November 13, 2017 | Fed Hoping for ‘Bad’ Inflation News

[I am airing this for a second day so that readers are well prepared for Wednesday’s CPI data. It could significantly impact U.S. and global markets.]  Bloomberg News has been drum-rolling Wednesday’ scheduled release of CPI data, since a report suggesting inflation has remained subdued will complicate the Fed’s task of convincing the world more tightening is urgently needed.  Yellen & Co. gave up pretending inflation was a big problem a few months ago, ostensibly because the only place this seemed to be true — to an appalling degree — was in real estate and stocks.  More recently, even with the Fed’s benighted lackeys in the news media blaring increasingly shrill warnings that inflation is about to return with a vengeance, no one seems panicked. Maybe it’s because American workers haven’t gotten a real pay raise in forty years.  You can bet they’re not cheering for more tightening.

Meanwhile, bond markets have been acting as though higher administered rates are certain. But if October’s CPI number comes in at 1.7% as expected — or, heaven forbid, a little lower — look for the Fed to amp up its warnings about how a supposed global economic boom is about to touch off a spiral of inflation. I’ll believe it when workers start asking for, and getting, big pay raises. Until then, we should continue to regard each 25-basis-point hike by the Fed as another trigger-pull in a game of Russian roulette. Sooner or later, tightening, however timid and fake, is going to have its effect on the quadrillion dollar derivatives bubble — a cosmic-size juggernaut of potential deflation that someday will put the central banks’ awesomeness in a more sober perspective. (Click here for an explanation of how the flattest yield curve in more than a decade could eventually send the U.S. economy into deep recession.)

This Is Tightening!?

Incidentally, it is only economists, pundits and editorialists at such mainstream mouthpieces as the Wall Street Journaland New York Times where what the Fed has actually been doing could be called “tightening.”  In reality, on a year-over-year basis, the monetary base has grown at a very accommodating 7.7% clip, free reserves are up 6.9%, M3 has grown 4%; and M1, 7.4%.  If that’s tightening, then just a little more of it would amount to helicopter money.

Rick Ackerman November 13th, 2017

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