I would bet money the Fed has no idea. But they’ve got this story of inflation not being a problem, and so far, they’re sticking to it. So, internal politics may also be playing into Powell’s positioning – a lousy thought, but nonetheless a potential reality as we try to understand the Fed’s backwards thinking. for Yellen. (Keep in mind, the Yellen we’ve seen as Treasury secretary is far more aggressive in her desire to tax the world than we ever saw at the Fed... so much so that she’s responsible for the 15% worldwide tax proposal.) The bottom line is this... inflation is coming. And at some point, the Fed will need to react. When that happens, you’ll want to be prepared... Capture the momentum on the upside by being invested in markets as they move higher. Consider diversification into some hard assets (gold or real estate) if you haven’t already in preparation for any challenges. And keep a little cash on hand to be ready to buy some stocks when the pullback in the market happens. And remember, don’t trust the Fed... Make your own judgments, knowing that sooner or later, the Fed will have to react if only to taper its bond buying, and that – in the long run – it will be healthy for the markets and the economy as a whole.
markets may suffer the consequences. If they don’t raise – and increasingly, the smart money is making that assumption – then the party lives on... until it ends. Badly. I’m convinced that we need, and the market would indeed even welcome, some more responsible rhetoric from the Fed and even some near-term tapering with a promise to look at all the data in case it needs to move on interest rates. Is it too much to ask that the Fed review all the data? That’s exactly what Powell should have told Congress in his most recent hearing. He should have said he would remain vigilant and watch all the signals and data points – from employment reads to producer prices and consumer prices and everything in between. When Janet Yellen was Fed Chair, she was quite good about promising to read all data in real time. So what happened? Some think that Powell’s job might be on the line... and that he’s speaking to an audience of one – his former boss at the Fed – now secretary of the U.S. Treasury, Janet Yellen. His term is coming up, and some anticipate that she may want to replace him. And, why not? He was “Trump’s” guy... liked by former treasury secretary Steve Mnuchin, and Powell effectively replaced Yellen herself. As such, she may feel more comfortable putting her own guy, or gal, into the spot. Lael Brainard, a friend of Yellen’s, could easily fit the job and might be a preferable and friendly alternative
American Consequences
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