Part of the US monetary policy during the great Pump-Up

Posted on: April 22, 2022 at 17:11:05 CT

has been to print extra dollars to support public markets in both stocks (general confidence of Wall Street and Mom and Pop) and bonds (keeping interest rates and borrowing too low). Now with no new money being put in, we're set for a recessionary cycle that will take investments with it. Higher yields in bonds with interest rates rising which will take longer term bonds down and a downturn in stocks as earnings tumble and no government money buying in like before. Yellen was drastically wrong about inflation, so the Fed did nothing until it has already become a huge problem. House prices are up 20%-30%, many food prices are up the same or much more, cars are selling over MSRP and gasoline has risen and will continue to rise.

Managing the economy is a delicate balancing act. It works best when small adjustments are made over long periods of time, not sudden knee-jerk reactions. It's a big engine that needs a very deft hand. Jerome Powell has said they will rise rates by 50 bps (1/2 a %) instead of the customary 25 bps, with more to come. One tool they won't be able to use is adjusting the money supply upward or pumping funds into the loan markets.

Protect thy anus.

Edited by JimD at 17:11:36 on 04/22/22