Fed minutes, ECB minutes ahead of the Jackson Hole

The calendar is light this week until Thursday. A fair amount of attention will go to the Fed minutes on Wednesday and the ECB minutes on Thursday ahead of the Jackson Hole shindig that starts Friday, with Fed chief Powell delivering the keynote speech. The central topic of the symposium is “changing market structure and implications for monetary policy,” whatever that means. Bloomberg suggests it means the dominance of tech companies in the stock indices, aka FAANG, vs. railroads, utilities and hard, tangible products, leading to the gig economy rather than old-fashioned factory jobs. Maybe this is the reason wages are not keeping up with overall economic growth. Gary Becker would almost certainty disagree. He is the one who devised the concept of human capital and got a Nobel for his troubles. In any case, the central bankers are probably talking about interest rates and bond markets when they name “market structure” and wo we may be going to get a treatise on how to reduce central bank balance sheets without spooking the horses into running away.

Speeches will have already been prepared long in advance but observers note that the topics of most interest will the effect of trade wars. Some analyst wonder if perhaps the too-strong dollar and currency wars might slip in there, too. We suspect the Jackson Hole central bankers and finance ministry officials will avoid talk of any kind of war, trade or currency, like the plague. Not because they are cowards, but rather because “war” is beneath them, has too much political content, and doesn’t contribute anything edifying.

It may be the third week of August and therefore the slowest week of the year except for the week between Christmas and New Year, but that doesn’t mean pots are not bubbling over on the back burner and ready to boil over any minute. Risk off is coming back.