The biggest economies in the world were paying people not to produce goods and services (or just boarding them into their homes like in China) yet no idea why this inflation fell out of the sky . Half the world is not working and the remaining half is unable to be as productive as they normally would be. Hence there is shortage of goods and services and higher inflation. The incessant attacks on the Fed reserve to keep interest rates low despite rising inflation is ridiculous. While higher inflation will hurt a bit, higher rates at this time will hurt a lot and will quickly lead to a recession. The Fed is going from one huge error (inflation is transitory) to another huge error (4 rate hikes and runoff won't crash markets). The Fed's job is the economy, not the stock market . Sure, interest rates deflate assets. But they won't do squat for consumer goods and consumption pricing. The stuff the 99% care about. The fiscal and monetary policies of the US have been inflationary for some time because. We haven't stopped printing money since 2008 (other than the taper tantrum). Rates have been near zero or negative real rates. The crack down on immigration (illegal or not) means less cheap labor. Tariff increases and trade wars. Massive government spending and stimulus. Regulatory increases. Minimum wage increases in many states. Labor shortage due, yes to pandemic, but also an asset bubble that let boomers and some Generation Xers retire early. Also, the labor shortage is not because there isn't free daycare. People can only not work if they have money and the government has been giving it to them. Skyrocketing housing prices mean skyrocketing property taxes (inflation) as well as rising rents. And if anyone thinks CPI accurately reflects the 50% increase in gas prices we've seen recently, I've got a bridge to sell you. People care a lot more about inflation in general than CPI. All of these factors built up to what allows the supply shortage from the Pandemic to create inflation. Most analysts just look at the last bullet point though. The Fed is the problem, not the solution. THE CRASH IS THE ONLY SOLUTION. The choice is between Too Big to Fail Institutions and the 40% renters with less than $1,000 at the bank This time either way Murphy's law will apply . Sounds like FED is now out of a magic bullet to manage the economy - They cut interest rates to near zero to stimulate the economy in the pandemic and flood the market with printed money, now they are tapering bond purchases and announce to raise interest rates above inflation rate sooner to control spiral inflation. Inflation may be caused by many factors, not the amount of money only; price increase due to strained supply chain and labor shortage after a long pandemic while the economic recovery relies on consumer consumption. If FED put the brakes so hard, it would affect the company's ability to raise capital that in turn cut back hiring or even lay people off to be afloat, the consumer would not be willing to get a loan for their consumption and tighten their spending that would cause the economy to slow down further. They will cause a full-blown recession. Just like Gerald Celente says when they start hiking the interest rates, the markets will crash, it ain’t going to be pretty, this will be the worst financial crash the world has ever seen be prepared, it’s coming supplies are not being distributed by the truckers ... Welcome to The Atlantis Report , please like and subscribe. The Fed mandate is for "Price Stability", not 2% inflation. Alan Greenspan said price stability meant ZERO inflation, if inflation was measured properly. The Fed redefined price stability to 2% inflation in 2012 because Ben Bernanke wanted to keep doing QE and keep interest rates at zero even though the full employment mandate was met (and inflation was still above 0%). The Fed does NOT get to redefine a mandate that had the clear intent of preventing them from growing the money supply at a rate that exceeded the value of new output. On top of that, if we were to use the same methodology for calculating inflation that we used in 1980, it would show inflation today to be over 15%. We have simply modeled inflation away through the likes of” Owner’s Equivalent Rent” (OER), "Hedonics" (my computer is ten time more powerful than it was ten years ago so it is deemed to have dropped in price by 90%) and "substitution" (the price of steak and chicken double in price but steak eaters will switch to eating chicken and therefore the price of their basket of goods has not gone up). Policy makers have many incentives for understating inflation. It reduces the amount of inflation adjustments to entitlement programs. It allows them to provide the illusion of real growth when that growth is really nothing more than inflation. The Debt Ponzi economy will end soon. In fact the economy runs on debt, that is the truth, and the FED is terrified to end free money and raise the interest rates. They are stealing money from people with pensions that are not adjusted to inflation, and forcing everyone to either real estate or stock market. FED is good at one thing, and that is creating bubbles, done that very well over the last 20 years. This isn't a value of money problem solvable with interest rate adjustments. We have a supply and demand problem with insufficient supply to meet demand. Prices go up under those circumstances, that's basic economics. Unfortunately the Fed only has a hammer, so every problem becomes a nail. Quarles suggestion is stupid to the point of being outright insane. Raising rates that much would crash the markets, the economy, and the country. Yes, control inflation, reduce liquidity in the system. 7% rates? That would be suicidal. Inflation is 6% for you if you don't eat food, drive a car, use plastics, or live in a wooden house . Actually running above 15% if we were to use the same methodology as we used in 1980. Just modeled away with the likes of OER , Hedonics, Substitution, and other slights of hand used to understate true inflation. Our government has no morals or ethics. Whatever it takes to keep their power and keep the elites on top. Inflation per se isn't bad for stocks (generally the reverse, since inflation reduces real debt). What's bad for stocks is high real interest rates. If last year's inflation shock creates a positive wage-price feedback loop, like it did in the 1970s, then it'll take higher real interest rates to break it, by increasing unemployment and thereby reducing wage demands. If it doesn't, it won't. If the current inflation shock turns out to be like the Korean War-era inflation shock, which didn't enter a positive feedback loop, then it'll mostly just be a nice debt reduction for firms. If it's more like the post-Bretton Woods inflation, which did enter a positive feedback loop, then there will be a lot of pain ahead. Stocks are real assets with a relatively limited supply (less limited than land, of course). I'd actually expect stock prices to be less sensitive to real interest rates than land and real estate prices, because the average debt to price ratio is much lower for stocks than for land and real estate. The Fed may be constraining short term rates, but the market is mispricing our longer term debt. We have high inflation, large deficits, and crushing debts. If our nation were a business, we would be in Chapter 7. Things will get ugly when the world realizes our only asset is a printing press. Quarles is amplifying Powell’s previous testimony that stopping inflation may result in a recession. Quarles is adding that the government will have difficulty paying its debt at the FFR required to stop inflation, but that the FOMC is committed to raising the FFR to that level regardless. Is he saying that the Fed is no longer concerned about the fiscal stability of the country? A while ago we discovered that EVERY single individual from the Federal Reserve was buying and selling stocks during the pandemic. Then in October of 2021 the fed reserve board announced a broad set of new rules that will prohibit the purchase of individual securities, restrict active trading, and increase the timeliness of reporting and public disclosure by Federal Reserve policymakers and senior staff. As a result of the new policies, senior Federal Reserve officials were limited to purchasing diversified investment vehicles, like mutual funds. These ethic standing rules for the Fed in October restricted individuals from buying any equities. To help guard against even the appearance of any conflict of interest in the timing of investment decisions, policymakers and senior staff generally were required to provide 45 days' advance notice for purchases and sales of securities, obtain prior approval for purchases and sales of securities, and hold investments for at least one year. 1 month later the market tanked and hasn’t come back since. Further, the FED advised that purchases nor sales will be allowed during periods of heightened financial market stress. So essentially the fed sold the top along with all of the big money on wall street. My question is…how long into 2022 do they think the market will go down? How bearish are they? This was The Atlantis Report ...Thank you for your time.
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