Thi photo shows the pay phone at a Richmond, Virginia, Exxon gas station where two men in a white minivan were taken into custody 21 October, 2002, according to police. The two men were questioned in the sniper investigation and then were turned over to the Immigration and Naturalization Service, a police spokesman said. The minivan was positioned at the booth so that the driver could use the phone. AFP Photos/Stephen Jaffe (Photo by STEPHEN JAFFE / AFP) (Photo credit should read STEPHEN JAFFE/AFP via Getty Images)
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The cost of a call in a telephone booth long ago dropped to zero. Should we give Fed officials a pat on the back for their brilliant market interventions of the “monetary policy” variety on the way to this alleged “deflation”? It’s a clown question, obviously.
More realistically, a rapidly advancing and globalized division of labor among hands, machines, and minds led to the disappearance of telephone booths. This globalized transition from “can you spare a dime” or quarter had nothing to do with central banks, and the economists in their employ.
It’s just a reminder that in the real economy, all prices are always transitory. Better yet, a falling price implies a rising price elsewhere or the introduction to the market of even more expensive goods formerly unknown, unimaginable, or both.
Implied in telephone calls of the booth variety going to zero was the introduction of amazing technological advances that enriched their creators. As telephone and long distance essentially went to zero amid a proliferation of supercomputers in our pockets, wealth chasing finite luxuries like hotel suites, beachfront property, K-12 private school, and a Yale degree (in 1993, tuition there was $20,000…) skyrocketed, thus driving up those prices.
Please remember this as a Federal Reserve that generally rates no defense is still being blamed for the “worst inflation since the 1970s” back in the early 2020s. These critiques aren’t serious, and that’s not just because from 2020-2023 the U.S. dollar crushed foreign currencies while remaining largely flat against gold.
The critiques are, if possible, even less serious in consideration of all the arrows slung at the Fed for describing the high prices that followed lockdowns related to the coronavirus as “transitory.” The Fed was right. That all prices – high and low – are transitory is tautological.
In a global economy in which every product and service is a brilliant effect of remarkably sophisticated cooperation among hands, machines and minds the world over, it’s only natural that prices of everything will be in constant flux not just due to enhanced cooperation, but also changes in consumer habits, introduction of new products, the introduction of new labor to the global force (think China in the 1990s-present), and so much more. Translated, the decline of RIM/Blackberry devices from high-cost luxury to meme representing the past had nothing to do with the Fed.
Yet still, economists, pundits, and politicians continue to heap endless scorn on the Fed for not seeing into the future back in 2019 and 2020, only to not intervene in the marketplace to ensure prices didn’t rise. The flamboyant conceit and fatuity of the “too-late” Fed narrative is boundless, and completely misses the point. The Fed controls nothing as its fiddling with an artificial price (the Fed funds rate) and so-called “money supply” in a globalized world of interest rates and circulating dollars reminds us.
Next, how would the hapless interventions described above shrink prices that are an effect of incredibly sophisticated global cooperation? The experts never answer.
From there, and in recognition of the fact that lockdowns variously eviscerated the global cooperation that gave us low prices in the first place, how was the Fed supposed to recreate the global trading system through the market interventions described above? The experts never answer this either.
Back to reality, the Fed’s “transitory” answer was correct. Its error was in suggesting that what politicians so obnoxiously broke could be fixed so quickly. Sorry, but what took decades to create can’t be fixed in days, months, or years. Shame on the experts for pretending otherwise.
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