Momentary Observation: The Shaping of Financial Reality

1 February 2016

This past week saw the latest Federal Reserve meeting.  I went online shortly after to find out what they said, what their latest move would be to shore up our failing economic system. More than anything else, one sentence in the New York Times online article entitled “A January Pause, but Fed Affirms Plan for Gradual Rate Increases“, by Benyamin Applebaum,  struck me. The telling sentence reads:

“Public expectations about future inflation also are eroding, a problem because those expectations help to shape reality.”

If there was ever any question about how media input shapes people’s notions about the economy, and how those notions are counted on to actually create the outcome, this sentence should help dispel those doubts.

The full paragraph reads:

“Public expectations about future inflation also are eroding, a problem because those expectations help to shape reality. People who expect prices to rise more quickly may press for higher wages, which can lead to higher prices as businesses compensate for payroll increases. That pressure may now be flowing in the opposite direction. A regular consumer survey conducted by the Federal Reserve Bank of New York found expectations of inflation in three years’ time had declined to 2.8 percent from 3.3 percent over the last two years.”

See the full New York Times article here.

 

 

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