More Federal Reserve Nonsense

So now the Federal Reserve has had to backpedal on its presumed interest rate cut this year.  That’s due to “a lack of further progress” on inflation says the new policy announcement.

The Deep State Money Manipulators are in one hell of a fix!  Again.

If they cut rates and loosen money, prices will keep climbing.  If they don’t cut rates, the economy could begin to stall as the decline in GDP suggests.

Wall Street knows that the stock market is driven by the creation of money and credit by the Fed, so the players are obsessed with the game of tea-leaf reading and “dot plots” that are supposed to be indications of what the Fed will do with rates at its next meeting and the one after that and the one after that…  They are so good for nothing, they make us laugh!

As recently as March the conventional wisdom was that the Fed would treat Wall Street to three interest rate cuts this year.  But what can it do when inflation is in rebound mode and the rest of the world, especially China, wants gold?

So here’s how the Fed hopes to walk the knife edge without falling off.  On the one hand, it intends to forego the rate cuts it has been dangling in front of the markets.  But on the other hand, beginning in June the Fed is actually going to ease back on “Quantitative Tightening,” its attempt to roll back some of the most frenzied money printing in US history.  From the Fed statement:

Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.

For perspective, from 2008 to this time in 2022, the Fed’s assets – basically the money it “printed” digitally, the money it made up to buy things – ballooned by $8 trillion.  Realizing that all that money printing would create new world indoor record inflation, the Fed has been trying to undo some of it while it still can.  They set out a long-term schedule for tightening, but now have announced they intend to back off.  This means they want to loosen money and credit, but they are afraid that doing so with interest rates will be all too transparent, spurring faster price increases.  So, they’re going for the sleight-of-hand rate cut.

At the same time, Chairman Powell sent a clear signal the Fed intends to keep a close watch on the employment numbers.  “The employment goal now comes back into focus. So we are focusing on it,” said Powell.  That’s Fedspeak for “don’t forget this is an election year!”  A weak labor market would be very bad for President Biden and you know our assumption:  the Fed will heavily tilt policy to help Biden win reelection.

Monetary policy resembles an old-fashioned pinball machine as it bounces from bumper to bumper.  The Fed bounces from inflation to employment, from easing to tightening.  All along the way it essentially admits that it doesn’t know what it is doing.

There is no way out.  High rates are taking their toll.  The cost of funding US debt is soaring.  US manufacturing is in contraction, as is employment.  But prices keep climbing.  Crude oil is up by double-digits since the first of the year.  Gas is up more than 20 percent.  

“There is a lack of further progress” on inflation.  That’s not us.  That’s the Fed’s official statement.

Now, doesn’t owning gold make all the sense in the world?