The Economy

I didn't "argue" anything like that.

You asked me who would supply money without the Federal Reserve. I told you that the Fed doesn't supply money, banks do.

You then said something about how the Fed "creates money" and I responded again, telling you that the Fed doesn't create money, it MANIPULATES the banks that create money by lending and taking deposits. The Federal Reserve tries to fix the price of money (using very hamhanded methods that essentially amount to trying to encourage the expansion of credit endlessly higher and higher). ... by intervening in our securities markets and buying assets, by using the discount rate to try to force banks into certain behaviors and by manipulating bank reserve requirements.

Which gets back to what started this. Someone asked which would I prefer, artificially low interest rates or sky high interest rates, as a result of their price fixing measures (with the sky high rates only coming when they unleash the inflation genie from the bottle after the sugar high of perpetual cheap money that is their default, and they are forced to deal with the misery they created for people). My response was that I'd prefer a market that is not price fixed by an appointed authority that is hurting everyone, I'd rather millions of buyers and sellers (i.e. lenders and borrowers) price money themselves via voluntary exchange WITHOUT a central planner trying to control everyone's behavior.

 

He's right about the DEI shakedown game and the racial quotas he has no choice except to adhere to. It's too bad that he is put in the position of having to talk around the fact that he honestly could give a shit if you are gay or black or hispanic or Martian, he is the CEO of one of the best-run businesses in the world and what he really wants is the best, most qualfied PEOPLE he can find. We'd be much better off if this was the focus everyone had.

 

This is surprising to me. Their default is usually to introduce a bail out, call it a temporary emergency measure, and then when no one is paying attention make it permanent.

What that does do is signal that they already have rate cuts planned. ... It gives the banks they have kept propped up another year on the freebie money they were given. But there is no way possible that they can take away the backstop that has been propping up our banking system and not have banks start failing again with so many of their bond portfolios still under water. The only thing that bubbles up the values of those bonds back to where they were and creates the false illusion of stability. ... is if they drop the discount rate back close to zero and get interest rates back down.

They are playing a dangerous game, because they don't have "inflation" under control and this is perilously close to lighting matches near a gasoline depot.

But this is the Weimar Republic roller coaster they have us on now.

 

Interesting take.

The UMich sentiment survey was in the tank two years ago. It was pure gloom. So to say, "People feel better," doesn't equate to "people feel good." The CPI (which undereports prices) is still running at 3.4 percent annually in the last print, which would have been unthinkable before they moved the goal posts. The Fed's own bullshit used to have a "2 percent" objective. When people's purchasing power is declining by 3.4 percent a year, the poorest people don't feel good, which is why the political polls tell a different story.

We'll see if the "soft landing" narrative is true. It has never happened in the history of the Fed creating booms and busts. Not once. It seems to me like the broad based sentiment (which is really based on "the Fed is going to cut and juice things again and the bubble is going to reinflate everything. ... not the actual economy) is doing a "mission accomplished" BEFORE we are at the finish line. That is always dangerous. The difference between now and all the other times the Fed pivoted after the financial crisis because it can never normalize things now without a debt bomb exploding. ... is the inflation genie that is out of the bottle. If they do reverse, that 3.4 percent which is killing poor people, can easily take off to prices rising at an even worse pace again.

 

Interesting story on auto insurance premiums, which have risen 37 percent on average since 2020.

Why Did Car Insurance Get So Expensive?