{"id":44117,"date":"2019-03-01T07:16:27","date_gmt":"2019-03-01T12:16:27","guid":{"rendered":"https:\/\/olduvai.ca\/?p=44117"},"modified":"2019-03-01T07:16:29","modified_gmt":"2019-03-01T12:16:29","slug":"remember-the-fed-hasnt-actually-done-anything-yet","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=44117","title":{"rendered":"Remember, The Fed Hasn\u2019t Actually Done Anything Yet"},"content":{"rendered":"\n

Remember, The Fed Hasn\u2019t Actually Done Anything Yet<\/a><\/h3>\n\n\n\n

When the financial markets got, um, choppy towards the end of 2018, the Fed caved almost instantly. But only rhetorically. <\/p>\n\n\n\n

Fed chair Powell promised to stop raising interest rates and shrinking the money supply, and the financial markets, trained to salivate at the sound of Fed happy talk, immediately morphed from \u201crisk-off\u201d to \u201crisk-on.\u201d Stocks are now approaching last year\u2019s all-time highs, bond prices are way up (which is to say long-term interest rates are way down) and the financial press is back to celebrating the \u201cGoldilocks economy.\u201d<\/p>\n\n\n\n

But remember that as far as actual monetary policy goes, nothing has changed. Last year\u2019s Fed Funds rate increases are still in place, while the Fed\u2019s balance sheet remains diminished (which is to say the cash drained from the economy as the bonds in the Fed\u2019s account were retired remains out of action). So the damage has not been undone, and it\u2019s starting to bite. Some examples: <\/p>\n\n\n\n

US retail sales<\/strong> are falling:<\/p>\n\n\n\n