# 39 The Waning of Desire, The Monetary Screw Turns
Fading embers AI image by Craiyon
The Waning of Desire
All of Friday, Premila worked with painters and polishers to get our son’s bedroom ready for his brief visit home from Chicago. The renovation was a long time coming. Plans to open his room up to the northern light and the trees in our front yard had gone into hibernation with the pandemic.
“The bay window looks lovely - just as I imagined”, Premila said, “but I’m underwhelmed by the closets - the finish and the door handles are so, ermm, ordinary; not like the handles we had earlier, with a unique character.”
It’s true. I had built this apartment almost 40 years ago, and despite the limited choices of the time, I extracted precisely the finishes that I wanted, on door handles and knobs, on the wood strips that made up the parquet floor, in the shade of paint for door frames, the colour accents of alcoves. When we got married 12 years later, Premila moved into my bachelor apartment, and relished the look and feel of our home. When she did make changes, they were deeply contested. “The first real fight we had”, she would tell friends, “was over the colour of a sofa”.
Through this summer, the construction team hammered, drilled and ground away, as they refashioned our apartment. I moved into my sister’s, directly below. “Use one of the rear bedrooms”, she enjoined, as I tossed my running shorts into the little guestroom - “you won’t be comfortable in this space.” Premila spent much of the summer with her parents, in Bangalore, and I spent the summer cocooned in the little room. The desk was too tiny for my sprawling 76-inch frame, so I answered e-mails and typed this newsletter draped across the double bed. For Zoom calls, I attempted a little propriety, plumping the pillows into shape, and propping my torso into some semblance of an upright posture.
In another few weeks, our renovated apartment will be back in business, with a new yoga room appended to our bedroom, and a modernist study with a cantilevered roof and vast blank walls on which to hang fresh art. All my adult life, I have relished the creation of new spaces, designing them from my very basic sense of design and architecture, then finding quiet joy in watching them acquire texture and colour from the shapes and desires of our lives. But this summer, there was joy too, in allowing our architect to refashion our home, while I took joy in a room I didn’t own, a space for which I held no sense of aesthetic responsibility.
On Friday, I visited some galleries with a friend, an art curator. It was the aesthetic equivalent of probing an aching tooth with your tongue, gingerly testing for how deep the rot.
At the Vadehra Art Gallery, we looked at Sunil Gupta’s portraits, larger-than-life posters of gay individuals, bursting with colour. “But those eyes”, I told Jasmine, “so soft, so vulnerable, pleading for understanding…” In the adjacent room, we looked at his photographs of Christopher Street, marking the day in 1970 when the gay and lesbian movement took their struggle for liberation to the streets of New York’s Greenwich Village. I admired the way an automobile curved into the frame, froze with the microsecond in which a subject’s sneakered foot touched the pavement, traced the shadow that outlined the curve of his thigh.
No, the delight is not gone. What has waned, though, is the need to exercise control, the need to own. I no longer have to command the shape of my little bubble of living. A thousand flowers will bloom, with or without my willing them. The passive, I hope, is not the indifferent; rather, it is the crafting of space for fresh ideas, fresh delights.
Thumbscrew - medieval instrument of torture
The Monetary Screw Turns
The world of finance shifted gears on Friday.
To fight the economic impact of the pandemic, the last two years saw ultra-cheap money sloshing around the globe. Even though inflationary signs have been flashing since early 21, the Chairman of the US Federal Reserve, Jerome Powell, first insisted that inflation was transitory. Then, even after he acknowledged - in November last year - that this might not be the case, there was an inexplicable lag in tackling the price situation through tighter money.
This year, the Fed has raised rates 4 times, and the last two hikes of .75% each have been the most severe since the 90s. Nevertheless, financial markets questioned the resolve of the Fed to continue monetary tightening. The median belief seemed to be that central bankers would chicken out at the first signs of weakness in financial markets. This belief took deep roots after the interest rate hike in mid-July, and in the 4 weeks to August 15th, the S&P index bounced by 17%.
On Friday, at the annual meet of central bankers in Jackson Hole, Wyoming, Chairman Powell made a short speech designed to eliminate any ambiguity about his intent to combat inflation. “My focus”, he said, “will be narrower, and my message more direct”.
Nothing could be more direct than his accepting that “reducing inflation is likely to require a sustained period of below-trend growth, (which) will also bring some pain to households and business.”
US central bankers seek to balance two objectives - a low level of unemployment, and an inflation target of two per cent. With inflation peaking at 8%, and record levels of job vacancies, I have been unable to understand the reluctance to raise US interest rates more rapidly. Powell’s speech clarified that fighting inflation is his singular objective, even though this “is likely to require a sustained period of below-trend growth”. This will probably “require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.”
Over the last year, many commentators have tried to deflect the cause of inflation away from money supply, to choked supply chains and the impact of the Ukraine invasion. Powell addressed the apologists directly: “None of this diminishes the Federal Reserve’s responsibility to carry out our assigned task of achieving price stability. There is clearly a job to do in moderating demand to better align with supply. We are committed to doing that job.
Lest anyone be left in doubt about the Chairman’s resolve to combat inflation, his last and second-last paragraph contained virtually identical phrases:
“we must keep at it until the job is done”, and
“We will keep at it until we are confident the job is done.”
US equity markets read Powell loud and clear; by the end of Friday trading, the S&P was down by over 3%, and the Nasdaq by just under 4%. Our markets were closed by the time the chairman delivered his speech, so we will see the impact of his words on Monday. It is unlikely to be pretty.
Over the last month, our equity markets have bounced, in tune with US markets. The rupee also traded in a narrow band between 79 and 80 - with a little help from the RBI, and at the cost of a drop in our foreign exchange reserves. August also saw foreigners injecting money into our equity markets, though they did seem to be in pause mode over the last few days, and it looked to me as if they were waiting for hints from Powell’s speech.
Powell’s words required no parsing, no scouting for hints. He proclaimed his intent in clear terms. Along with interest rate hikes, the Fed seems likely to start selling the bonds that it had bought in 2020 and 2021, to support financial markets. This Quantitative Tightening (QT) was on the time-table for the second half of this year, but market watchers have been sceptical about the real intent of the Fed. Powell’s speech was designed to dispel any such scepticism, and we are going to see a steady tightening of US money supply. Central bankers around the world - including in India - will have to follow suit, or run the risk of currencies depreciating even more rapidly against the dollar, which is up almost 14% in 2022.
The world has got addicted to cheap money. Whether it was the dot-com bust, the Global Financial Crisis, or the pandemic, it was the elixir for all economic ills. Powell has loudly acknowledged that it has serious side effects, and that “the burdens of high inflation fall heaviest on those who are least able to bear them.”
It’s too early to pronounce that the era of cheap money is behind us; it is too beguiling a wand for central bankers to resist waving at the first sign of trouble. In his speech of Friday, Powell has not suggested he is dumping his wand into the trash can, but it does look like being relegated to a bottom drawer for a while.