Chat with us, powered by LiveChat
Menu

How Did The Fed Really Not See Inflation Coming?!

the fed and inflation
Print Friendly, PDF & Email

EDITOR'S NOTE: We’ve heard it a million times already: the Fed had no idea that the skyrocketing inflation we have now wouldn’t be “transitory.” Is it really possible the United State’s central bankers — some of the (supposedly) best and brightest financial minds in the country, including the “Dream Team” of Fed Chair Jay Powell and Treasury Secretary Janet Yellen — didn’t see this coming? Did they really dump “trillions of dollars into an economic system and didn’t think there would be negative consequences??” They saw “the surge in M1 Money Stock at the same time asset-backed commercial paper rates are 0.08%. That is, about 1/3rd The Fed Funds Target rate (upper bound). None of this concerned The Dream Team?” Confound Interest, for one, finds this very hard to believe. Even so, we are now living with the consequences of this catastrophic miss. 

The Dream Team (Fed Chair Jay Powell and Treasury Secretary Janet Yellen) just can’t believe that inflation struck even after M1 Money Stock increased by 369% from March 2020 to today while interest rates remained near zero.

From The Hill: Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen on Wednesday said they underestimated how quickly the U.S. economy would rebound from the COVID-19 recession and strain supply chains.

During a Wednesday hearing before the House Financial Services Committee, the top two U.S. economic policymakers acknowledged that high inflation has risen higher and lingered much longer than they expected.

“We understood demand would be strong,” Powell said. “We didn’t understand [the] significant problems of the supply side.”

Both Yellen and Powell said substantial fiscal and monetary stimulus played a role in stoking the higher demand that fueled inflation, but they called it a challenging side-effect of an otherwise fast recovery.

Seriously? The Fed and the Federal government dumped trillions of dollars into an economic system and didn’t think there would be negative consequences??

Look at the surge in M1 Money Stock at the same time asset-backed commercial paper rates are 0.08%. That is, about 1/3rd The Fed Funds Target rate (upper bound). None of this concerned The Dream Team?

Photo: Confounded Interest

An example of what The Dream Team didn’t see happening was the explosion of home prices. Home price growth was about 4% YoY prior to COVID, and is now 19.51% YoY.

inflation

Photo: Confounded Interest

Now we have the US Treasury Actives curve inverting like the US Dollar Swaps curve after 20 years.

inflation

Photo: Confounded Interest

Here is a composite photo of Jay Powell and Janet Yellen (to save space). Here is a video of Powell/Yellen composite trying to control inflation.

Photo: Confounded Interest

inflation

Photo: Confounded Interest

Bank Failure Scenario Cover Small Not Tilted

GET YOUR FREE

BANK FAILURE SCENARIO KIT

  • This field is for validation purposes and should be left unchanged.

All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

Precious Metals and Currency Data Powered by nFusion Solutions