FOMC LOOMS
Why would the Fed hike rates into what is an obvious self inflicted bout of elevated inflation? There are some of you MORONS out there who do nothing but worry about the national debt and make grim forecasts about its ultimate demise. While I do not deny the spending to be reckless and the budget to be corrupt, there isn’t an alternative in the world to the American economy.
The US treasury market is the most liquid in the world, fueled by dollar reserve status that isn’t changing any time soon. In an alternate universe, the dollar collapses and the US 30YR spikes to 100% and America collapses into the dustbin of history. Back in reality, Americans have over $100t in wealth, possess the best minds and technology in the world, and have a very high standard of living — even the homeless are fat.
My point:
To doomscape about end of times has more to do with internal conflicts than reasonable outcomes on a macro level. China isn’t supplanting America any time soon and the dollar remains King, although its buying power has dissipated considerably over the past few decades. But that’s all relative, since all fiat currencies have lost buying power to the wonderful confines of gold but also STOCKS, you fucks.
Yes, the rate of change for gold v dollars has been impressive since 2001. But the same could be said about GOOGL v dollars or more recently LITE v dollars.
Whether we think now is a good time to hike rates or not is immaterial. Fed funds futures says he is so he will hike rates next week. To go against the Fed funds futures would make the FOMC unpredictable and that might rock markets. Perhaps markets view it as a “one and done” to prove Warsh is his own man and not hand selected by Trump to do his bidding. One thing we all know to be true is the fucking inflation rate is only elevated due to the Iran war, spiking oil, chems, and all sorts of materials that come from that region. Have you see the spike in spot tanker rates?
This is the type of parabolic chart that screams mania. The real bottleneck isn’t in AI, but the Strait of Hormuz. So until this folly is concluded and things normalized to the best of this administrations ability, there will be elevated inflation. Much of this inflation will deflate once oil comes back down and at that point will be Fed adjust its position towards rapid rate cuts.
I suppose we can view this as a stasis period, whereby assets are mispriced due to macro factors. The only problem with this school of thought, playing devil’s advocate, is how long will it last and if indefinite — it is certain to lay waste to consumer sentiment and spending. This is the reason why investors are far less tolerant with consumer driven stocks than anything else.
I doubt it would be a 2022 redux, since that was an entirely different scenario — coming off the $5t in free COVID era handouts coupled with a Ukraine war infused spike in crude. But if we want to truly enjoy this here fucking Golden Age of winship and prosperity, the devils in DC need to get their shit together and make decisions to benefit Americans, rather than the pipe dreams of foreign expeditions and Empire.
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