Never in the history of the world has the financial well-being of so many tied to the economic competence of so few. Yet what emerged from the latest FOMC meeting (March 15-16th) indicates a complete lack of the macroeconomic fundamentals that is driving the markets.
Given how wrong the US Fed has been in its forecasts of transitory inflation, one would have hoped that Fed officials would have questioned some of their basic assumptions which had led to such dramatically erroneously conclusions. Yet, they continue down the path of mistaking bubbles for growth, extremely frothy market valuations for solid fundamentals and the cheery market consensus for a stable equilibrium.
Make no mistake—We are in extreme bubble territories for the asset classes of equities, bonds (despite the recent routing, valuations are still very frothy – more on that latter) and real estate. US GDP numbers these days are pretty much largely dependent on the reserve currency status and is just a pin-prick away from a cascading collapse on multiple fronts. What lies in the months and years ahead is sheer mayhem in the equities, bonds and real estate markets and consequently on the economy and currency markets as well.
A legitimate question at this point would be what has changed in the immediate past to convert what was an inevitable event to an imminent one? Just to point out, the fundamentals of the US Economy have been degrading for at least a couple of decades now and it was the apparently low consumer price inflation despite all of the monetary inflation (i.e. expansion of the money supply) that was masking the disease. Economists, investors and the general public have been mistaking the equity, real estate and bond bubbles (which are a direct consequence of the monetary inflation) as indicative of a sustainable economy. Continue reading “The Extraordinary Popular Delusions at the Eccles Building”
