We consider ourselves reasonably competent in the rant business, but must take our hats off to MUFG’s chief economist, Chris Rupkey. His instantaneous smash down of the Fed’s idiotic decision to cut rates by 25 basis points is one for the ages and deserves to be quoted in full:
Congratulations to all of you down in Washington who have lowered the boom on interest rates today. We guess you must be feeling pretty proud of yourselves. US central bank policymakers have learned nothing from the experience of low interest rates in Japan or Europe. The economies of Japan and Europe aren’t going up like a rocket ship and it is doubtful economic growth will see any greater liftoff here in the good old USA.
Go ahead and eliminate interest rates. Wall Street is already eliminating thousands of jobs in sales and trading and more rate cuts mean reduced margins and less volatility and thousands more will be told to go. Hedge interest rate risk. What interest rates?
Countries with low rates have economies with low growth. The Fed’s decision today is like in the days when doctors bled their patients to heal them. Fed officials made a very unwise decision today and buckled to the president’s demands by manufacturing reasons to cut interest rates despite a strong economy with no recession signs apparent anywhere out on the horizon.
The stock market may be partying today, but it will wake up with a huge hangover tomorrow as the Fed alters the way the country saves and spends and borrows and invests forever. I think they are probably proud of themselves, but they should really be more ashamed.
The Federal Reserve threw away their independence today and with each future rate cut they will gradually eliminate their relevance to the economy forever.
What’s so stunning about the above is not just that it comes from a Wall Street economist; it’s that Rupkey is a card-carrying Keynesian to boot!
What we are saying is that the ship of fools in the Eccles Building are so entombed in a puzzle palace of tortured groupthink that they have even lost some of their Wall Street cheering section. And that loss was made all the worse by Powell’s incoherent gas-bagging during his post-meeting presser.
As Sven Henrich observed this morning, unemployment is at a 50-year low, consumer confidence is at 20-year highs, financial conditions are the loosest in a quarter century, the stock market capitalization at 145% of GDP is at the tippy-top of history, GDP growth plods along at 2-3%—so what’s the emergency that required a rate cut?