I was really surprised for them to announce rate cuts next year. They keep saying their goal is to get inflation to 2%. However, this tanked the long term interest rates yesterday. Isn't this going to increase loan demand (housing and other) and also spike consumer spending? Isn't there a real chance of this causing CPI to start ramping again? I expected them to hold rates where they are and maybe soften the language some, but I am not following the rate cut announcement move.

Oh, that explains it. Trump was pushing Powell around like a ragdoll. I guess Biden has started it now since election year is coming up. I hope inflation ramps again and it bites him good.

Powell had a bunch of bitcoin and needed to drive up the price so he could cash out.

Bonfire97 said:

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Something caused this "pivot". My guess is an oncoming widespread bank bust. I think there are many banks in trouble due to owning deflated bonds. That probably explains this. There is no other reason for what they did yesterday. It completely contradicted their "war" against inflation to get it back to 2%.

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If the pivot comes with additional MBS purchases by the Fed, I'd be more inclined to believe it was bank stress causing this.

Powell has been very strategic about which measures he has used for his talking points to substantiate the rate increases...CPI, Core CPI, Super Core CPI, Employment ... he has found the most favorable for his hiking campaign. Now they're all starting to line up against rate increases and I think he has run out of red herrings and is being forced to consider going the other way.

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Powell has been very strategic about which measures he has used for his talking points to substantiate the rate increases...CPI, Core CPI, Super Core CPI, Employment ... he has found the most favorable for his hiking campaign. Now they're all starting to line up against rate increases and I think he has run out of red herrings and is being forced to consider going the other way.

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Yeah, I am with you. The part of it that lost me was announcing the rate cuts. Seems like a dangerous move when you are trying to be sure inflation is actually coming down in a sustained manner.

Bonfire97 said:

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Actually, the stupidity is the fact that inflation is causing people to be poor and they are too dumb to realize it. I don't care about Biden or any other politician. I am tired of manipulated markets.

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And they continue to use politics to distract from inflation and market manipulation. They know that as long as Republicans blame Democrats and Democrats blame Republicans, few people will be able to see under the curtain and realize that both parties will continue to print money and inflate away our wealth.

And the sooner people realize this and realize that this is the very reason Bitcoin was created, the sooner we can get out of this broken system.

The Fed has essentially lost all concepts of independence that should be their bedrock. They let Trump brow beat them and now they are likely getting heat from Biden. Also, they care way more about employment than they do inflation and while the unemployment rate is low", that is primarily because of a low participation rate.

One other data point, the longest the Fed has kept rates at their highest level after a tightening period in the last 40+ years is 7 months. They are following the Fed playbook from before.

No thanks... I don't have time to debunk conspiracy theories. You all are making the claims you should prove them true.

Bonfire97 said:

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I was really surprised for them to announce rate cuts next year. They keep saying their goal is to get inflation to 2%. However, this tanked the long term interest rates yesterday. Isn't this going to increase loan demand (housing and other) and also spike consumer spending? Isn't there a real chance of this causing CPI to start ramping again? I expected them to hold rates where they are and maybe soften the language some, but I am not following the rate cut announcement move.

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Herein lies the problem:

The Fed in 2023 no longer has any room to maneuver with monetary policy. And it's because of the elephant in the room that will not be addressed - The Debt.

The standard deviation for rates now is going to be low because even a small move in rates has an outsized impact on debt interest and payments.

For perspective, many people like to call back to Volcker and his extreme rate moves to rein in inflation. He pushed interest rates to a maximum of 20% in the early 80s to kill inflation. People want to know why we haven't done that? It's because in the early 80s our debt was only about $1T.

Our debt is now $32Tish. So, any moves the Fed makes now with our current debt load have a much greater weight than they did in an era where we could just ratchet rates up to 20% with no other impact than temporary pain in the day to day. At the rate we are going with our debt, monetary policy will become less relevant as debt payments eclipse everything else. It's just a matter of when. There is no way out without a reset of the current financial system.

For further perspective, here is a chart showing current debt loads of western countries. You have probably heard about the PIGS (Portugal, Italy, Greece, and Spain) and their notorious debt troubles...thus the derogatory name.

Well, here you can see we are now a qualifying member of that prestigious group. Maybe we could call it USPIGS. Look at us pigs and our lack of debt control!



To answer your original question, there is no game left to play. What the Fed is doing right now is more akin to changing the box scores and stats after the game is already over.

YouBet said:

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Bonfire97 said:

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I was really surprised for them to announce rate cuts next year. They keep saying their goal is to get inflation to 2%. However, this tanked the long term interest rates yesterday. Isn't this going to increase loan demand (housing and other) and also spike consumer spending? Isn't there a real chance of this causing CPI to start ramping again? I expected them to hold rates where they are and maybe soften the language some, but I am not following the rate cut announcement move.

---

Herein lies the problem:

The Fed in 2023 no longer has any room to maneuver with monetary policy. And it's because of the elephant in the room that will not be addressed - The Debt.

The standard deviation for rates now is going to be low because even a small move in rates has an outsized impact on debt interest and payments.

For perspective, many people like to call back to Volcker and his extreme rate moves to rein in inflation. He pushed interest rates to a maximum of 20% in the early 80s to kill inflation. People want to know why we haven't done that? It's because in the early 80s our debt was only about $1T.

Our debt is now $32Tish. So, any moves the Fed makes now with our current debt load have a much greater weight than they did in an era where we could just ratchet rates up to 20% with no other impact than temporary pain in the day to day. At the rate we are going with our debt, monetary policy will become less relevant as debt payments eclipse everything else. It's just a matter of when. There is no way out without a reset of the current financial system.

For further perspective, here is a chart showing current debt loads of western countries. You have probably heard about the PIGS (Portugal, Italy, Greece, and Spain) and their notorious debt troubles...thus the derogatory name.

Well, here you can see we are now a qualifying member of that prestigious group. Maybe we could call it USPIGS. Look at us pigs and our lack of debt control!



To answer your original question, there is no game left to play. What the Fed is doing right now is more akin to changing the box scores and stats after the game is already over.

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Somebody gets it. But because the market keeps moving up, because the engine is still moving us forward, nevermind the weird sounds its making. Don't look under the hood. Just keep driving. "It's always worked to this point, so it will keep working just fine".

Read this book if you want to understand the Fed's game. This is a recurring cycle that will continue as long as there is a Fed.

The Creature from Jekyll Island

Very well put. And I'd also add, to the extent your chart doesn't include it, the unfunded obligations of the government with respect to benefits. That is added stress on the house of cards. It amazes me the number of people who fail to understand that the bill always comes due. There is a reckoning that will have to be addressed one way or another.

lobwedgephil said:

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Read this book if you want to understand the Fed's game. This is a recurring cycle that will continue as long as there is a Fed.

The Creature from Jekyll Island

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I haven't read this yet but it's on my Christmas list.

Aglaw97 said:

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Very well put. And I'd also add, to the extent your chart doesn't include it, the unfunded obligations of the government with respect to benefits. That is added stress on the house of cards. It amazes me the number of people who fail to understand that the bill always comes due. There is a reckoning that will have to be addressed one way or another.

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Yep, the Voldemort Debt because it will be kept on this balance sheet over here in the dark and shall not be named.