Discussion about this post

User's avatar
jeff's avatar

I always see CPI as part of the scam, although certainly if you start seeing broad price increases past a 2% target then thats quite a heavy devaluation. Higher wages enable CPI. In the UK its been about 3.5% and this was the same in the US as well until after 2008 when it went down to 2% growth. What truly enables the iniquitous inflation tax is that products have truly become cheaper, but the give away is that property of course tracks inflation. Its my pet peeve that wage inflation always takes second place to CPI when considering underlying actual growth in the money supply.

Anyway, that aside, when the Fed *indicates* (not do) its going to taper its clear to see that yields would reduce in anticipation. BUT this is not an actual taper. Actual tapering is an end to yield manipulation i.e. fake taper+yield control=lower yields but actual taper+no yield control is entirely different. Nobody knows what the market rate for yields is. I think its very likely that the market yield would be much higher and that the tightening of policy which should lower yields will be overwhelmed by real market pricing. So I personally think that indicated taper and actual taper are two extremely different beasts, and that the Fed will find that tapering does cause a panic and it is indeed now trapped. Its very easy for Powell to essentially game expectations but the reality is that he is bluffing his way for stability through a period of dollar devaluation. If tightening causes yields to rise then clearly this is to lose control of the monetary levers.

Expand full comment

No posts