The knee-jerk reaction to the conclusion of the press conference by Federal Reserve Chair, Jay Powell, was positive for the equity markets, as they closed in the green after trading in the red for much of the day. So for the time being, a pot of gold was given to the markets. Now one day does not make a trend and this could easily reverse. However, when the Fed is seemingly committed to keeping interest rates low until at least 2023 and probably longer if they can, they are sending conflicting signals. On the one hand, they want to note how resilient the economy is and how it is likely to grow at a solid rate this year; and yet on the other hand, despite record high equity and real estate markets, an economy they claim is resilient and growing, still somehow needs the Fed to keep interest rates at record lows for the next few years at least?! Something does not add up. This is no surprise, as the Fed is always talking out of both sides of its mouth. They are also well aware that markets nor the economy like higher interest rates and yields on notes and bonds. Recall what occurred during Q4 of 2018 as the Fed attempted to reduce their balance sheet and raise the Federal Funds Rate. All it took was a Funds Rate of 2.4 percent and a 10-year Treasury note slightly above 3 percent to bring equity markets down 20 percent. Now, with the economy weaker, and trillions of dollars more in debt, even lower rates and yields will prick this bubble. However, such increases are exactly what is needed to help rid the markets of malinvestments and zombie corporations. There is no easy way out of this quagmire.
Since the GFC and the implementation of QE, the global economy has been living through the largest economic experiment ever conducted and it also happens to be the biggest wealth transfer in human history as well. Policymakers and central bankers are aware of the fragility in the system. This is evidenced by their actions of attempting to keep interest rates low and to put downward pressure on yields, should they begin to rise. They know the patient, the economy, is weak. But they cannot state this obvious truth because it is they who would be to blame for the mismanagement of the economy and financial markets. So instead of leadership and accountability, we shall have cowardice and more of the same implementation of one asinine policy after the next. How will this end – in blood and tears. When will this end is up for debate. But if yields and interest rates continue to climb higher, and one nation after the next continues to protest and riot because of the now brutal intersection of economic, political, and societal problems, then the end of this economic charade may be fast approaching. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Markets #EndTheFed #bananarepublic #FoodPrices #FireCongress #USA #Liberty #Leadership #Gold #Silver #Bonds #Debt #Commodities #Protests