SSM-Audit Q&A Series – Crisis Foresight (Question 4J)

Employment strong, yet price-stability band failed quietly

Question
Jobs were plentiful and nominal growth solid. Yet inflation broadened from energy into services, policy rates jumped, and some banks and borrowers felt unexpected stress. Could a simple stability band beside the usual series have shown the transmission risk and fragility building through 2022–24 while employment remained strong?

Answer ✅
Yes. Totals masked transmission mechanics: energy import dependence stayed hot, price dispersion widened, wage–price feedbacks formed in pockets, and duration mismatch left balance sheets exposed as rates repriced. SSM-Audit adds a read-only stability band alongside KPIs you already track, separating resilient calm (A+/A++) from brittle calm (A0/A-/A–) even while the labor market headline stays green.

What the bands would have shown 📊
• Energy Import Dependence Stability sliding from A+ toward A0/A- (price/input shocks transmitting quickly)
• Duration Mismatch Band weakening to A- (assets longer than deposits/debt; NIM and OCI sensitivity rising)
• Policy Pass-Through Cadence degrading to A0/A- (rate hikes transmitting unevenly to lending/mortgage costs)
• Wage–Price Loop Stability drifting down-band (A0 → A-) in services with tight labor and rising expectations
• Price-Dispersion Cadence softening to A- (core goods vs services spread and shelter lags widen/persist)

What to do now 🛠️

  1. Cool the input channel: if Energy Dependence band < A0, hedge exposures, diversify sources, and throttle energy-intensive expansions.
  2. Shorten or hedge duration: when Duration Mismatch band hits A-, add swaps, shorten asset duration, and strengthen stable funding share.
  3. Normalize pass-through: if Pass-Through Cadence sits at A-, transparently pace repricing to avoid cliff effects and credit whiplash.
  4. Dampen the loop: where Wage–Price band weakens, use targeted, temporary incentives tied to productivity, not across-the-board escalators.
  5. Watch dispersion, not just headline CPI: if Price-Dispersion band remains A-, reweight policy/portfolio to stickier categories (shelter/services).

How SSM-Audit helps (practicalities) 🌟
• No additional infrastructure: overlays existing CPI/PPI, energy shares, bank ALM, and lending-rate series.
• Numbers unchanged: stability is a read-only lens beside reported figures.
• Easy to use: spreadsheet/BI friendly; one lightweight weekly or monthly ritual.
• Universal language: A++ / A+ / A0 / A- / A– aligns finance, risk, ops, and policy teams fast.

CLI 💻 — try our mini Calculator to identify the drift
(Mini CLI Download Page)
Bind your historical series and see bands and drift at a glance (numbers unchanged).

# Energy import dependence stability (exposure vs buffers)
ssm_audit_mini_calc crisis_2022.csv --kpi "Energy Import Dependence Stability" \
  --out bands_energy.csv --plot_kpi "Energy Import Dependence Stability" --build_id 4j

# Duration mismatch (assets vs deposits/debt duration)
ssm_audit_mini_calc crisis_2022.csv --kpi "Duration Mismatch Band" \
  --out bands_duration.csv --plot_kpi "Duration Mismatch Band" --build_id 4j

# Policy pass-through cadence (policy -> lending/mortgage rates)
ssm_audit_mini_calc crisis_2022.csv --kpi "Policy Pass-Through Cadence" \
  --out bands_passthrough.csv --plot_kpi "Policy Pass-Through Cadence" --build_id 4j

# Wage–price loop stability (services-heavy segments)
ssm_audit_mini_calc crisis_2022.csv --kpi "Wage–Price Loop Stability" \
  --out bands_wageprice.csv --plot_kpi "Wage–Price Loop Stability" --build_id 4j

# Price-dispersion cadence (goods vs services, shelter lag)
ssm_audit_mini_calc crisis_2022.csv --kpi "Price-Dispersion Cadence" \
  --out bands_dispersion.csv --plot_kpi "Price-Dispersion Cadence" --build_id 4j

Technical notes
Representation: x = (m, a) with a in (-1, +1)
Collapse parity: phi((m,a)) = m
Order-invariant pooling: U = sum(w_i * atanh(a_i)), W = sum(w_i), a_out = tanh( U / max(W, eps_w) )
Typical bands (example):
A++: a >= 0.75
A+: 0.50 - 0.75
A0: 0.25 - 0.50
A-: 0.10 - 0.25
A--: a < 0.10

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Page disclaimer
Illustrative scenario for research and education. Observation-only; do not use for critical decisions without independent validation.