The Fed Announces
The Federal Open Market Committee announcement:
The bond market meanwhile has already moved:
Daily Treasury Par Yield Curve Rates
Blah blah blah … uncertainty … yadda yadda yadda … uncertainty … when is the future ever certain? The Fed is making excuses for making policy on grounds of other than actual data … if you claim you need data you can’t discern, you claim license to make stuff up. But the Fed has all the data it actually needs … government employment and consumer price data so lag they’re almost irrelevant ,,, stock prices, bond yields, commodity prices, and most of all money supply, are all it really needs. It studiously ignores all the most timely inflation data, preferring to follow lagging data which it then erroneously purports to forecast. It then winds up so far behind the curve it is pro-cyclical; inflicting the bubble and bust dynamics that have become all too familiar over the past thirty years.
All you really need to know is that the Fed has spent the past quarter century cheapening and incentivizing borrowing, and that the federal government has responded by doing it in spades. The Fed has boxed itself into a corner where it now falls under immense pressure to monetize this debt via yet more inflation, and there is no indication it has any of the that mythical independence to resist. Inflation begets inflation.
In case any doubt remains, consider that unemployment remains near multi decade lows and even the watered down official “inflation” stats are well above the Fed own inflated target and rising. Consumer prices are at all time highs amidst multiple asset price bubbles. Yet the Fed is easing. Because that’s what it wants to do. To please Wall Street, Silicon Valley and other deep pocketed constituencies that profit from inflation. Whatever data it may be missing due to the government shutdown would be used to justify it anyway. It’s a forked tongue Fed.
Sure, President Trump has very vocally and rather rudely been pushing for easy money too. But he is summarily dismissed on grounds of Fed independence, while its independence or lack thereof from other powerful constituencies is kept off the media radar screen. So ironically presidential influence is virtually an asterisk next to the control that really matters.
The force the behind the growing wealth gap is this. Fed independence in practice boils down to monetary policy run for the benefit of the rich and powerful.
Besides announcing a 25bp target rate cut, the FOMC said it plans to terminate QT in December. Whoop-de twang. It’s only doing $5B a month already. The greater significance is that this is likely prelude to resumption of QE. And that won’t be a mere few billion.
Forgive me for being a cynic, but America is heading into an irresponsible financial boom
“If you thought quantitative easing (QE) was dead and buried, you may soon be in for a shock…”
Lots of unwarranted hand-wringing about the lack of government data. One economist on CNBC seemed on the verge of tears about it. As I pointed out in the post, the Fed is better off ignoring this data anyway. It won’t though because the absurd exercise of making forecasts based on lagging data is an all purpose excuse for arbitrary policy adventurism.
The Fed’s case for easing? It has nothing to do with the data. Rather, it boils down to its assertion that current policy is “modestly restrictive”. To heck with the data!
The bottom line is the Fed is easing policy into already elevated and rising inflation. No amount of missing data could fix that.
With accelerating inflation, is it possible that behind it a deflationary wave is gathering? Sure. But there’s nothing to prevent the Fed from responding promptly if clear evidence emerges, except possibly its own self-imposed dogma to tell the markets what it’s going to do well in advance of doing it.
Pre-emption doesn’t work. The higher inflation goes, the greater the risk of deflation. Recall the deflation of 2008 did not develop from gradually falling inflation … it was born in the midst of accelerating inflation. Crude oil prices hit their highest ever peak of $147 a barrel on July 11, 2008 … mere weeks before Fannie, Freddie and Lehman Bros collapsed in a tidal wave of deflation. That the Fed had begun cutting rates nearly a year before in September 2007 did nothing to prevent it.
Inflation does not prevent deflation. Inflation causes deflation. If the Fed wants to avoid deflation, it should stop blowing bubbles.
After the dovish policy announcement, markets interpreted Powell’s post-announcement remarks with a hawkish spin. Possibly fairly … but if we have learned anything lo these many years it’s that talk is cheap. Even Powell doesn’t know what he’s going to think a few months down the road. For now, the dollar rose and stock, bond and commodity prices fell. Take that as representative of a new trend at your peril … walkbacks and reinterpretations of Fedspeak are routine.
Watch not what they say but what they do. No not even that … watch the bond market.
Been watching a bloke talking about the draft ref the war in South east Asia. The delightful process were you were in a lottery for your life. If your number was up off you go…….unless you has some sort of medical or educational “get out of jail card”.
Failing that you had 2 other options, go to jail or go to Canada.
Assuming you returned alive, without shell shock or drug habit or poisoned by Agent orange,you then had the pleasure of watching a angry & vengeful “Inner party members” burn you with massive inflation & then wipe out your employment with mega high rates.
Indeed you got to watch your jobs get “exported” to the very people you been killing in Asia.
Meantime you told that Dow chemical had no idea that Agent Orange would cause you to give birth to disformed children or get Cancer. Finally forced to payout the reward was only a few thousand per claim.
Now we are at the point were even China will refuse to bale the bastards out. All they can do is threaten to start “colour revolutions” here & there. It is my hope that the rest of the world will see that its time to stand up & not get bullied by these assh0les.
We are entering an end game…………..
Members of my family served. The draft continued long after the war was over, but ended not long before I would have had to register.
