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Fed May Need To Torch $30 Trillion To Tame Inflation
The Fed's credibility problem is beginning to grow again.
And no, I don't mean the Austan Goolsbee soap opera. Allow me a quick word on that, though.
Everybody's a partisan in America, and the selection process for top jobs of all sorts is fraught with conflicts on interest, some of which are so egregious as to be wholly laughable. Who knew, right?
If we want real technocrats, in the strictest sense of the term, and relatedly, if we want totally unbiased Supreme Court Justices, we'd have to r
Thinking back to a Pozsar note from last year where he posited that the Fed will have to utilize volatility.
“But, from a 30,000-foot view, we seem to be getting perilously close to some kind of reckoning where everyone runs out of excuses”. Right. Which can only happen when mainstreet runs out of money (equity in their homes)
Powell @ recent fomc,bostic this week were reckless with their statements not caring about the fci easing in the markets. Trying to get into their minds, starting to wonder if thats how they r attempting the softlanding. With contracting M2, terminal rates at ~5-ish,continuing qt but spx >4500 (by next month & trending further up later) is softlanding + 2% target inflation (sometime down the line) possible? i strongly doubt but may be therez a slight possibility.
coming back to this article “fed deliberately destroying the 30$ trillion excess wealth” ? no way, not even close, why coz of the monstrous debts in the system, it causes contagion credit events. Even at the slightest chance that the inflation peaked and its under control, they will pause, next pivot & finally another round of mmt, Qe will be coming. main reason why is there is no other practical feasible solution (for them) to this. market knows this
FWIW, I think the Fed is doing a very good job of draining liquidity from the system: not too slow, not too fast, kinda just right.I’m an unabashed Jay Powell fan, and if he’s left alone to do his job as spelled out
in the Federal Reserve act, I think he’ll go down as one of the greatest Fed chairs of all time.
i wonder, what happens if the Fed does drop the 2% inflation target. surerly, current asset prices will look dirt cheap then?
Duration would get rekt, and futures everywhere would bend a lot more contango.
…or the gov could pursue more aggressive antitrust enforcement to make actual market competition more viable than simply opportunistically raising prices and knowing customers have few other options.
What happened to all the antitrust guys? WTF is Lina Khan doing?
Everyone should give this paper (or at least the twitter thread) a read: https://twitter.com/isabellamweber/status/1630322490559037440
Relatively speaking, Lina Khan has been excellent — the first FTC chair in forty years to actually take her role seriously.
Instead of an indiscriminate destruction of $30T of wealth that hits all sectors and wealth brackets, why not a well-aimed tax increase – probably much smaller – at the beneficiaries of the bulk of that inflation?
Because that will never pass. The fed presumably can just do what needs to be done.
I completely agree. A blanket 15% minimum tax on the wealthy would help to address the deficits we’re discussing here. The Trump tax cut was a gift to the wealthiest Americans who had no need for it.
In response to Fatmoose as to how and when to pass it, never is a long time. FDR II (Biden) is not unlikely to have a majority in the House after 2024, thanks to Kevin McCarthy and Jim Jordan. The bigger question is what happens in the Senate.
,” there’s $26 trillion in “extra” household
wealth competing for goods and services, the provision of which is hampered by lingering supply
chain distortions exacerbated by commodities volatility and an acute worker shortage,
respectively. ” This is exactly the problem, and since we can’t wave a magic wand to fix it, we are in a
bind !