The Fed sees itself as trapped by the incompetence and greed of the other players and by its own policy extremes that were little more than expedient “saves” of a system that is unraveling due to its fragility and brittleness. .
There are two standard-issue narratives about the Federal Reserve’s agenda: the Fed’s official narrative is that the Fed’s mandate is to keep inflation under control while promoting full employment. The unofficial mandate that’s obvious to all is to prop up assets, especially the stock market, which has become the Fed’s preferred
signifier of prosperity and the rightness/goodness of Fed policies.
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The Federal Reserve is reassuring us daily that
inflation is temporary, but allow me to assure you that
wage inflation is just getting started and will accelerate rapidly. As I noted yesterday, the Fed can create currency out of thin and funnel it to financiers, but the Fed can’t create experienced, motivated workers out of thin air or entrepreneurs with the chops to launch and sustain real-world enterprises.
Let’s start with a funny little thing called
competition, which has been pushing wages down for the past 50 years. Globalization means
you’re competing with every other worker on the planet for jobs in tradable goods and services, and mass immigration and relatively high birth rates means there have been more potential workers than secure jobs.
Among the difficulties of entering uncharted macroeconomic territory, where daily transitory changes cause wild volatility in all corners of the market, is documenting key themes as they emerge.Â
One of the better analyses of the current market environment that we have read has come from Bloomberg Opinion writer John Authers. In a piece published on Friday, Authers lays out two key market themes heading into the end of Q2:
The developing problem of inflation, especially as it relates to the cost of food, in emerging markets.
How Elon Musk has, alongside of all of his devotees and disciples, placed himself firmly on the wrongside of what could be a serious coming market correction.Â
Inflation or Deflation?
I see the same question in forums, threads, articles and emails: what can I do to protect myself and my family from whatever lies ahead?
Given the uncertainties and extremes that are so evident, recognizing risk is a useful first step, a recognition that is very much out of fashion.
If we glance at the charts of margin debt (loans taken against one’s stock portfolio) which is at record highs, and short interest (bets that stocks will drop) which is at record lows, it seems the primary risk on investors’ minds is FOMO (fear of missing out) of all the fat, juicy guaranteed gains just ahead.