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September 7, 2022 | Aggressive Fed-Rate Increases: Is Powell Doing A Volcker?

Bob Hoye has been in investment business for some 50 years, making him one of the more experienced researchers. His historical work has been thorough providing the first recognition of the fascinating transition from speculation in commodities to speculation in financial assets. It was controversial when Bob observed that “No matter how much the Fed prints, stocks will outperform commodities”. In January 2000, the research team concluded that the Dot-Com Bubble would peak in March 2000. In early 2007, the team outlined that the credit markets would reverse in May-June 2007. They did and the stock market followed. The latest was the call in early October for the Bitcoin Bubble to complete in December. Bob’s essays and speeches on political change and on actual climate change have been widely circulated.

After being arbitrarily accommodating, then in a relatively sudden fit of increasing administered rates, is the current Fed Chair, Powell, trying to replicate Chairman Volcker’s “success” in ending inflation in 1980? Perhaps, but since the Fed opened its doors in 1914 the US dollar is only worth, well, 3 cents on the dollar which is an indelible record of deliberate depreciation otherwise known as policymaking. And just what drives chronic depreciation? Generations of central bankers pushing the concept that the Fed can prevent recessions, which was understood by the original backers. Recessions followed financial crises and as “lender of last resort”, such crises would be prevented, therefore no recessions. The theory is still appealing, but with 19 recessions, including one Depression, it has never worked.

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September 7th, 2022

Posted In: Charts and Markets - Bob Hoye

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