By The Time The Fed Hits Its Goals, The Markets Will Be Crashing

Friday, September 21, 2018
By Paul Martin

by Graham Summers via Gains, Pains, & Capital,
Fri, 09/21/2018

The Powell Fed has set one goal and one goal only for its policy…

Hitting the “neutral rate of interest.”

The neutral rate of interest is when the Fed has rates equal to the pace of inflation. While this is technically what the Fed is SUPPOSED to be doing, NO Fed (or any other Central Bank for that matter) has done it in over 30 years: the Greenspan, Bernanke, and Yellen Feds were all notorious for running “accommodative” policy in which rates were kept well BELOW the rate of inflation.

Indeed, if you had to summate Fed policy from 1987 to 2018, the best word would be “accommodative.” It is not coincidental that this time period coincided with serial bubbles in the financial markets. This was done intentionally by Alan Greenspan, Ben Bernanke, and Janet Yellen.

Not Jerome Powell. During his July Q&A session with Congress in July, Fed Chair Powell emphasized that the most important focus for the Fed under his leaderhsip would be “a neutral rate of interest.”

In answering a question [concerning the yield curve flattening] from Senator Pat Toomey of Pennsylvania, Powell said that, in his view, “What really matters is what the neutral rate of interest is.” And perhaps longer-term Treasury yields send a message about that rate.

Source: Bloomberg

The Rest…HERE

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