Endless, Nameless. The title of an old Nirvana song which also describes the Fed’s position on monetary expansion (“endless”) and the Fed’s overall monetary strategy (“nameless”).
The biggest bubble the world has ever witnessed. Fundamentals are out the window. Former politicians and baseball GM’s are leading SPACs. Stock splits lead to material increases in market value (see AAPL and TSLA). Euphoria is running hot. The Fed is stoking market euphoria as it pursues the wealth effect with its irresponsible zero interest rate policy and loose lending standards in violation of the Federal Reserve Act of 1913.
I would love for business leaders to voice their concern about the economic path the U.S. is on. The various Federal Reserve lending facilities are open for public comment. Zero percent interest rates and endless printing/debt monetization has crowded out savers, has crowded out private capital, has created speculative bubbles in equities, debt and housing and has created significant moral hazard. Further, these short-term policies discourage long-term real GDP growth.
The Fed has suffered mission creep under Chairman Powell as articulated by Powell himself in Jackson Hole at the end of August. The Fed is placing greater emphasis on full employment and “equality”. Neither are part of the Fed’s mandate. There was a time when the Capital Markets were essentially private markets, when the Fed allowed interest rates to float (see former Fed Chairman Paul Volcker’s book below).
At the current pace it will only be a matter of time before the RMB (or perhaps the HKD?) becomes the world’s reserve currency. How low will the DXY go over the next decade? This is all avoidable if the Fed would abandon its short-term view toward the U.S. Economy and begin to take a long-term approach. I know – political incentives are not aligned with the long-term well being of the U.S. Economy. Highly unfortunate.