Unravelling the FED mistake

We got the expected big inflation number yesterday. Probably good to consider the following:

  1.  4.0 Trillion dollars of FED Balance Sheet caused the inflation.
  2. We know the only way to stop inflation will cause a crash.
  3. 1.0 raise in FED funds rate will not stop inflation.
  4. We know that Powell doesn’t want to cause a crash.
  5. We know Biden doesn’t want a crash.
  6. That leaves a lot to figure out.

And, Powell is no Volker. Volker would have stopped buying Bonds, etc one year out on the Covid emergency, like April 2021. We now have almost a year of fluff piled on top of everything.

And the result..

Markets like this, trading in a measure of confusion, need to have some kind of velocity generator. To me that means measuring which side of the equation gets overbuilt, will it be the Bears or the Bulls. Then the market will tear down the overbuilt sector.

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