Im watching Fed Powell speech heres the link for anyone innterested.
VIDEO So they are admitting that inflation is going to be out of control. But because they are jumping out of the gate early and saying they are targeting higher than 2% inflation before acting on rates - hoping the market will see inflation and still back the dollar (because the FED has stated they expect higher inflation??!!) Will the markets buy that??
With rates low, businesses and economy against the wall AND inflation higher - (real FED measured inflation) so we know inflation we see on main st will be waay higher. So costs will rise, but luckily, lending rates will be low
so everyone that cant afford the rising cost of living can borrow at low rates to make up the gap??
That is the view of the FED. Being rich certainly helps understand that this is gonna be a good thing - great for the growth of the economy.
They are a slow moving train wreck getting closer to smashing into the station. It can no longer be stopped - it can only be sidestepped.
They are worried about deflation - even tho everything is going up in price. They say deflation makes people hold off spending but before CV19 - spending was at record highs and unemployment was record lows - it should have been firing on all cylinders and any pullback such as we have just seen, should have been something easily taken in stride.
They are worried about deflation because it hurts the balance sheet.
They are also now giving up on their employment mandate it seems. Looks like its higher inflation, low cost of debt for a while longer, higher permanent unemployment and then some time down the track, to tackle inflation, they will raise rates which will hamstring the economy for longer.
"winging it" is what we call it in Australia. ie Having No idea but having a go anyway. Thats ok for doing a bit of concreting around the home - NOT OK when you are in charge of the worlds currency.
I guess CBs cant really do much for main st - they cant take on uncollateralised loans or risks associated with small business lending - so its unlikely our national/regional banks will do differently - so small business lending is drying up. I see contraction, inflation and rising permanent unemployment and further down the track, rising interest rates as no one but the fed wants to lend for zero return and only big business can successfully apply for, or afford, credit .
