The Fed’s Real Unintended Consequence Problem…
The problem? It looks like the Fed just proved the President correct.
Can you say “Uh Oh?”
The real issue now facing the Federal Reserve is not only may they have just crushed any remaining credibility with their complete and utter reversal of monetary policy going forward. But, they may have done it leaving one of the most unpleasant aftertaste they’ve ever considered.
Regardless of what side of the political aisle one stands, if the “markets” falter or the economy tanks – it will be they that will be blamed, with non-other than the President having the evidence to both point the finger and tweet the charge.
Why? Both the “markets” as well as GDP began falling at the same time as they pursued an aggressive schedule of both raising interest rates, as well as shrinking the balance sheet. Something the President railed against to the sheer publicly visible repudiation through non-answers and verbal queues via Mr. Powell during conferences and interviews.
Again, regardless of what side of the political aisle one sits, the complete reversal, and then some, of what the Fed delivered yesterday in comparison to what they were proposing and promoting just two meetings ago, along with their articulated defenses of how and why they were able to do it, is nothing less than astonishing. Period – full stop.
It now appears via their own actions that for as much as they were dissing the President – they proved by their own actions yesterday that it was he that was correct. i.e., “They’re hurting all my good work!”
Again, doesn’t matter what side of the political aisle one stands – those are the facts as they stand. Whether right or wrong that’s the way it can now be spun politically. And I’ll bet dollars-to-doughnuts that’s exactly what you’ll begin to see happen should these “markets” and economy begin faltering.
Think about it.
Now here’s a bit of proof as to what I was saying. To wit:
The reason why I want to bring this to your attention is that the situational possibility that such was even possible was completely anathema to anyone’s thinking, not just in politics or the “markets.” Rather, the entirety of the Fed, mainstream business/financial media, academia, “think tanks” and more. But most especially – its Chair, Mr. Powell.
I have been arguing and articulating thoughts akin to the above over the rampant condemnation of the so-called “smart crowd,” now going on so long I’ve lost track.
So how do I prove I was not only ahead of the curve or crowd, as they say? Better yet, was actually (once again) the one who was proved correct? Fair and great question, and it is via this:
The entirety of the above I wrote on March 21st directly in the teeth of television interviews, speeches, panel discussions and more, where Mr. Powell was being elevated as a stalwart of Fed. integrity and prowess, inferring his openly displayed disdain for having anything to do with the President was if he was openly saying, “Meeting with the President? I don’t need no stinkin’ meeting!” To the sycophantic applause of this, again, so-called “smart crowd.”
Today, let’s just say: It’s different this time, shall we?
Sometimes it just takes awhile for the consequences to unfold in full view. But none of them saw it to even begin with, and are now being blindsided with the true consequences. i.e., The political finger of blame.
I would also recommend to Mr. Powell and the entirety of the Fed, one should not look for it to end anytime soon. If ever.
Who’da thunk it.
© 2019 Mark St.Cyr