That’ll Buff Out

Well I got that one wrong, fortunately my trading system had no dog in the hunt. Yes, Powell did hint at slowing rate increases. But the markets were shocked, shocked I say, by his acknowledgement of the 15 years of futile attempts to curb inflation before Volcker took matters in hand. That an economist should consider history rather than models and calculus is pretty much unprecedented, at least in modern times. His academic credentials may be called into question. The calculus thing was introduced because economists – it was called, correctly, “political economy” at the time – felt they were underpaid, relative to the physical sciences, and therefore needed to emulate them. It helped their prestige but not their forecasts.

Sarcasm aside, it’s a good thing. But the bad thing is there is way too much money in circulation. Consider the following mantra from Milton Friedman in 1963, years before the 1970s inflation.

“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

Then please consider the following:

fredgraph

money to gdp

That’s going to take a lot of buffing. And yes, Mr Powell, it is the product of years of central bank economic idiocy and arrogance. First chart St. Louis Fed, second John Hussman.

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