RWL #280

in your eyes, Fed Funds, young adult romantic relationships, and more!

Jun 17, 2022

Greetings from the LHH! My wife and I celebrated our 30th wedding anniversary this past week. It’s hard to believe - it feels like just the other day we started dating - back in 1988. But I guess that is actually a long time ago. In Listen this week I share my podcast interview with my colleague Tyler Jamison who studies romantic relationships of emerging adults. As I prepared for the interview, I couldn’t help but reflect on how different my romantic life has been compared to the average American. My wife and I married much earlier than average, even for Gen X (our generation). Our relationship has intertwined with our own personal and professional growth in a way that I think marrying later does not create. I know without her I would not have had the (modest) success in my personal and professional life that I have had. Tyler and I talk about a study in which some psychologists looked at the way couples spoke to each other to see if they could find signs to predict whether a relationship would last or not. The thing that predicted almost certain relationship doom was an attitude of contempt when one or both members of the couple spoke to each other. With my wife, I’ve always been blessed with just the opposite. Since we’re kids of the ‘80’s, the song we have always felt was “ours” was Peter Gabriel’s In Your Eyes.

I hope all of you have or have had as much luck as I have had in finding a life partner.

In other news, it looks likely we are going into or are already in a recession. This past week the Fed voted to raise the Federal Funds Rate by 0.75%, the largest single increase in decades, in order to fight inflation. Here is a good explanation of the Federal Funds Rate: https://www.investopedia.com/terms/f/federalfundsrate.asp , but in a sentence: the Fed Funds Rate is the rate at which banks lend (short-term) to each other. This rate has a fairly direct impact on short-term borrowing by consumers (look to see rates for car loans to go up, for example). Long-term borrowing, like mortgages, will have less of a direct effect. Businesses also borrow short-term for many expenses, so this rate will likely reduce business borrowing, which means less business investment in the near-term, which then means a slow-down in economic growth. A slow-down in economic growth usually leads to lay-offs and increases in unemployment. Two consecutive quarters (i.e., 6 months) of “negative growth” in Gross Domestic Product (meaning GDP decreases instead of increases) is referred to as a recession. Gross Domestic Product is a measure of all of the economic output happening inside the national borders of a country. Below is a graph of GDP since 1947:

(source: https://fred.stlouisfed.org/graph/?g=QH8M)

The thing I want you to focus on is the series of gray vertical bars on the graph. Those represent recessions. It’s normal for an economy to have periods of growth and periods of recession - this is referred to as the business cycle. You’ll notice that the frequency of recessions has diminished over the last 40 years or so. This period is referred to by economists as “the great moderation” - we have seen slower growth over this period, but it has also been less volatile (fewer booms and busts). The Fed has a dual mandate to keep inflation low and maintain full employment. Sometimes these mandates run counter to each other. Right now that is true. With high inflation, the Fed is intentionally raising interest rates to reduce inflation, which will likely work, at least to some degree. But the increase in rates will likely result in higher unemployment, as I mentioned above.

The main point I want to make is that recessions are normal, if less frequent, parts of the business cycle. They haven’t been as common as they once were, so it may feel like the world is coming apart. It is (coming apart), but it will most likely come back together again in relatively short order. As the meme says, Keep Calm and Carry On. This too shall pass.

So with that, willing good for all of you, I present you with the links!

Flourishing in the World

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