Originally published at: https://peakprosperity.com/finance-u-fed-cuts-rates-with-stock-and-home-prices-at-aths/
The Fed claims to be “apolitical” in the same spirit as OJ claimed to be innocent. The Fed opted for an emergency level rate of 0.50% despite stocks and house prices being at all time highs and inflation hardly back to safe levels.
In other words, asset prices going up for wealthy people, and incumbents facing better re-election odds were higher priorities for Fed than young people being able to get a decent start in life.
Because that’s the message, loud and clear.
Obviously, when starting out people deserve to be able to buy affordable homes and start investing at reasonable valuation levels and to afford the basics of life such as food, fuel, property taxes, and insurance.
The Fed doesn’t care about any of the concerns of the young. It cares about an out-of-control system of financialized wealth harvesting being able to continue for a bit longer.
In other words, it’s the same old, same old.
Different day, same playbook.
Where does all this lead? Nowhere good, obviously, because there has to be some connection between the real world and the equity markets, but for now they are about as disconnected as they have ever been. One need look no further than Germany’s stock market which stands in stark contrast to its rapidly deteriorating economic conditions and obvious geopolitical risks in Ukraine and with Russia.
Note: the box in yellow in the insert graph matches the timeline of the equity chart: 2023-2024
If the central banks have some sort of a plan, some sort of an exit strategy, I sure wish they’d share it with the rest of us, because this doesn’t add up.
Until they do, or until the Fed changes its generational reward/abuse habits we’re going to predict they keep being exactly who they’ve already shown themselves to be over and over again. So expect more inflation, more “”market”” rescues, and eventually lots more currency creation, a.k.a. “QE.”
The only thing that will stop them is some external force…such as the BRICs or a major oil shortage and price spike.