As expected this week, the Federal Reserve did not raise or cut the federal funds rate. Instead, after a two-day FOMC meeting, the central bank announced on Wednesday that it would keep flat interest rates within its target range of 5.25% and 5.5%.
What surprised the stock market was Federal Reserve Chairman Jay Powell’s remarks following the official statement. Powell has repeatedly said the Fed needs more. “faith” The point is that consumer price inflation has been licked.
Powell also said he would not cut interest rates at the next meeting in March. This comment had the same impact as poop in a swimming pool. Stocks were suddenly sold off. The S&P 500 index closed down 1.6% and the Nasdaq index closed down 2.2%. Shares of Alphabet fell 7% after the company reported weak advertising revenue.
The Federal Reserve continues to find itself in a precarious position. The consumer price inflation rate is still above the target of 2%. However, some local banks are overflowing with cash.
Case in point, shares of New York Community Bancorp tumbled 38% on Wednesday. This comes after reporting a deficit in the fourth quarter. $252 million.
To this end, the Fed deleted the following sentence: “The U.S. banking system is healthy and resilient.” In the latest statement.
Make this whatever you want. As far as we can tell, another banking crisis is brewing in local banks that could end by the end of this year.
Therefore, the Federal Reserve must prepare large liquidity pools to bail out banks when a crisis occurs. How to do this while maintaining a tough stance on consumer price inflation is a question for which there is no good answer.
We’ll consider what this means in a moment. But first we need proper context.
deep time
Author John McPhee first detailed what he called ‘deep time’. He used this as a way to describe the sense of time in terms of millions and tens of millions of years rather than days, hours, minutes and seconds.
Considering such long and deep time scales, the human lifespan dwarfs, reduced to a point of nothingness.
A friend recently told me that people care too much about the Federal Reserve and what it does. To be sure, the Fed’s decision to keep interest rates steady over a long period of Himalayan rises and falls makes no sense.
Nonetheless, we are still considering it. What choice do we have?
We are human just like you are human. And we all live in a centrally planned credit market. It was rigged by a committee of unelected bureaucrats for the benefit of the big banks. We can’t talk about that.
What the central planner does in the minutes and days that make up the here and now may have little relevance in the context of deep time. But you can’t ignore it. It has repercussions that affect your life, compromise your security, and erode your family’s future.
This is our fundamental dissatisfaction with this matter. Labor creates value, which is rewarded with money. But the problem is that the money is corrupted for the bankers, big government spenders and their associated beneficiaries.
Not only is this fundamentally unfair. It also creates disharmony and confusion.
extreme misinvestment
2024 stumbles like a three-legged monster. That’s because new all-time stock market highs are recorded almost every day. As the presidential election approaches, politics moves forward with reckless logic. As geopolitical hotspots boil over. Domestic discord escalates into full-blown discord.
Take comfort in knowing with as much certainty as possible that the misinvestments the Federal Reserve and Treasury have jointly caused over the past 40 years have not only become more extreme. But it will be especially more extreme.
Madness will turn into greater madness. The stock market bubble will inflate before it can inflate further. Reckless speculators will reap huge profits and huge egos. Fund managers will gamble on technology stocks to ensure their performance catches up with index benchmarks.
In fact, until the big collapse happens, nothing will make sense if you use simple logic to understand what’s going on. How can that be?
The enthusiasm for a stock market crash caused by the latest technology is highly irrational. Greed trumps all critical sensibilities. Fear of missing out allows the blind to lead the blind. Go big or go home.
At the same time, fundamental analysis is off its rocker. Historical means are thrown into the trash can. Honest investing takes a backseat to boat gambling.
For now, the Fed’s monetary policy can remain stable. But Washington’s fiscal spending is truly insane.
According to its latest monthly financial report covering the first quarter of fiscal 2024, Washington has already $510 billion. At that rate, Washington is targeting a $2.4 trillion deficit in fiscal 2024.
Are you passionate about political solutions??
Like the chaos created by central banks, Washington’s massive deficit spending follows its own illogical logic.
At a time when our European allies are increasingly dependent on U.S. natural gas, what logical reason would President Biden have to stop authorizing LNG exports?
Did Biden inhale gas? Does this actually have anything to do with global climate change? he claims? Is the Earth really getting warmer? So, is combustion of carbon-based fuels the culprit?
The answers to these questions don’t really matter. What really matters is passion for political solutions. And how such passions can manifest themselves to siphon off the spoils of workers and savers for the benefit of insiders.
Renewable energy, such as defence, education, finance, healthcare, etc. are industries promoted by government intervention. This creates pockets of apparent wealth financed by bad investments.
If it were not for government policy, the companies and individuals involved would have been doing other things elsewhere. Instead, they are busy working on projects in seemingly prosperous industries.
Unfortunately, the heavy hand of government intervention in the economy will continue until the government debt pyramid finally collapses. This will be followed by an extended Dark Age, a period of division of power.
But until then, any garden variety recession or serious recession will be solved by bigger spending programs and debt-based misinvestments. And greater madness and madness will follow.
Choose your location wisely.
thank you,
minnesota gordon
for economic prism
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