The end of the football season is always an interesting time for coaches. They receive their season-ending report cards and either get a pat on the back by the athletic director or general manager, or start looking for their next job. In general, there are two types of football coaches – the offensive-oriented and the defensive-oriented. I have noticed over the decades that offensive-minded coaches gets fired because they ignore the defense, and defensive-minded coaches get fired because they ignore the offense. Successful head coaches recognize their weaknesses and hire strong assistants to offset the head coach’s strengths in other areas.
Most presidential administrations rely on their team of economic advisors to help move the economy with as little volatility as possible. They lean on the Federal Reserve, lovingly referred to as the Fed, to control the money supply, regulate financial institutions, and function as the mover of payments such as direct deposit and consumer bills through the Automated Clearing House, commonly referred to as the ACH network. Both the economic gurus and the Fed analyze hundreds of data points to determine the best course of action.
However, this administration appears to be looking at only one financial indicator – the stock market. In their mind, if the stock market goes up, the economy is good. This is a fallacy which makes for potentially fatal decisions. Making economic policy relying only on the stock market is like driving a car without the side-view and rear-view mirrors and closing one eye.
This administration, as well as a former Senate Banking Committee Chair, feels the Fed is doing a poor job of managing interest rates because the stock market is currently in a slump. Sorry, that is not the Fed’s job. They control the amount of currency which can determine the level of one rate, the so-called Overnight or Fed Fund rate. Other rates, for instance the two-year and thirty-year rates, are determined by the buying and selling of U.S. Treasury securities by investors. Interest rates are also affected by other market forces such as inflation which is affected by White House policies such as trade tariffs.
It appears the U.S. is headed toward a mild recession by the end of this year or beginning of 2020. This recession will not have the devastating effects of the Great Recession of 2008 because the situation is very different. There will be increased unemployment and a lower stock market, which is also a function of demand and supply. Recessions are part of the normal economic cycle. Trying to change the economy to avoid recessions is like attempting to manually move the sun so we can get more sunlight. It just isn’t going to happen.
It is true that the economic conditions during an election year can buoy or sink an incumbent. But it is also true a strong bench of assistant coaches and advisors will keep the organization, or in this case a presidential administration, successful even through the rough years. The late Bill Walsh surrounded himself with the brightest young minds, many of whom became head coaches. His teams did not win the Super Bowl every year but had a lasting effect on professional football. We will get through future economic downturns if we use all of our resources to make informed decisions.