O, What A Relief Rally
With today’s relief rally, we’d do well to remember, macro is at play. It’s bigger than the markets. Inflation is a beast we haven’t tamed. Christopher Leonard, author of “The Lords of Easy Money”, said in his Wiggin Session: the Fed is running “a truly unprecedented experiment.”
“In the first 95 years of its existence,” Leonard continues, “the Federal Reserve steadily increased the monetary base – dollars that only the Fed can create out of thin air. The Fed increased the American monetary base to about a trillion dollars between 1913 and 2008. A trillion dollars in a century.”
But it gets worse. Leonard, again: “Following the financial crisis in 2008, the Fed’s balance sheet grew by $3.5 trillion by 2014. The Fed printed over 300 years worth of money in about four and a half years. Couple that with holding short term interest rates at zero for about seven years…” A spectacle of excrement waiting to happen, swept under the rug for another day. (Click here to watch Christopher Leonard’s full rundown of the Fed on YouTube.)
Throw in the “stimmie-gimmies” from the Pandemic and another round of zero interest rates and you’ve got inflation to the moon. We knew it was possible, but refused to acknowledge its reality. The former head of the New York Fed said out loud he thought they’d waited too long to tackle the Beast.
At least for today, the market doesn’t agree.