1 disparity between the unvaccinated and the vaccinated? Well, if your ‘tribe’ decides that being vaccinated goes against the tribal values and is a betrayal of your commitment to the tribe; well, then your desire to be a member of the tribe is going to influence your decision. Conforming to the tribe’s position may even provide a strengthening of the bonds and beliefs in the tribe. It’s just human nature.

If conservatives live in communities that are composed of mostly or more conservatives, if conservatives interact with and engage more often with others who are conservative, if conservatives are more likely to choose to be unvaccinated because not getting vaccinated is perceived as following a conservative value then the spread of the virus among conservatives is increased. The consequences of those infections being more severe for unvaccinated individuals will contribute to the known outcomes. The 20 to 1 disparity in hospitalizations and deaths makes perfect mathematical sense. The process of herd-immunity operates locally through the transmission of the virus from person to person. The concentration of unvaccinated individuals due to factors like political alignment just plays into this process. It’s just simple math. It’s the math of epidemics/pandemics. It’s the math of herd-immunity. It’s the math of Darwinian evolution.

It has now also become the math of politics.

What If We Did a Little Math? - Rogue Thinking #1

 Don’t worry, this really isn’t about math that you have to do, so much as math you ought to have already been thinking about. There is no heavy lifting here, but you may have to be able to follow the reasoning.

COVID is on the up-tick again in the US; well, lots of nations. But not every up-tick or ‘surge’ is like the others. Let’s just take a US-centric view. The first surge (Wave) was COVID spreading in a generally pristine population of available hosts but it was also much more geographically limited; it wasn’t everyone yet. It’s growth just reflects a simple power function, it increases as it increases. If this isn’t that familiar to you, perhaps you remember a story about someone, the “hero”, being asking what reward they wanted for accomplishing some task for an emperor/king/ruler. The savvy reward recipient simply asked to receive an item [for example: a grain of rice, a penny, a small plot of land, …] that doubles in number each successive year on the anniversary of their accomplishment. It’s a highly under-valued reward if the hero lives to long life. [You could have the reward double every month, week, or some set number of days instead of yearly if you are not a patience ‘hero’.]

The second Wave came along and still had access to a wide-open population where more people hadn’t been infected than had been. Plus, the number of points from which a transmission can originate was vastly greater as a result of the first Wave. It had carriers in every state. So, even though there were people who had been exposed there were many more who were able to transmit it to all the very many  others who had not been exposed. It’s just a numbers problem. Remember that “hero” story? Consider the implications if there are a lot more heroes and each hero creates more heroes; or in this case the heroes are the viruses and the reward is a punishment and it doubles say every week.

During the second Wave steps were taken to contain COVID and progress was made by states invoking policies for reducing spread by using social-distancing, masks, lock-downs, and the disruption of the easy ways to transmit the virus. It worked, the spread declined. Then summer arrived and we re-opened (or many states did) and celebrated. And of course, another Wave, the third, was upon us as the school year began. I think this Wave ought to have taught us a decent lesson about “cause and effect” but that’s a physics lesson and we are focused on just simple math here right now. The third Wave was the ‘mother of all’ surges. Clearly the opportunities for transmission were excellent. The most likely reason is by this time COVID was everywhere and still most people had not been infected. By this time, COVID and policies regarding it had become political issue. There’s no rational reason for this but then what has reason to do with politics. Two important things happened. We had an election and vaccines became available

By February the terrible third Wave was rapidly abating, vaccinations were increasing, and it looked like the nation was making excellent progress. The effort to vaccinate the population “surged” (I couldn’t help myself) but began to run out of steam. It seems there were a lot of people who didn’t want to get vaccinated. Remember that ‘political’ thing! Still, the incidents of infection continued to decline, but a new COVID variant (Delta) showed up on the scene. By July the fourth Wave had been seeded and would grow; and of course summer was underway and people wanted to get back to ‘normal’. I am not sure that people knew what 'normal’ they were going to be getting back to but there was still a large number of people remaining available to be infected; and the Delta variant was more transmissible.

This is where we need to do that ‘little’ math I warned you about. Something interesting started to happen during the fourth Wave or just became much more salient with this Wave. As the vaccinated portion of the population increased the availability of hosts shifted toward the remaining unvaccinated. This is not to say that the vaccinated population didn’t have some individuals who were still going to be infected. We are talking about a large population where the COVID immunity efficacy spectrum will still have some hosts that are exposed to the virus exhibit symptoms and get sick. Just as the unvaccinated population has its own immunity efficacy spectrum. What the COVID new infections data was beginning to show was the unvaccinated were 90% of those infected. The unvaccinated are also more likely to be hospitalized (greater than 95%), and to be the majority of deaths from COVID (greater than 92%).

This is all that has already happened. The math to understand that is simple. Look at the relevant numbers. What is much more important is what would some simple math tell us will happen?

