We've Been Here Before

No, we haven’t been here before. We are truly in uncharted waters here. The Fed allowed themselves to become enablers of irresponsible government policies in response to COVID. They did this by financing government spending through the purchase of government Treasury and MBS aka printing money. They increased the money supply by over 40% within an 18 month window then acted surprised when inflation ignited like a California wildfire. They then said that it would only be “transitory”. The problem now is that the federal government continues its profligate spending, currently running a $2 Trillion annual deficit. That $2 Trillion has to be financed through the sale of US Treasury notes in the Bond markets. With actual inflation currently in double digits, private capital and other sovereign purchasers of US Treasuries are going to demand higher yields. The Federal Governments unwillingness to address deficit spending leaves the Federal Reserve with only one tool to lower long term interest rates…restart QE policies and print more money. This would result in even higher inflation…think Weimar Germany in the 1920’s. This is a vastly different overall economic situation than what Paul Volker faced in 1980.

We were in this together Mike

We need Ronnie back!