The usual suspects are flyspecking the Fed’s June minutes for hints as to what this camarilla of madmen, dolts and dunderheads may do next, but that rather misses the point. The real takeaway is that the Fed amounts to an exceedingly dangerous committee of dilettantes, who have absolutely no clue about what they are doing. Yet they are possessed with sweeping, nearly dictatorial, powers over the entire financial system—powers that were never delegated by Congress and should never be conferred upon a committee of 12 government apparatchiks.
The June meeting’s discussion of the near term economic outlook, like always, amounted to a superficial kibitzing session, which produced what resembles an economic weather report for inflation, employment and other top line variables. As such, it conveys no value-added or insight whatsoever and could have been just as easily gathered from any random pick of 12 CNBC talking heads and/or guests, viewers, producers, cameramen and limo drivers.
Indeed, in their own right these outlook discussions, and the accompanying three-year forecasts for inflation, unemployment and GDP made by each Fed member, are stupid, pointless and actually embarrassing when all is said and done. Main street economic function and capitalist prosperity would not be diminished one whit if these discussions were never held or transcribed and published.
Unfortunately, there is more to it. The Fed is not a Wall Street debating society or social club, meaning that these kibitzers actually take their “goals” for the economy ever so very seriously. And worse still, they proceed to act upon them with massive financial firepower via $120 billion per month of what amounts to outright monetary fraud.
The effects of that massive, legally sanctioned fraud are counter-productive and destructive throughout the length and breadth of the money and capital markets, which negative effects spillover to the main street economy, as well.
The reason is that by definition the Fed’s massive intrusion in the markets obliterates honest price discovery, thereby systematically and deeply falsifying the price of money, debt, equities and all manner of other derivatives and tradable assets such as cryptyos and NFTs, which get swept up in the resulting speculative bubbles.
It’s almost as if these people have blacked-out the very financial markets which they are corrupting and poisoning with their rampant money printing. For instance, as is typical, the June meeting minutes focus almost exclusively on the broad main street economy that the Fed can do almost nothing to manage, even as it floods Wall Street with $4 billion of newly minted cash day-in-and-day-out:
Overall financial conditions remained accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses…… Several participants highlighted, however, that low interest rates were contributing to elevated house prices and that valuation pressures in housing markets might pose financial stability risks.
Actually, housing prices have now risen during the last nine years just as far as they did between 1998 and 2007, which was about 85%. And if memory serves, that particular bubble posed a not inconsiderable “financial stability risk” when it inexorably collapsed.
Yet this time the risk to main street is even greater. That’s because two pointless Fed-inflated housing bubbles later, worker wages are hopelessly behind. Since 1998, cumulative house price inflation now stands at 174% versus a 97% gain in average weekly wages.
In fact, it is deeply ironic that by early 2012 average wages had finally caught up with housing prices, after the 21% plunge in house prices during the Great Recession bust. But that made no difference to the Fed. At the very same time, it launched its foray into formal inflation targeting at 2.00% per annum, measured on the shortest inflation ruler they could find (PCE deflator).
In still another proof that prices do not march in lockstep under the Fed’s misbegotten pro-inflation regime, average weekly wages have risen by just 32% since January 2012 versus the aforementioned 85% gain in house prices during the course of the second housing bubble.
And yet the best that the Fed minutes could muster was a tepid unnamed sources wondering about “valuation pressures in housing markets”.
Based on the chart below, we’d say they should have been wondering about housing bubbles years ago; and that after the near death experience of 2008-2009, the second bubble displayed in the chart below is surely beyond the pale.
House Prices Versus Index Of Average Weekly Earning, 1998-2021
Nevertheless, the meeting minutes are chock-a-bloc with pro-inflation palaver, and confidence that current elevated readings are transitory and that all is falling into place for the Fed to achieve it 2.00% inflation goal averaged over time. As the minutes noted,