If 71% of the population is vaccinated, then 29% isn’t. For a population of 330M people that 234M vaccinated and 96M unvaccinated. Now more and more people are getting vaccinated, I suspect because slowly the math is sinking in. But there is still a really big part of the herd that is operating under different math than the rest of the herd.

With 110K (average) new cases a day, this is 110,000 cased divided by US population 330,000,000; or 33 people per 100K citizens in a population. But If 90% are due to unvaccinated people than that is 99,000 from the 96M people who have freely chosen to remain unvaccinated. And thus only 11,000 people from the 234M who are vaccinated. Using those numbers: 99,000/96M is 103 people per 100K unvaccinated citizens; and 11,000/234M is 5 people per 100K vaccinated citizens. That’s a 20-fold difference. If all else were to stay the same, then 20 times more people die from just choosing to not be vaccinated. This should have some implications for the herd.

Remember that ‘political’ thing? If the choice to be vaccinated or unvaccinated is determined or influenced by that ‘political’ factor, then over time for every 1 person in the political group who vaccinates dies from COVID there are 20 people in the other political group who die from COVID. I am not sure, but shouldn’t this be a problem for one of our political parties? The amount of a problem it could be for them will depend upon how long the pattern plays out.

This could be the most extensive Darwin Award worthy of being awarded.

What If We Did a Little More Math? - Rogue Thinking #2

 

If you don’t remember or haven’t seen the simple math that was done for the Rogue Thinking #1 article, then hopefully you will be able to accept its basic results. Those results are:

·         COVID infections are running at 33 new cases daily per 100K people as of the first week in December 2021.

·         Between the 234M vaccinated people and the 99M unvaccinated people, a little math will show that the Vaccinated sub-population’s new case rate is 5 people per 100K and for the Unvaccinated sub-population their new case rate equals 103 people per 100K. That is a 20-fold increase.

·         This disparity between the two groups carries forward to hospitalization and death rates (or even increases).

What those numbers tell us does not have to be limited to just how COVID progresses within those two population groupings. With a little more math there are other things that we can learn or be able to forecast.

You might also remember there was a “political” dimension to these results. Whether the connection between political alignment and/or ideology and the decision to be vaccinated or not is an interesting aspect of the results, we can agree that it is what it is. But we can look at what is and use a little math to see where we are going. The relevant view is given these correlated positions: Vaccinated & low new case rate versus Unvaccinated & high new case rate, provides some useful future results that ought to be ‘informing’ us or others about strategies and actions that are being taken (or ought to be taken).

For example, there are the mid-term elections in just under a year. The vaccine mandate issue is already playing out between the political parties. So, what would a little math tell us?

Let us assume that 1/3 of the country is dedicated to one side, 1/3 is dedicated to the other, and 1/3 is not dedicated to either political side. To simplify things lets’ split this last 1/3 into equal parts that are attracted equally to one of the other two groups. Thus, half the population is in each political group. Taking the new case rates would say that over some period of time the two groups cannot stay equal. One group benefits at the expense of the other. Now for the math.

If the new COVID cases run at the current 33 people infected per 100K across the population and this continues for 1, 2 or 3 months. Then we would see 3.3M new case in 1 month, 6.6M new cases in 2 months, and 9.9M new cases over 3 months. Those numbers don’t change anything unless getting infected caused individuals to change their political alignment. We can assume that it does not. So, no impact on the political front.

However, we can’t stop (or should not stop) here. For all those cases there are also deaths (and hospitalizations). Deaths could have an impact in the political sense. For one thing, everyone who dies before the mid-term elections will not be vote for their preferred political party. [I am going to forgo and ignore the inane assertion that one party will have the dead voters vote anyway. This seems reasonable because we have a lot of really stupid people who will be trying their best to find them, and experts who will easily be able to identify them if a state keeps its voting process even moderate effective.] What we need here is a death rate to use. Generally, 1 person per 100 infected dies within the US based on recent data. That means that we can forecast 1% of those monthly projections will die; or 33K in 1 month, 66K in 2 months, or 99K in 3 months. As tragic as this would be, it isn’t equal between the two groups.

Remember that 20 to 1 disparity, this is where it has some importance to our political entities. For one party 31K voters will die in 1 month and only 2K for the other party. Comparably, 62K voters versus 4K for 2 months and 93K voters versus 6K for 3 months. Those voter differences might be important to which party’s candidate wins in some elections. It will also have the potential to carry over into the next presidential election.

It’s not hard math to do. It is even rather obvious that you should not have to do the math to know that the original disparity of 20 to 1 would have implications to our political conditions on the ground.

Now someone might argue that while these loses are regrettable, they will be spread across the entire nation. Well, you ought to be able to do a little simple math and see if that’s true. I am thinking there is a Rogue Thinking #3 coming.

By the way, do they award Darwin Awards to politicians?