Fed Has Shovel, Digs Bigger Hole
Let’s get to the bottom line on all this “rate cut” nonsense.
The Fed made a fatal mistake in first promoting “fiscal” actions (during the 08 crash) and then continuing to support them well after the bottom in 2009. This allowed Barack Obama to run trillion dollar deficits for years and, once he did so to push policies that were economically bankrupt (e.g. the ACA) and got them embedded it was faced with the reality of the creature of its own design.
It appears that Yellen thought she could leave her office with a belated “goodbye” of “normalization”, after having been complict herself, and evade the impending blow up — at least until after her chair had cooled off from her ugly ass sitting on same.
She was wrong.
Powell not only ratified Bernanke’s policy he doubled down on his and Yellen’s insanity instead of putting up the middle finger when Donald Trump was elected. By supporting Trump’s crazy deficit spending ramp he managed to stick ~30% on the stock market at the cost of trapping The Fed, permanently, in financing deficits.
If there was no cost to the real economy or real people in doing this it would defensible. But there is such a cost, and it falls on 90% of the population — which owns only a tiny percentage of equities. Worse, that cost falls not only on savers but those who have a fiduciary responsibility toward safety and return, which also typically have as their beneficiaries that same 90% of the population!
Then there’s the impact on state and local governments who can’t earn that return either and thus this ramps property taxes in response. And while ultra-low rates seem to be good in some other places (e.g. home values) that’s a chimera.
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