The pandemic was a last stage consumption orgy prior to global collapse. The first pandemic in world history in which demand went up instead of down. The bill is due, but the accounts have already been plundered...
Macron's detour into the truth today was a shocking bolt from the blue:
"I believe that we are in the process of living through a tipping point or great upheaval...because we are living through the end of what could seem like the end of abundance...A tipping point that can lead our citizens to feel a lot of anxiety"
...Faced with this, we have duties, the first of which is to speak frankly and very clearly without doom-mongering"
Three paragraphs of truth before returning to sugar coated bullshit. Not bad for a politician. It's not going to "seem" like the end of abundance it IS the end of abundance. And what a wild ride it has been. For some. But not so great for the majority on this planet. When I first started blogging in 2007 I was writing about the collapse of the U.S. middle class. Now, here we are talking about the collapse of Globalization. While so many were eagerly telling me I'm wrong, the table stakes grew by an order of magnitude. And yet like a tsunami in the open ocean this incipient collapse is imperceptible to the average person, because the super wave has yet to break on shore. We all have a personal choice to step back and gain historical perspective or just get buried under a deluge of disinformation.
The anxiety Macron speaks of is something we all must confront. I have embraced the fact that pursuing a less stressful lifestyle is a central part of life now. A critical part of repudiating what I call the corporate death style, which is physically, mentally, and spiritually toxic on every level.
Getting back to the topic of markets and the economy...
One year ago at the Jackson Hole meeting, Powell was doubling down on his transitory inflation theory while at the same time, continuing record monetary easing. Which is where it all went wrong. He basically stated that loose policy would be indefinite but inflation would be transitory. We all know that inflation is "always and everywhere a monetary phenomenon". Or at least we used to know. Therefore how could the continuation of record easing lead to transitory inflation with the CPI already at 5%?
No surprise, inflation accelerated right after Jackson Hole last September (see chart below).
This year, he is making the exact same error in the opposite direction. While engaging in record tightening, he is telling people that inflation is no longer transitory. He has already forgotten the fact that he's been playing catch up on rates for six months now. He raised rates as much in the past six months as the Fed raised rates in eight years after 2008.
These two Jackson Hole meetings one year apart are at the polar extremes of Fed policy error. Here we see the CPI in the top pane with the 30 year mortgage in the bottom pane. Since he announced inflation is transitory, prices skyrocketed and mortgage rates DOUBLED. Both of which are deflationary to a middle class far behind the curve on wage increases.
This week we learned that unsold housing inventories are rising at the fastest pace in 75 years of data i.e. likely in history.
For the past year, the middle class has been imploding due to inflation shock, oil shock, war shock, and now rate shock. Not a day goes by when we don't learn that this mid-market retailer or another is seeing collapsing demand. Today it was the dollar store (DLTR). And yet at the high end of consumption everyone is fat and happy.
One thing NO pundit wants to admit is that Quantitative Easing is inflationary. The bailout drug of choice since 2008 is the primary driver of today's trickle down asset inflation.
So it is that the Fed must now specifically target asset markets. Meaning the Fed "put" is now the Fed "call". Instead of bidding up risk assets from below, they will be selling down risk assets from above.
"When interest rates were at rock-bottom levels, market analysts used to talk about “the Fed put” — the notion that the Fed would step in to backstop the market if equity prices tumbled. Now that the Fed is in tightening mode, this relationship has become inverted"
Unfortunately, a swirling cloud of disinformation has enveloped the permanent plateau of financial delusion. Fully exploiting financial PTSD. Financial pundits have been behind the curve all year on adjusting their wrong forecasts. Every day they are falling further behind the curve and they have ZERO incentive to catch up. Therefore we can fully expect that the economic data will continue to surprise to the downside until such time as this society realizes they have been led into the abyss by serial con men.
However where some see risk, some see opportunity:
"The growing risk of a “major financial accident” that causes a market capitulation later in the year could open up opportunities for investors to “pile up on quality risk assets,”
He said there is a danger that a “weak link” in the financial system breaks and investors flee en masse, providing investable bottoms for shrewd investors"
We are watching an accident alright.
It's called FOMC: Fear of missing crash.