Economically speaking, it’s the role of the Federal Reserve (Fed) to keep us out of harm’s way – from bear markets or recessions. Remember, in the story, Goldilocks escapes harm from the bears by fleeing out the door and back into the woods. When it comes to wage growth, we want that just right place of around 3%, not too hot 6% or too cold 0%.Īnd as for housing starts, if we need one million to stay even, then the Goldilocks rate is at about 1.2 million. In this case, between 4% to 5% is perfect. And who doesn’t want that?Īs examples, to have 0% unemployment would be too hot, while a 7% or 8% rate would be too cold. When we’re in the Goldilocks zone, it means that we have the ability to keep plowing new economic ground while maintaining stability for a more extended period of time. We want economic stability, so we want numbers that aren’t too hot (causing inflation) or too cold (causing recession). In a Goldilocks economy, we want things to be “just right.” Hot data isn’t always good news, because often it isn’t sustainable. When the subject is the economy, the middle is, indeed, a very good thing. We should swing towards the mid-point of the pendulum, no matter what the subject. Extremes on either end of the spectrum aren’t necessarily a good thing. If something is too expensive or too cheap, get the thing that’s just right. So, aside from the fact that you should run away from bears, the story teaches us that it’s best to find a happy option in the middle. Eventually, the three bears that live in the house come home and find a sleeping Goldilocks, but she wakes and escapes back into the forest. Feeling sleepy after her meal, she finds three beds – one too hard, one too soft, and one just right, so she settles down and goes to sleep. One is too hot, one is too cold, and one is just right. When no one answers, she meanders in and finds three bowls, and she samples each in turn. Remember, Goldilocks is wandering the forest when she stumbles upon a house, and the smell of porridge wafting from inside makes her decide to knock on the door. The 19th-century British fairy tale Goldilocks and The Three Bears is a perfect (and thus often used) analogy for how we’d like the economy to run – and for how it’s operating right now. That’s too bad because many classic fairy tales contain timeless truths about love, loyalty, courage and, in one instance, economics. “Telling fairy tales” is a term often used these days to sugarcoat an accusation of lying.
0 kommentar(er)
