What is the definition of Insanity, again..?

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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.

What folly, given the current pandemic. Translation: We will keep interest rates on the floor, until economic activity picks up to our liking” which is for a long time.

One thing you cannot create is demand. Unless you have the confidence you can pay back a loan, even at a fraction of a percent, it ain’t happening.

Yet, the unelected Federal Reserve keeps buying $120 billion of securities monthly (read: managed economy) jawbones it needs to keep rates low until inflation picks up and spews other BS (Fed-Speak) to mollify the markets. Not quite working today, Jerome.

If there is one thing to watch out for in the future is the return of the bond vigilantes. You may recall those indiscriminate folks that keep the Fed accountable, by trading Treasury securities. Recently, the benchmark 10-year T-Note was yielding nearly 1.20%. Today, 1.00%. What does that tell you or me..? I don’t know about you, but it tells me the markets have no faith that no matter what amount of money Central Banks throw around, it’s not working.

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Greg Zandlo

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