Last week marked the 25th anniversary of the release of Nirvana’s iconoclastic album, Nevermind, September 24th 1991. The album catapulted the band and the genre of music into the commercial mainstream, something that was perhaps too much for front man Kurt Cobain to handle.
I may be wrong, but I doubt Janet Yellen, Chair of the US Federal Reserve, would count herself among the many fans of the legendary grunge band. Still, you never know. Janet would have only been 45 when the album was released. Econometrics by day, grunging by night!
The anniversary likely went unnoticed at the US Federal Reserve last week, as Chair Yellen and her colleagues fretted over whether or not to raise interest rates. You can imagine them all sitting around a huge boardroom table, framed paintings of ex chairmen dawning the walls, market favourites like Ben Bernanke and Alan Greenspan, the inflation slayer Paul Volcker front and centre maybe, debating the pros and cons of a rate hike.
Now if you were to add a soundtrack to their predicament and the general edginess of the financial markets, you might think classical music would best fit the scene but I reckon Nirvana’s “Territorial Pissings” is perfect! If you are not familiar with it, have a listen.
The repeated yelling of these lines by Cobain sums up the Fed’s position:
“Gotta find a way, to find a way, when I’m there
Gotta find a way – a better way – I had better wait”
The Fed’s policymakers are not stupid, they know that holding rates at record low levels risks an even bigger market crash than the previous one. They know they need to find a better way, but they know no other way, their decision making shaped by frameworks in place for decades. What else to do, but wait! We are told the committee is ‘data dependent’ and more data is needed before raising rates from crisis levels.
Dan Loeb, billionaire hedge fund manager, founder of Third Point LLC, sums up well the reliance on monetary policy: “They used to call it the punch bowl. I say we’ve got to take the crack cocaine pipe away and start focusing on real fiscal policy and structural reforms.”
Crack, easy money, is a hell of a drug. Not many can shake the habit, it usually ends in tears.
There is still time Janet, the album is worth a listen.