if we cannot get people seriously mad at the Fed now that they have failed so severely that they experienced the first loss in their existence and then panned it off to the US government (as was always the option built into their charter for a time such as this), then how will we ever get people upset enough to fight the Fed for all the damage that it does to all of us? So, please go back to this week’s anniversary article and share it with anyone you think might become riled up over what the Fed has just done, using the share button on the article or email a group of friends and associates with a link to the article, or send it out by X.
I’m not asking just for the sake of helping this site but because, seriously, if this big bank bailout that was paid in advance with Fed free money stashed away with the promised interest on those TRILLIONS of free dollars to banks now passed off to the tax payer in the form of a higher government deficit does not bring serious pressure on the Fed for its failures, nothing ever will. I mean, why do you have to pay interest on money you GAVE to the banks in the first place? Much less do it in a way that leaves the government paying for it! This is obscene, and it is the one best chance to hope people WAKE UP! If this doesn’t do it, I cannot imagine what will, and the mainstream press is silently sitting this one out. Shame on them!
And now on to the business of the day, and it’s plenty big!
Wow! Is the Fed losing ground fast! CNBC’s Rick Santelli started the day by saying “Wow!” when he saw the hot jobs report that came out. It may be good news for the economy, and surprisingly it didn’t stun stock investors who have typically seen good economic news as bad for years because today’s investors only care about the cheap money the Fed creates when it tries to save the economy, but it certainly was bad news for the Fed’s inflation fight. So, you would think a hot-in-the-headline-number jobs report would have set off a stock shock.
Thursday, it appeared the Fed’s Neil Kashkari spooked the market quite seriously when he said that hot jobs and rising inflation in the last couple of months could mean that the Fed would not cut rates at all. The market plunged, except one commentator noted the markets rout started before Kashkari spoke. At any rate, the market rose Friday, even though a second Fedhead spoke and said something even worse, which was what I have been saying for a couple of months now: The Fed may actually have to RAISE rates another notch if things keep going like this.
After Kashkari was “first to say the quiet part out loud,” Fed Prez. Bowman spoke up and said that just continuing to hold off the hoped-for rate cuts might not be enough. The Fed may have to raise rates. That would be, of course, in order to tamp down all the enthusiasm Powell torched off back in November when he started hinting that rate cuts could be near IF the market kept doing the Fed’s dirty work (by which he never meant as near as March), which caused the exact reaction I criticized him for back then of setting the market to undoing all the tightening it had done … and who couldn’t see that reaction coming, except apparently Powell?
So, here we are: the Fed’s advance team that runs new possibilities up the flag pole, first broaching the subject of zero cuts all year (Remember my saying the June rate-cup hopes were a bit aggressive?) and now the next member of the team running the prospect of an actual hike up the pole.
The stock market seemed to say, “Whatever! We’ve done enough of a correction. Let’s get back to flying high on hope.” Delusional as always. The bond market, on the other hand, was not so sanguine. The 10YR Treasury rose nine basis points, which put its yield at the highest it’s been in about 4-1/2 months. There is still a good measure of loosening that happened in the first half of last November, however, that needs to be clobbered back out of the picture. It will be before inflation is done, and rising bond yields will pull down stocks, regardless of what they did in their delusions Friday.
Thursday was, all the same, the worst day for the Dow in over a year, and the S&P ended down this week for the third week in a row. Things are clearly looking more chaotic now that it is becoming clearer with each passing week that the Fed is losing the battle with inflation because 1) we’re at the sticky part; 2) Powell gave the markets the whiff of oxygen they needed for their fantasies back in November, completely destroying all the tightness his words and policy earlier in 2023 had brought about; 3) inflation was showing signs of rising clear back in the middle of last summer; 4) we have spreading wars that just got a lot hotter this week both between Ukraine and Russia and between Israel and Iran and in Gaza that are now seriously driving up the price of oil.
Friday, oil beat and held above the $90 mark I’ve been saying was likely coming soon. It’s here.
As a result of all this, the headlines reverberate throughout with a slaughterhouse of stories that show the Fed is losing the fight and will be forced to get tougher. Even though all those new jobs in Friday’s report went to part-timers, the report is still cutting the Fed no slack whatsoever, playing the role I’ve warned we should expect where the Fed’s broken labor gauge and resurgent inflation hold the Fed in the fight until it breaks something seriously.
Then we’ll see stocks plunge for sure and see the economy plunge into an undeniable recession, for my prediction has alway been based on the fact that the Fed has cornered itself into an intense inflation battle, and that battle will crash everything before it is over. This week’s news clearly showed it’s far from over! The week took away hope for interest cuts and even suggested a return to interest hikes. I think I was a lone voice on that prospect when I started warning of it on Goldseek Radio a couple of months ago. But now we have a voting Fed member saying it.
March cuts flew off the table. June is off the table. And maybe the whole year is off the table, and maybe even another hike is coming! It’s often a thankless and lonely job, but I’m staying with my convictions.
About the author
David Haggith is the publisher/editor-in-chief of The Daily Doom.
Economic, Social and Political News of Our Troubled Times -- a non-partisan daily collection of the most consequential stories about our complex times from multiple sources around the world plus daily editorials like the one you read here.
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