I’m watching the stock and bond markets gyrate after the release of the minutes of the last Fed meeting. They gyrations illustrate the dependence of the illusion of viability of the economy on faith in the Fed.
Unfortunately this faith is completely misplaced. The economy is in recession, corporate earnings are sagging badly, bond spreads are blowing out and there is a whiff of financial crisis in Europe after Deutsche Bank’s forecast of huge losses. But still the Fed is in denial.
Pump pump pump go the black boxes, driving the S&P back over 2000. But they will be overwhelmed at some point.