Anyone else STRONGLY disagree with what the Fed is doing?

[Specterx]

You hear all this "gotta do whatever it takes to stop inflation". Just saw another article that Fed must cause massive job loss to stop inflation.

What in God's name?

I get inflation bad, but you know what? YOU ALREADY PRINTED THE MONEY THAT CREATED THE INFLATION. I read in several places that money supply was up by like 25% yearly, I think for the last few years. That is what created the inflation. There is no stopping that. Sure, you might defer it a bit by absolutely destroying the economy, but eventually that inflation will come home to roost because the printed money is not going away. Devastating the economy to try and get rid of inflation is like cutting off your legs and throwing them away to try and lighten a boat that is leaking water - sure the leak might slow down but you need those legs to swim when the water eventually gets high enough!

This is an absolute truth. The Fed should not cripple the economy now, the damage (them printing money at a huge rate) is already done. Just stop printing huge amounts of money going forward and the inflation will necessarily peter out after a time.

Someone send an email to Powel and link this thread so he can smarten up and get with the program, please...

The Fed has to raise rates. If they don't raise them, then people can continue to borrow at deeply negative real rates and inflation will only accelerate.

Right now the market expects that Fed policy will be effective in breaking inflation without even taking real rates positive... an assumption likely to be challenged.

 

[SunTrader]

The Treasury issuing bonds is not in and of itself inflationary - its taking the money out of the public and putting it in the hands of the government.

But the Fed BUYING those bonds by printing money is what is behind all this inflation. As you said, they just need to quit purchasing, and let them expire. Inflation by definition will have to peter out in time. Raising interest rates to bring on a recession or possibly even a depression is what I am saying is INSANE. Waaaay more harm than good given that if they just quit printing money and buying bonds inflation has to drop over time.

THE FED buying those bonds kept rates down. If they hadn't, market forces would have taken over years ago to force The FED to raise sooner.

No free lunch.

 

[Real Money]

It's not just the Fed. Kuroda's yield curve control, the RBA pumping AUS RE with ultra low rates, even with >50% of mortgages on floating...

Canada's central bank and Trudeau pumping RE in Toronto to some pretty ridiculous levels.

Honestly, it's criminal that the Fed didn't change policy after the covid selloff crushed rates on tens and the long bond. Wall street seized on the opportunity to leverage RE, finance corp buybacks, push M&A, and refinance everyone at once in a lifetime rates. Rates so low, buyers and hedge funds were willing to pay any price, 50k over asking 100k over asking...

The Fed was there to buy the MBS, and finance all the Repub and liberal spending, all the bullshit in the CARES act, omg it's bad, the PPP loans and then forgave them...

Its pretty bad. A lot of it deserves to fail. Powell had the 2year yielding 0.25% which is almost as bad as Kuroda. What's the implied 10 year rate on that?

 

[SoyUnGanador]

THE FED buying those bonds kept rates down. If they hadn't, market forces would have taken over years ago to force The FED to raise sooner.

No free lunch.

Yes, hence STOP BUYING BONDS FED. That is all that needs to be done is my point. Don't raise rates to such a degree that you cripple the economy because crippling the economy will mean depression which will mean everyone poor which will mean nobody can afford things which will mean prices must come down. That is literally what many news articles are saying they are doing or that needs to be done. That is insane is what I am saying.

 

[DaveV]

They're fighting terrible domestic policy (Biden's war on U.S. energy, which drives up oil/gas prices ...

The price increases of oil/gas is not due to Biden policies. First oil production under Biden either equals or exceeds 3 of the 4 years under Trump - https://www.politifact.com/factchec...s/oil-production-bidens-first-year-par-trump/

Second, even if US oil companies pumped more oil they are not going to sell it in the USA for less than they can sell it in Europe/Asia, who desperately need it now that Russia production is down. Witness Canada that is a huge net exporter of both oil and gas; gasoline prices in Canada have increased 250% since 2020.

 

[SunTrader]

Yes, hence STOP BUYING BONDS FED. That is all that needs to be done is my point. Don't raise rates to such a degree that you cripple the economy because crippling the economy will mean depression which will mean everyone poor which will mean nobody can afford things which will mean prices must come down. That is literally what many news articles are saying they are doing or that needs to be done. That is insane is what I am saying.

You're late to the party.

The FED stopped months ago. They are getting rid of what they have on expiration.

 

[piezoe]

Look at what the Fed says and what base rates suggest about the path of inflation. Core is driven by shelter inflation which lags market rents & housing prices by ~12 months — this means core cpi won’t peak until end of this year / early next year. The fed knows this and reflects this in their estimate of rate hikes (Fed terminal rate as implied by dot plot). Should core cpi accelerate faster than they anticipate then perhaps we see another 25-50bp of tightening.

Right now the Fed implied terminal rate is 4.6% while the market (Fed funds futures and forwards) are closer to 4.9%. I think it’s safe to say that the market is pricing in a moderate acceleration in inflation through q1 2023, which they expect will cause the fed to hike additionally in March 23.

What happens next month if inflation comes in cooler? Market implied terminal should move down from 4.9% to 4.6%. If inflation accelerated further, the market will fully reflect 5%.

What does this asymmetry tell you about how to position and what to prepare for?

I like your a,nalysis. I have a slightly different take though. I see fiscal policy fighting Fed monetary policy. Because of that, it seems likely a funds rates above 5% will ultimately be needed to bring inflation below 5% and I fully expect the Fed to go on until they induce a recession and unemployment. I don't see a return to the old 2% target, barring a deep recession. It will have to remain higher than 2% for long time.

There are alternatives that should be attempted, but it would take forward thinking and action from the administration and Congress. The Fed is doing what they know how to do.

 

[comagnum]

The Fed's goal is transferring as much wealth as they can to the richest 1% at the expense of the other 99%, at this they have a stellar track record.

The Fed creates larger & larger bubbles & more lies - they are the drunken clowns spiking the punch bowel moonshine, crack, & heroin.

 

[piezoe]

They create inflation then periodically p&d the market at precise intervals.

Win/Win.

They are also responsible for Global Warming! Then just when we start suspecting them, they cool things for a while to throw us off the track. Then they turn up the temperature again and melt some more icebergs.

 

[SoyUnGanador]

You're late to the party.

The FED stopped months ago. They are getting rid of what they have on expiration.

They didn't stop hiking rates to Bolivia...