Happy Powelleen
Capping off a resurgent year for the genre, four of the top 10 box office earners this weekend were horror films.
The biggest hit, Smile, was recently the best-grossing movie three weekends in a row, before being supplanted by Halloween Ends.
And it's not just the time of year: Despite being beaten out by a superhero flick and a rom-com this weekend (Black Adam and Ticket to Paradise), horror films have won the US box office for a total of nine weeks so far in 2022.
A Washington Post article on the renewed popularity of scary movies cites the horror writer Meg Hafdahl's reasoning that "horror has been 'the perfect genre' for filmgoers who are returning after missing the communal experience earlier in the pandemic."
Post-pandemic, we like our movies scary again.
And we like our monetary policy scary again, too.
Monetary entertainment
FOMC days are entertainment for monetary nerds — of which there are more and more.
This is not new, however: CNBC kick-started the phenomenon in the 1990s with its breathless coverage of Alan Greenspan's press conferences.
(In case you weren't around at the time, CNBC was the finance Twitter of the 1990s.)
The stock market became entertainment, and the Fed became the over-simplified explanation for everything that happened to it.
Greenspan was happy to lean into this mainstreaming of the Fed, but he wanted to keep people guessing, which he did with deliberately inscrutable statements on policy.
Greenspan spoke in riddles because he knew monetary policy itself was a riddle.
"The Maestro" was keenly aware that fiddling with Fed funds was mostly smoke and mirrors, so he embraced his role as the Wizard of Oz, the mysterious man behind the curtain.
Chair Powell, in contrast, is not interested in riddles.
At the FOMC press conference this Thursday, his answers to questions from the media will be earnest, straightforward and easy to understand.
Asked about the relationship between interest rates and inflation, however, I'm sure he would respond that the effects of monetary policy on the economy remain as long, lagging and inscrutable as ever.
The effect of monetary policy on markets, though, is immediate and easily observed.
For this reason, the entertainment value of Fed funds has perhaps become the most useful tool in the Fed's limited toolbox: Moving financial markets is the primary mechanism by which monetary policy has its effects.
And because the economy becomes ever-more financialized, moving markets gets easier and easier.
This makes Powell's messaging much more effective than it would have been in Paul Volcker's day.
Powell's hikes are far smaller than Volcker's in absolute terms, but far more immediately impactful.
And — as more people pay attention to the Fed — Powell's goals get easier and easier to achieve.
Crypto has played a role, here: Thanks to Bitcoin, millions more people now have an opinion on monetary policy.
And because bitcoin seems to go down every time Powell speaks, millions more are listening to him.
Scary stuff
The Fed is a lock for 75 bips this Thursday, with the only suspense in the hints Powell may drop for the next meeting.
Whether the Fed goes for 50 or 75 bips in December will be a function of how much they want to scare us.
There's nothing mechanical to this — there's no mechanism by which a rate hike of X affects a change in the money supply of Y.
It's all art, no science.
And right now the art is in scaring people.
Powell's intent is to scare investors into selling stocks and bonds, scare prospective home buyers into renting, and scare Congress into balancing the budget.
This will have a real impact on inflation: Lower stock, bond and house prices make us spend less, lowering the velocity of money.
Lower congressional spending lowers the quantity of money.
Less money being spent less quickly should mean lower inflation.
Easy.
Giving the people what they want
Just as Greenspan leaned into the demand for CNBC entertainment, perhaps Powell can lean into the current demand for the paranormal?
A recent YouGov poll found belief in the paranormal to be on the ascent, with over 50% of Americans now saying they believe in haunted places. And Otherworld, which ascribes paranormal explanations to inexplicable phenomena, is the surprise podcasting hit of the year.
I'm not one to believe in ghosts myself, especially not financial ones: In my experience, there's a banal, non-conspiratorial explanation for every inexplicable thing that ever happens in markets.
It's good to have faith, however.
The rising belief in ghosts seems to be inversely correlated to the declining faith in government institutions.
Perhaps the Fed, still generating believers in the power of its mysterious monetary policy, is the government institution that can bridge that gap?
Rob Salkowitz, the author of a book on the business of pop culture, told the Washington Post that "it's a reassuring aspect to a horror movie that it's going to be resolved, even if you're creeped out."
We want the Fed to reassure us that things will ultimately work out.
But we also want them to creep us out a little.
I expect Chair Powell will be happy to oblige on Thursday.
Happy Powelleen.
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