Wile E. Powell

There are endless choices of kids’ entertainment these days, so Atlas will opt for a more timeless cartoon to illustrate the point we’re trying to make: Wile E. Coyote and the Road Runner.  It’s all about the chase.  Unfortunately for Mr. Coyote, it happens to come with many missteps, often leading to a cascading outcome.

America’s economy is complex like the Southwest setting of the cartoon.  Wile E. Coyote is like the central bank, tinkering with the environment, hoping to steer the fast bird in a way which he sees as advantageous.  You know, like when Chair of the Federal Open Market Committee Jerome Powell and his team scheme to adjust inflation and employment.  Often the tools they implement are well known, yet other times they’re more experimental.  It just depends on the lay of the ever-changing economic landscape.

First, they’ll observe the conditions of output. Not unlike the coyote bird-watching from a distance with a pair of binoculars.  Like the Southwest, the economy is vast, making it difficult to observe all at once no matter how many PhD economists are on staff.  Sometimes things appear to emerge like a mirage.  Inflation might be offering one now.  This economic phenomenon was trending lower since reaching a recent cycle high in the summer of 2022, but some evidence that the trend has halted has materialized, seemingly out of nowhere.  Just this week we saw that the Consumer Price Index from the Bureau of Labor Statistics accelerated on both a monthly and year-over-year basis.

Next, the Fed must come up with a game plan, perhaps ordering a newfangled contraption from Acme Corporation.  Once the trap has been set, the canine must wait to see if it’s effective.  We all know they aren’t, so Wile E. must resort to a chase.  While we cannot claim the Fed’s contraptions aren’t effective, the central bank is often in pursuit, trying to tame something within our economy.  And this becomes the next cause of concern.  Like Mr. Coyote’s chase. Mr. Powell’s will encounter a sharp turn at some point, and if they don’t pivot soon enough, their policies could be overdone, leaving the economy out over a cliff, just waiting for gravity to kick in.  Stay tuned.