{"id":66604,"date":"2025-02-03T20:35:14","date_gmt":"2025-02-03T20:35:14","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/real-estate\/the-feds-overreaction-and-inaction\/"},"modified":"2025-02-03T20:35:14","modified_gmt":"2025-02-03T20:35:14","slug":"the-feds-overreaction-and-inaction","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=66604","title":{"rendered":"The Fed’s Overreaction and Inaction"},"content":{"rendered":"


\n<\/p>\n

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They say that the Federal Reserve\u2019s policy action works with a lag but what simple maxim would be best suited to describe the result of their initial massive over-reaction and then subsequent hapless inaction?\u00a0<\/p>\n

What the market is still not fully appreciating is the notable downside risks inherent in both the Fed\u2019s reckless \u201cextraordinary\u201d policy action implemented after the crescendo of the 2008 financial crisis and further hysterical response to the COVID-19 panic, as well the lack of action once the consequences of these policy blunders resulted in an obvious and not-in-any-way \u201ctransitory\u201d bout of textbook monetary inflation.<\/p>\n

Make no mistake, the Fed\u2019s era of QE and ZIRP has drawn to a close and, as we move further away from the Great Moderation into the Great Agitation<\/a>, history will judge these actions harshly with great and powerful Nobel-winning Keynesian wizards fully revealed as panic stricken academic weaklings that debased our monetary system thereby totally distorting all markets, public finance and a generation of now delusional \u201cinvestors\u201d.<\/p>\n

Similar to Fed Chair Bernanke’s March of 2007 testament that the tumult in the subprime market was “contained”, Powell’s 2021 “transitory” narrative was an overt charade attempting to frame an emergent, highly problematic economic trend in a light that simply wasn’t even remotely true thereby seriously damaging the credibility of the Fed and allowing matters to get far worse before any actual policy action response was be mounted.<\/p>\n

But unlike back in 2008 where the Fed first exhausted all normal policy tools before then overreacting and intervening in markets with unconventional methods, today, Fed Chair Powell has all the tools he needs to respond to the current economic conditions but is simply too timid to fully use them.<\/p>\n

Today\u2019s inflation is not temporary or supply chain related or coming from China lockdowns or the war in Ukraine or any other recent \u201ccon\u201d whipped up by statist policy junkies.\u00a0\u00a0<\/p>\n

Our current bout of inflation is simply plain old monetary inflation coming as a long delayed effect of the Fed\u2019s own reckless \u201ceasy money\u201d policy action.\u00a0<\/p>\n

Adding insult to injury, the Fed\u2019s hesitance to own up to this fact allowed inflation to continue to run wild becoming an ingrained intractable factor in the minds and actions of all market participants.<\/p>\n

The Fed funds rate hikes to date have come nowhere near the level required to arrest ongoing inflationary pressures with interest rates still far below even the most optimistic read of rising prices (PCE, core-CPI).<\/p>\n

As Powell stated himself during his September 21 press conference<\/a>; “… you want to be at a place where real rates are positive across the entire yield curve.\u201d But the Fed continues to delay making this tight money yield curve a reality.<\/p>\n

After the horror that was the September CPI report (as well as PPI), it is quite clear that inflation has moved well beyond the point that the Fed\u2019s typical forward guidance and regular schedule Fed meetings can contain.\u00a0<\/p>\n

The Fed needs to go big, once and for all.\u00a0<\/p>\n

The only option for the Fed and Powell now is to implement emergency inter-meeting rate hikes.<\/p>\n

Unscheduled, unexpected large Fed policy action will provide the shock the markets need to put a final and lasting end to all forms of speculative delusion bringing participants back to their senses as they abruptly realize that the era of \u201ceasy money\u201d is gone for good.<\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"

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They say that the Federal Reserve\u2019s policy action works with a lag but what simple maxim would be best suited to describe the result of their initial massive over-reaction and then subsequent hapless inaction?\u00a0 What the market is still not fully […]<\/p>\n","protected":false},"author":1,"featured_media":66605,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[99],"tags":[35737,35739,35738],"dealstore":[],"offerexpiration":[],"class_list":["post-66604","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate","tag-feds","tag-inaction","tag-overreaction"],"yoast_head":"\nThe Fed's Overreaction and Inaction - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=66604\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Fed's Overreaction and Inaction - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"Like this post? 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