So Hawkish It Hurts

[BUZZWORDS GO HERE]

So if I Google 'hawkish fed,’ I get 26.4 million results, which is odd, because as far as I’m concerned the Fed is anything but hawkish.

I mean, sure, they talk hawkish, lately (but remember, not that long ago they were begging for higher inflation.) They generally do all this forward guidance through something known as the Fed “bullshit channel.”

It helps a lot that every single MSM Fed reporter on Earth has their head firmly up the Fed’s, um - anyway, they all use words like “Volcker” and “restrictive” and other economic terms, but I’ve been making tapering (and liftoff and QT etc.) jokes on Twitter for nine years, and as for “normalization”? Fuggedaboutit.

Note that this tweet is from 2013.

As I wrote back in January, the fact that the Fed is painted in a corner is 100% the Federal Reserve’s own fault. They had over a decade to QT Taper Normalize Liftoff etc. and they blew it. Citadel Ben started the whole nonsense. Yellen in particular was asleep at the wheel 2014-2018, and Jerome chickened out in Dec. 2018. The Fed is really good at pissing on your leg and telling you it’s raining.

Even today the Fed is still buying T-bills and bonds. Why?? Would the ATM’s stop working otherwise? WTF?

(Waiting for the econ majors to chime in with, ‘You know, tapering does not mean decreasing the balance sheet, it simply means blah blah blah'…Yes, I know. Shut up.)

As an aside - how did we as a nation get to the point where a failed-regulator Berkeley econ professor & a fabulously wealthy private-equity oligarch are the two most powerful people in America?

("You know, if baseball umpires were on the front page of the sports section every week, you'd know something was desperately wrong with the game." - Jim Grant, on central bankers)

Anyway, starting in June - they promise this time they mean it, for real - they’re going back to QT. We’ll see how long that lasts before they have to reverse course, slash rates, and start buying $240 billion a month (or week) of…whatever. Baseball cards.

(By the way, the "Fed Put" is at whatever market level causes the future jobs at Citadel, Pimco and Blackrock to dry up.)

When SOMETHING BREAKS, again, as in 2008 and 2020, the same arsonists who set the place on fire will be tasked with being fire marshals, saving the billionaires who, to be fair, will be the ex-FOMC members’ future employers.

Weirdly, I am not in the very popular Fed as savior shill camp. If I was, I’d be chief economics correspondent for The Wall Street Journal, or CNBC’s Senior Economics guy.

I am in the much smaller Fed as serial killer camp, since I think I have the weight of the evidence on my side.

As for rates, three 50-basis point hikes are in the bag, which would take real rates up to…checks math…about negative six percent or so (SO HAWKISH!!)

It’s ok though, because inflation (which was all caused by Putin, BREXIT and supply-chain disruptions®) will soon drop back to our normal level of inflation and all will be well again!

I guess my point here (and forever, if you followed my now zapped Twitter account) is that the Fed will never normalize or hike much, because, as Steve Bregman would say, “they can’t.” They broke the system. What we have now is a Soviet-like corporatist-government central planning system, more akin to fascism in my mind than capitalism.

I am skeptical that our FOMC high priests can even get the Fed Funds rate to 2.5%, which would be about half of its historical norm. Everyone the Fed really cares about would blow up. Clearly they don’t care about the 90% of Americans who make under $100k.

It’s important to remember that the Fed WANTED INFLATION, even though their mandate is actually “stable prices.” They want to debase the currency slowly, believing they’re much, much smarter than, say, the German central bankers of 100 years ago.

(“The Federal Reserve Reform Act of 1977, for one, does not say ‘price stability.’ It does in particular not say ‘a stable rate of inflation.’ It says ‘stable prices.” -Alex J. Pollock, President and Chief Executive Officer of the Federal Home Loan Bank of Chicago from 1991-2004

…and this, from Credit Bubble Stocks…

"0% inflation feels like deflation for people who have made commitments that depend on gradual currency devaluation.")

I suppose I’ll close with something I wrote back in August 2018:

Re: The supposed end of QE. Nonsense. How much stomach do global central bankers have for rising rates, or lower stock prices? Not much. They're not going to say "Oh well, we tried $20+ trillion and it didn't work. Let's go back to MIT." They'll quadruple down.

TL;DR: The Fed is full of shit.