Interest rates have finally risen from their artificial lows, giving savers ADIATS (A Different Investment Alternative To Stocks) and thus a reward to being prudent in managing their fiscal affairs, unlike the Federal Government. Ever wonder why politicians clamor for low interest rates..?
Well, haven’t the last two weeks been interesting? From Silvergate, Silicon Valley, and Signature Bank all failing (must be an “S” thing), throw in Credit Suisse across the pond getting nationalized (for all intents and purposes), then a run on select US regional banks, add in a dash of moral hazard (fully insuring all depositors above the FDIC limit of $250k) and a 1/4 point rise in interest rates and what has changed? Nothing.
What’s not to like? Blue Skies, Gentle Waves, A Beach 🙂 However, that was most certainly not, 2022. In fact, last year, except for Cash, every major asset class I can think of got hammered. No matter where you went, nothing worked.
The unelected entity and purveyor of chaos, better known as The Federal Reserve, will issue its latest edicts today and the guardian of the dual mandate of 2% Inflation and Full Employment is brewing up, nothing short of a disaster.
A recent article in the WSJ espouses the virtues and foibles of backward running. Great in concept, but difficult to pull off, once, let alone constantly. Kinda reminds me of the Federal Reserve and their attempt to execute their dual mandate (full employment and 2% inflation (unrestrained laughing).
For anyone old enough to remember, let’s hope the boys are back in town. For anyone born after, say 1980, here is today’s history lesson: As Paul Volcker was choking out the ravages of inflation, beginning with 1979-1980, the Prime Rate (remember that) was 21.5%, it started an old fashioned, 4-decade decline on interest rates.
The first Fed Q & A session is underway. Chairman Powell notes “We are a long way from a full recovery”. In case you need a refresher, that is “Full Employment” (whatever the Fed deems it to be) and 2% Inflation.
Although not a bull, the bison is in full regalia with party hat, balloons and cake with lighted candles complimenting the festive atmosphere. And why not !!!
Feels like April 14, 1912 all over again. Not so much actually hitting the iceberg, but the fact there are only so many lifeboats for way too many passengers. Fast forward to present day and the clamoring to exit any asset class is experiencing the same déjà vu.
Although you may have not seen ‘The Hunger Games’, you have probably heard of the movie and soon HG 2 will be showing at a theatre near you. For the uninitiated, the premise is one of survival amongst your peers. Basically, kill or be killed. Barbaric indeed, but true. I bring this up in the context of changing the Gazbit title, slightly, to describe what little effect all the continuous QE (Quantitative Easing) is having on the global economy.
