Heretical Heterodoxy
If Jerome Powell made anything clear during his May 1 press conference (and I'm not at all sure he did), it was that the Fed lacks sufficient confidence in the outlook.
The Committee isn't sure about much, and the inflation data covering the first three months of 2024 didn't do them any favors. In fact, Powell admitted, the incoming data served to detract from whatever confidence officials had regarding the likely path of inflation going forward.
When reality steadfastly refuses to conform to
Somehow, we fool ourselves into pretending we know what the past meant.
and now that QT is on the way out, liquidity won’t be as big of an issue. Combine this with massive interest income and you have an economy that won’t quit. To the moon! lol
How is money supply seemingly growing when it is supposed to be getting destroyed?
Continuing post-Covid velocity blues?
This has me thinking about the reverse of a dynamic that was more on-topic years ago. The “transmission channel” of QE wasn’t what Bernanke had hoped, as discussed here plenty of times. Running in reverse, it’s still not transmitting to Main Street to offset inflation where it’s needed.
Time to replace the Fed’s hammer with an AI based multi tool 😉
Assume this scenario for the US over the next six months: inflation sticky, jobs strong, economic growth unchanged, Fed frozen, geopolitical unchanged. What are the N6M investment implications?
I have also been shouting this from my very small reseach rooftop. The disconnect is clear. Only 20% (or fewer) voters are cash balance positive in a significant way. AND 50% of all individuals are short net assets and are borrowing month to month at 20% (and up) to stay afloat. Those struggling are voters and every one of them gets one (1) vote – (it is not asset weighted like Powell’s numbers) and they think Biden is doing a terrible job. TRUMP WINS in a walk (if he can shut up) because of inflation compounded by high rates (for renters and poor)
There are definitely two distinct economies right now. Half of the small businesses are floundering (mine included). Jamie Dimon beamed today that the US economy is booming, because Wall St hates to learn hard lessons (Occupy, anyone?). Biden would be best served raising capital gains to the sky and personally handing out large envelopes stuffed with cash along Main St.
But I digress…..
So if tech is booming and high interest returns, booming hard assets, etc are fueling shangri-la for the upper crust, what is a Central Bank to do? Seriously, what is the answer?? What could Powell do if they were to properly assess (admit) to this problem?