I believe the Fed is making a mistake. Powell ju
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Posted On: 12/19/2018 5:29:22 PM
I believe the Fed is making a mistake. Powell just basically said that the Fed will invert the yield curve. There is no reason for the Fed to continue raising rates with inflation, wage growth and GDP growth well contained. The chart below shows the history of the Fed inversions and recession.
Going back to the early 80s, The fed raised rates dramatically because inflation was approaching double digits. The inflation was in response to the guns and butter spending by Johnson, the wage and price controls by Nixon and oil price shocks that were accommodated by earlier Feds. Volker really had no choice. Of course, the move by Volker killed the S&L industry. The economy rolled over into a recession.
In the late 90s inflation was running a bit hot (6%) and the Fed once again inverted the yield curve and caused a recession.
After the Fed government pushed the stupid Y2K scare and forced companies to update technology, which caused the tech bubble, the Fed inverted once again and caused a recession.
After the tech bubble burst, The Fed held rates too low for too long and ignored the credit abuses in the housing sector. In response to poor policy decisions, they inverted the yield curve once again and brought on the Financial Crisis. The failure of supervision by the Fed was the main cause of the financial crisis. Geitner deserves a lot of blame for his poor record at the New York Fed. Letting Lehman and Bear run at 30X leverage was a huge mistake. Also, the Fed government forcing Freddy and Fannie to take on subprime mortgages also played a big role.
Now after keeping rate too low for too long, we are seeing Powell tell the market that the Fed is once again going to invert the yield curve. Add to the rising Fed Funds rate the 50 billion per month roll off of the Fed balance sheet and we have the Fed actively pushing the US economy into a recession.
I wish someone would have asked Powell if the Fed would raise the Federal Funds rate above the 10-year rate if inflation remains well contained and below their 2% target. I also wish someone would have asked about the Fed's terrible track record.
I think Trump is right to be pissed.
Going back to the early 80s, The fed raised rates dramatically because inflation was approaching double digits. The inflation was in response to the guns and butter spending by Johnson, the wage and price controls by Nixon and oil price shocks that were accommodated by earlier Feds. Volker really had no choice. Of course, the move by Volker killed the S&L industry. The economy rolled over into a recession.
In the late 90s inflation was running a bit hot (6%) and the Fed once again inverted the yield curve and caused a recession.
After the Fed government pushed the stupid Y2K scare and forced companies to update technology, which caused the tech bubble, the Fed inverted once again and caused a recession.
After the tech bubble burst, The Fed held rates too low for too long and ignored the credit abuses in the housing sector. In response to poor policy decisions, they inverted the yield curve once again and brought on the Financial Crisis. The failure of supervision by the Fed was the main cause of the financial crisis. Geitner deserves a lot of blame for his poor record at the New York Fed. Letting Lehman and Bear run at 30X leverage was a huge mistake. Also, the Fed government forcing Freddy and Fannie to take on subprime mortgages also played a big role.
Now after keeping rate too low for too long, we are seeing Powell tell the market that the Fed is once again going to invert the yield curve. Add to the rising Fed Funds rate the 50 billion per month roll off of the Fed balance sheet and we have the Fed actively pushing the US economy into a recession.
I wish someone would have asked Powell if the Fed would raise the Federal Funds rate above the 10-year rate if inflation remains well contained and below their 2% target. I also wish someone would have asked about the Fed's terrible track record.
I think Trump is right to be pissed.
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