Be afraid. Be very afraid. Your economic and financial future is in the hands of an incestuous combine of the most spineless and most incompetent people on the planet on the one hand and the greediest on the other.
The first group are the people at the Fed — the Federal Reserve Board and its Federal Reserve Bank members — who have spent the year literally and utterly incompetently not seeing the rising inflation all around them in the US, and then pretending the inflation wasn’t real.
The second group is of course those ‘masters of the universe’ that infest — and that word is used very deliberately — lower Manhattan, mid-town, indeed anywhere there are $US10m, and higher, condos, and Long Island and in particular its eastern end.
With this week’s figures, inflation can no longer be hand-waved away as “transitory”:
Annualised, that’s inflation of more than 10 per cent! For the whole 2021 year it will top 7 per cent.
In late September, the Fed was ‘forecasting’ 2021 inflation would ‘only’ be 4.2 per cent. Utter incompetence … So traders looked at the number and yawned. The Dow eased just 240 points — all-but a rounding error for a Dow at 36,000.
Is the Fed acting in your interest?
Those traders know that the Fed will continue to sell out the vast bulk of the American people — from those earning $US15 an hour and are struggling to survive with soaring prices of life-necessities like food and heating, up to and including the rapidly vanishing ranks of ‘middle America’ that might be earning between $US40 to $US100 an hour.
The Fed will continue to sell them out to the aforesaid Wall St vermin, who earn anywhere from $US1,000 to $US100,000-an-hour, riding the Fed-created and sustained biggest bubble in world history.
Faced with the very real and rising inflation, last week the Fed only committed to the gentlest of QE-tapering — it will still keep printing $US100bn of new money a month, further pumping the market, and left its interest rate at zero.
A competent Fed, a responsible Fed, would have responded to the inflation number with a 180-degree U-turn: immediately abandoning all QE and raising its policy rate by 50 points. That would have sent the Dow down — 5000 points? 10,000 points? ...
Don’t worry, short-term. There’s not the slightest prospect of the Fed doing anything even the tiniest bit responsible. It will bend over backwards to keep the bubble bubbling.
But worry, really worry, long–term. The longer the bubble lasts the bigger the ultimate bust.
This will not end gently. With a steady moderate inflation, the pain of ending this debt bubble will be drawn out over a decade or more. Or there might be an accident along the way.
The biggest theme in markets is reversion to the mean. It always happens eventually, one way or another. Most ratios are way out of whack right now, so there’s a lot of reversion to do.
hat-tip Stephen Neil