Goodbye Fed Credibility, Hello Stagflation – Ep. 168

* Another volatile day in the stock market sees the major averages deep in the red * The Dow was down just over 1%; down 180 points, 17,529 * The NASDAQ actually got walloped a little more; down just shy of 60 points, 1.25% * I think the catalyst for today's declines was a couple of Fed officials talking about how June is a live meeting - live from the perspective of, "We might raise interest rates" * I don't think it's live at all, I think it's dead, and if it were alive, the stock market decline would kill it * If Wall Street actually believes that the Fed is serious about raising rates in June, the market would be tanking * In fact, if more people believed it, the market would be down more than 180 points today * As we got closer and closer to the date that the Fed was theoretically going to raise rates, the market would be so low, that any talk of a rate hike would be dead, because the Fed would be dealing with tighter financial conditions * The Fed doesn't want to tighten monetary policy with financial conditions are tightening on their own * It's interesting, too, that you hear people asking, "Why does the Fed have a June rate hike on the table"? I keep hearing about the economy strengthening * The economy is not strengthening! That's just the point, the economy is weakening * Yes we did get a little data in the last few days that was better than expected, buy we also got data that was worse than expected * Most of the financial data that has come out since the last time the Fed hiked rates has been bad * If the Fed is talking about raising rates, it's not because the economy is getting stronger, it is despite the fact that the economy is getting weaker * What is getting stronger is inflation * The problem is, even though inflation is above the Fed's so-called 2% target, I don't think this raises the probability of a rate hike * If anything, the increase in prices will slow down the economy even more * We actually got some official inflation data today, we got the April CPI * The consensus was for a move +.3, following the prior month's +.1 * We got a bigger jump than was expected - we got +.4 * The year-over-year headline number - not the core number - is now 1.1 * So the year-over-year is below 2% but if you annualize that .4 for the next 11 months that would be a 6% annualized rate of CPI-based inflation * I read articles about the jump in the CPI and the jist was that this is good news, because the Fed is making progress on its policy goal of price stability - * If you think about how ridiculous that comment is: * We had a big spike in consumer prices, which if you annualize the rate of increase that's 6% increase in prices and that's progress on price stability? * If anything, the Fed is moving away from price stability *  If you're going for price stability, the less prices go up the more stable it is * I don't know how much more "stability" people can stand - * If prices get any more "stable" than this, we're going to have runaway inflation * This is not about price stability - this is about generating inflation on purpose because there is no alternative for the Fed * In recent times, a hotter than expected inflation number, causes the currency goes up * And when inflation is lower than expected, the currency goes down * Now, you might think that's counter-intuitive, and actually it is * Why would higher inflation be good for a currency?  After all, inflation measures how quickly a currency loses purchasing power * So why would a currency that is losing purchasing power more quickly be more valuable? * In today's world, low inflation is bad for your currency and high inflation is good for your currency Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out Plaud AI and use my code GOLD for a great deal: https://plaud.ai* Check out Quince and use my code quince.com/gold for a great deal: https://www.quince.com* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy