He Did This…
While it is quite simplistic to blame or credit any one person with something as complex as the U.S. economy, and the way it is going at any particular point, here’s what’s happening in America in real-time these days… you may have seen these stickers:
Americans are all aware of inflation. If, for example, just three or four years ago, no one was talking about rents, gas prices, food prices and shortages of goods, today it is a national and an international problem, at the center of the global media consensus.
We live in the most inflationary period of the past 40 years…
With that, there’s a danger that the FED officials, most of whom lived during the 1970s and 1980s, but were teenagers or young adults, freak out and turn into irrational hawks.
Last week, I started to see just how much the markets are surprised that the institution they have come to rely on to spark growth and stimulate the U.S. economic machine is now doing everything it can to ensure the opposite.
I’ve never seen the FED so publicly and methodically break down any of the confidence the market has that the Fed will always be there for them.
The Federal Reserve has never given investors so much hard truth.
The reason the FED is so in your face is because monetary policy is not the topic of Wall Street and academia any longer.
Americans are all impacted, so the FED is front and center and must make sure to be theatrical, because its words are now mainstream.
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Biden’s “secret agent” inside the FED is his newly-appointed vice-chairman Lael Brainard.
She has turned into a hawk and she’ll make sure to pound the table and scare investors that the FED is politicized.
She just gave a big speech and made comparisons to Paul Volcker, known for saying that in order to stop inflation, recession is of less importance.
Jerome Powell understands that price stability is a prerequisite for creating maximum employment, so while there’s a dual mandate, the FED is prioritizing inflation right now.
“Currently, inflation is much too high and is subject to upside risks,” Brainard said, adding that “it is of paramount importance to get inflation down.”
Every FED governor that has a chance to speak is more hawkish and gives a more horrific account of the inflationary pressures than his predecessor.
The problem that Brainard has introduced is the balance sheet reduction, a subject about which the FED hasn’t directed the market, so the fact that she was so hawkish over it is cause for concern.
So what do we have? HAWKS and perhaps super-hawks.
All of this has brought MASSIVE Wall Street bears to the table, as you can see.
Unlike December 2018, the FED isn’t about to U-turn, so we continue to believe commodities are a MUCH BETTER bet than traditional equities.
I wouldn’t be surprised if gold reaches $2,000/ounce before the end of the month.
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