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Kevin Donovan
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As a supervisory analyst at several bulge-bracket research shops, I watched the hubris of Wall Street forecasts from a front-row seat. In a triumph of hope over experience, this has not stopped me.
My blog:
The Donovan Report
  • Why The Fed's Non-Taper Is Depressing 0 comments
    Sep 24, 2013 7:30 PM

    By Kevin Donovan

    Forgive our crowing, but occasions to indulge are so few and far between that the temptation is irresistible. The Fed's decision this month to keep its quantitative easing pedal to the metal came as a surprise to most everyone but us (see our Aug. 2 post, "Taper Tigers…" at

    The reasons for the Fed's reluctance to quit printing money have been printed almost daily in economic statistics from job creation to personal consumption and boil down to this: steady erosion that threatens to turn into a landslide as sequestration bites harder and the suicidal impulses in Washington gain traction.

    But we think an even more depressing development is persuading the majority of policymakers to believe it is the last, best hope for keeping the American glue from melting. We're talking about the uncomfortable reality that nobody but Jamie Dimon and A-Rod are getting ahead. Wages remain stagnant and nearly all the fruits of the recovery that began in 2009 have gone to those whose plates are already full.

    The most disheartening evidence of this comes from the recent walk-outs by fast-food workers and Wal-Mart "associates" seeking higher wages. This is depressing not because they will almost surely fail but because the mini-strikes speak to the growing realization that opportunity will likely not be knocking down the road.

    Frying hamburgers and stocking supermarket shelves were once transitional jobs filled by students looking for gas money, prom dresses or tuition. They were way stations on the road to better things. Indeed, that's the way the Wall Street Journal opinion spinners and the like-minded still view them when arguing against raising the minimum wage.

    But large numbers of employees obviously see themselves going nowhere. If this is their last stop along the food chain, their only way up is more do-re-mi for singing for their suppers at the Losers Lounge. Add to that the rotten tomatoes Tea Partiers are throwing at them in their uber-churlish desire to derail affordable health care for low-wage families and you have one nasty commonweal.

    Which brings us to the Fed. More than anything, Ben Bernanke and his team must view themselves as social workers. To remove the only brick keeping the Losers Lounge from cratering would be dereliction. Wall Street's prognosticators didn't see it even though the data the Fed said it was looking at should have made it clear.

    Now there is talk that the Fed will taper its bond buying program next month. Could be, but if inflation remains quiescent we wonder why it would take the chance.

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