Gold’s not done: LBMA survey forecasts prices near $5,000 in 12 months
I don’t know what happens in the next 12 months or even 12 days, but big picture … gold is not done.
No asset lives in a vacuum; they all compete with each other for investor interest. Comparisons to 1980 are a bad fit. In 1980, stocks has been in a 12 year secular bear market and were screaming bargains. The S&P was yielding 4-5 percent. Bonds were yielding much more, the federal debt was much lower, and we had a credible Fed on the inflation case. Now the S&P is priced so high it yields a pathetic 1 percent and change. Morningstar even advised retirees to reduce their withdrawal rate to acknowledge the poor long term return outlook.
Gold is the default asset … what you own when you don’t have a reason to own something else. 1980 presented an abundance of attractive alternatives. 2025 doesn’t.
A wish list a assume?
🇺🇲🇨🇳 President Trump announces China tariff reductions after “amazing” meeting with President Xi, including:
1. Reduced Fentanyl Tariffs to 10%, effective immediately
2. Overall tariffs on China reduced from 57% to 47%
3. China to “discuss” chip restrictions with Nvidia
4. “No more obstacles on rare earths”
5. China and US to collaborate on Ukraine
Fentanyl tariffs?
If you can’t stop it, tax it?;-)
The good old days…………
https://www.autocar.co.uk/car-news/company-cars/repmobile-royalty-cars-defined-70s-80s-and-90s-office-life
trump got zip from China………..
Political theater. These high profile meetings rarely break much new ground. Negotiations have already taken place and the meeting itself is mostly smiles and handshakes.
The AI bubble is starting to show cracks. Meta stock was crushed after among other things investors began to question its massive AI spending with little evidence of returns. Microsoft is receiving a similar treatment.
Meanwhile Caterpillar stock is ahead of Nvidia year to date. It’s apparently on the receiving end of a lot of this AI spending … seems it’s taking a lot of oil and steel to build that infotech infrastructure.
This isn’t about AI itself not being real or anything like that. It’s about how extremely expensive it is. It’s just starting to sink in how much.
There’s the prodigious power demands. Another cost not yet widely appreciated is rapid obsolescence. Check this out:
Nvidia’s new six-trillion transistor Vera Rubin ‘superchip’ for AI
You mean to tell me after I just spent billions on AI chips I’m going to have to do it all over again next year?
Then …
Nvidia makes a major push for quantum computing
And you might have to build your own nuclear power plant to run it all.
AI benefits have been fully priced in, but the costs are just beginning to be.
I have a major problem with “A.I”……………most of it is nonsense.
Its a bubble, “They” blow them up now & again to drive the market. I thought they try with Fusion power, but nope they gone for this.
The UK news is saying outright that Trump went to China & got very little…”They did not buckle like Japan & Korea.
We see whats what very soon.
Mike
The Trump Xi show was a media event staged to put a happy face on a sour situation. Economically speaking, an asterisk. Big picture: The globalists pushed their agenda too far. Now the reaction is going too far the other way. From one extreme to another without even passing Go. The center cannot hold. Nevertheless, and although it was mostly prenegotiated, there were some minor takeaways:
U.S. and China Reach Agreement, But Experts Say This Is Just A Pause In The Trade War
In yet another instance of reality zigs when headlines zag, the bond market hiked rates when the Fed cut.
Daily Treasury Par Yield Curve Rates
While MSM touted the pending interest rate relief for borrowers, real world rates – mortgages, car loans, etcetera – rose. I know I’m getting to sound like a broken record on this, but so is the media’s Fed fetish … if you want to know about interest rates, watch not the Fed, watch the bond market.
Gold has put in at least a temporary low below $4000 and has regained that mark, last trading around $4024.47. This downdraft is over. But is it off to the races again? I don’t think so, nor should gold investors be rooting for it. A hundred yard dash is over a few seconds; a daily jog is sustainable.
Gold and silver to hit new highs in 2026, but the rally ends in 2027, says World Bank
So what is going to stop the dollar from its slide? The US will stop running multi-trillion-dollar deficits? The Fed will stop inflating? Are stocks and bonds going to be good investments again?
Mega’s dispatch from England:-The West is lost
Well good week for some, less so if you used to be a Prince.
Trump went to China & got less than ZIP, it was a show mans appearance. If he thought he could blag something out of CCP then he was left broken hearted.
Some rantings about “Testing Nukes”…….& bashing some 3rd World types in Central/South America. Sadly no chance of anything productive coming from his Presidency now.
Meantime Ukraine grinds on, over 100K young men have taken the chance to “Do a runner” & not get killed for the West. Ukraine only has plenty of dead, everything else is short.
I sense a MAJOR-MEGA-MONEY print very soon………….
Have a good weekend
Mike
Minnesota farmers relieved after Trump’s soybean deal with China
And rare earths can continue to flow.
Should the Fed Be Paying More Attention to Inflation? At Least Three Central Bankers Think So
A hundred million other Americans might agree.
Consumers Expect Inflation To Get Worse, Even As Fed Cuts Rates
They’re very likely correct, if rising consumer prices are what they have in mind. Asset prices are the inflation first responders, and they have been galloping higher. Unless this is soon reversed, consumer prices will folllow suit.