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Tweets of the Day: The Fed’s Policy Is to Hurt and Credit Words of Warning

May 13, 2022

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1:01 pm

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23 comments

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Economics

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23 Comments

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BDR45

4 years ago

Are we not experiencing demand and lack of supply inflation, rather than just “money printing” inflation? How would increasing interest rates make goods more available, or demand to decrease? This is an honest question on my part. Thanks.

JackWebb

4 years ago

So you know, none of the tweets show up on my laptop (Windows/Firefox), and not on my phone (Android). It’s been a problem with other posts on the laptop, but the workaround was the phone. Not this time. No other site gives me these problems. Is there a different workaround? Trust me, no complaints about the material. Other way around. If I wasn’t really interested in seeing it, I wouldn’t bother mentioning it.

JRM

4 years ago

Reply to JackWebb

You need to allow more time for them to load on firefox, don’t scroll until the first tweet shows up..

Doug78

4 years ago

The Fed spend over a decade fighting the specter of the dreaded deflation by ulta-low interest rates which resulted only in blowing big asset bubbles. Something else was needed so when covid came along they were able to do mega Keynesian stimulus by keeping people at home and sending them gobs of money. It worked! Now we no longer have to worry about deflation. Now in in extremis the Fed had to cut the stimulus and raise interest rates which will wipe out stock paper capital gains and drop home prices creating good conditions for a nice recession which might result in deflation worries again with the Fed cutting interest rates too soon and by too much and the cycle continues.

If the Fed takes the hard line and keeps to it then the cycle is broken. That’s what Volker did.

AWC

4 years ago

I have utmost confidence the Fed will accommodate,,,,,,

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

AWC

4 years ago

Reply to AWC

Ludwig von Mises.

Rbm

4 years ago

ok been trying to wrap my head around this thought and comments are welcome. How do you actually curb inflation. Seems to me the money is in the system and will collect somewhere. Gold/ crypto / housing/ stocks/ cash./ etc. i would think the only thing that would actually lower inflation is removing and destroying the cash from the system or add more people who use the dollar.

You can destroy demand for a product which may lower its cost but the cash is still in the system. Comments welcome.

bgwms

4 years ago

Reply to Rbm

See Mises quote above. A total overhaul of the fractionally reserved, price controlled (fed fixing interest rates) banking and finance system would be necessary along with a return to sound money policies and getting rid of Central Banks. And while you are at it get rid of legal tender laws. I don’t see any of that happening short of a full blown crisis. Hell, half of the sound money commentators seem to be tacitly endorsing the Fed put by pointing out that the current Fed policy of baby steps, i.e. 50 bps increase in the Fed funds rate is already puncturing the stock bubble. From the tenor of these comments they act like “tightening” is a bad thing. Think about it, the stock market and R.E. bubbles risk collapse because the Fed raises interest rates 50bps yielding a real interest rate of, what MINUS 7%, maybe MINUS 12% if you use the inflation metrics of the 80s and we are supposed to think that they are really serious about QT? Never going to happen. The Fed will fold and re-initiate QE because they and all of the elites half way believe or want to believe in MMT. Read your Mises, they are on the bull and one way or the other we are going to get bucked off and face plant. IMO the only way this all ends is in currency crises and regime change. Nothing short of that will stop all the magical thinking going on in DC and the Academy.

JackWebb

4 years ago

Reply to Rbm

In normal times, when the Fed supplies extra liquidity for this or that short-term issue, they quickly “sterilize” the intervention by withdrawing cash. Not so after the Panic of 2008. I really thought that their QE would fail, but it didn’t. Then they did a MUCH bigger QE, and Biden/Congress added gigantic fiscal stimulus that accelerated monetary velocity. Usually velocity is an afterthought — justifiably so — but not when either inflation or deflation is present. At that point, velocity (which I think — watch me be wrong — is very difficult to measure, it being an error term in the equation) becomes pertinent.

