How Stupid Does the Fed Think We Are?

[Judging from the email I received, this commentary struck a chord with readers, so I am letting it run for a second day. RA] Betting on inflation has been a lousy gamble for most of the last four decades, even if the Fed has worked tirelessly to convince us otherwise. Talking about tightening has been the Fed’s johnny-one-note theme since the early 1990s, when stimulus applied to extricate the economy from the savings and loan debacle supposedly was going to produce a return of 197s0s-style inflation. It didn’t, in part because wages never took off in the way that financial assets did. Nor was there much tightening — then or now.  At the moment, however, even the yo-yos who have been talking the Fed’s book, most particularly the benighted hacks who gin up the news, are starting to wonder how a few more 25-basis-point hikes in the fed funds rate will even be possible with the housing and auto sectors starting to roll over. For sure, Yellen & Co. would like to push administered rates a percentage point or two higher so that they’ve got room to ease when the next recession hits. But their window of opportunity may be past, since it’s going to be increasingly difficult to convince even the yo-yos that the economy is in danger of overheating when it is clearly weakening. A think-piece published on ZeroHedge fleshes out the Fed’s dilemma persuasively.  Read it and check out the chart (inset) before you buy into the twaddle we’ll be hearing in the coming weeks as the Fed makes a laughable, last-ditch attempt to convince us that significantly more tightening is planned. How stupid do they think we are?

  • none May 23, 2017, 8:57 am

    When Cleander under Commodus look to corner the grain markets, it cause a major out break of plague and crash the economic system to the point that latter cause the assassination of Commodus, to which the retraction he started during his reign begin the slow decline of the roman empire. It was a simple ‘corner on the grain market’ that cause the start of the fall of Rome.

    The FED in many ways is just acting out what had be done many times before though out history, observing and profiting from the short term which moves the longer term towards the cliff even better than before.

  • none May 23, 2017, 8:48 am

    I am seeking a low in rates, and a turning point 44 years from the 1981 high from the 1949 low point of 2% coming in at about .76% prime rate low stamp in the next 5 years or so.

    So, a print of 194- 212 in ZB is about the contract value to seek.

    The next downward equity market, more than likely will push rates towards and under zero, this will aid in all the counts and sling shot in pf to move for such a turn in rates.

    Housing will have a lower low in value, as the 2007 more than likely be non confirm towards new lower rates. This will be the signal that the large turn is confirm and in. Restate values may even decline towards such a event of these lower rates.

  • NowWhat May 23, 2017, 12:55 am

    Stupidity and ego to prove to themselves and the world that they are masters of the universe, irregardless of the consequences!

  • none May 22, 2017, 7:37 am

    Histrionically a 1%
    ‘Prime Rate’ will turn the tide, the question is could we even go lower?

  • NowWhat May 22, 2017, 3:17 am

    Is it stupidity, or the Fed’s/Corporate America’s desire for self-preservation, assuming enough of them actually sees and/or understands what is actually happening, that perpetuates the fraud?

    &&&&&

    It’s stupidity, since only an imbecile could believe that creating a quadrillion dollar credit bubble will end other than badly. RA