The much bigger second QE wave got inflation revved up, and the fiscal side added major velocity (think the rate at which money is spent.) I look at the Fed’s declaration of the end of QE (aka “trim the balance sheet”) as a kind of sterilization. Well, if they actually follow through and stick to it, the amount of sterilization that would be effective will tank the economy. Soft landing? Nope. Won’t happen. Now it’s a tradeoff: Inflation or recession.

RonJ

4 years ago

“Centralized Control”

China has that. Gives new meaning to the term, Shanghaied.

RonJ

4 years ago

*** New York’s Fed Williams Says Fed to Curb Inflation Without Raising Unemployment ***

Carvana dumped 2,500 employees, 12% of their work force.

Tony Bennett

4 years ago

Consumer sentiment declined by 9.4% from April, reversing gains realized that month. These declines were broad based–for current economic conditions as well as consumer expectations, and visible across income, age, education, geography, and political affiliation–continuing the general downward trend in sentiment over the past year. Consumers’ assessment of their current financial situation relative to a year ago is at its lowest reading since 2013, with 36% of consumers attributing their negative assessment to inflation. Buying conditions for durables reached its lowest reading since the question began appearing on the monthly surveys in 1978, again primarily due to high prices.

The median expected year-ahead inflation rate was 5.4%, little changed over the last three months, and up from 4.6% in May 2021. The mean was considerably higher at 7.4%, reflecting substantial variation in price changes across types of goods and services, and in household spending patterns. At the same time, long term inflation expectations remain well-anchored with a median of 3.0%, settling within the 2.9 to 3.1% range seen over the last 10 months.

http://www.sca.isr.umich.edu/

Tony Bennett

4 years ago

Preliminary Consumer Sentiment for May

prior … 65.2

expected … 63.7

range of “experts” … 62.0 to 65.7

actual … 59.1

the chart says it all –

http://www.sca.isr.umich.edu/files/featured-chart.pdf

Tony Bennett

4 years ago

“Let there be no doubt, that the Fed’s POLICY is to hurt.”

…

Excellent.

Any asset holder who thinks current market valuation “legit” does not have a clue. At all.

Just like homeowners sobbing in 2008/2009/2010 about where their 2005 prices went.

FooFooFed

4 years ago

What percentage of Americans are aware of these unfolding events?? 2%? Ironically I didn’t hear anyone saying on the way way up that BuyBacks are a distortion along with mark to model and non-GAAP earnings and other parlor tricks. We saw a market sky rocket over last decade when the reality is that growth was stuck in a quagmire. House of Cards, Again!

Tony Bennett

4 years ago

Reply to FooFooFed

Yes … the bottom 90% (who hold little to no assets) are focused on inflation. Nothing else.

If the top 10% has to take a hit (for a change) to help the masses, I could care less.

Siliconguy

4 years ago

Reply to FooFooFed

The market was definitely out of whack. I retired four years ago with $X in a 55-35-10 portfolio. On January 1 of this year I had 1.25 $X, and that is after living off of the income with no SS, no pension, buying a new truck, a new laptop, and a canoe. This is not normal, it had to correct sooner or later, and it looks like it’s sooner.

The stock market decline also saved me from having to rebalance my portfolio which was too stock heavy. Now it’s not.

Sunriver

4 years ago

We live in an inflationary economy that is fundamentally deflationary………………………………Thank the FED.

Lisa_Hooker

4 years ago

Any country with many tweets will find itself full of twits.

Captain Ahab

4 years ago

After fifteen years (post 2008), maybe it is time to restore belief in the Efficient-Market Hypothesis, because the Fed-Controlled MArket Hypothesis clearly is NOT working?

killben

4 years ago

Powell said he couldn’t promise a so-called soft landing for the economy.

There’s a good chance the Fed can pull a soft landing says Nuveen’s Saira Malik.

Now who is the Fed Chief?

Captain Ahab

4 years ago

Reply to killben

That would be the senile corrupt fool who appoints Fed members, and the chair.

Maximus_Minimus

4 years ago

Reply to Captain Ahab

That senile fool doesn’t choose anything, the treasury selects the candidates. And the treasury secretary is selected by the hands behind the curtain. Trump, to his credit, was at least involved in the process.

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