On September 22, 2021, the Federal Reserve reported its current policy position. Currently, the FED is creating liquidity (i.e., printing money) through its Quantitative Easing (QE) program at the rate of $120 billion per month. The market has been fearing that the FED would begin tapering, i.e., cutting back on its liquidity creation. Rumor was that the FED would start reducing their QE by $10-$15 billion per month due to inflation concerns. The last time the FED embarked on a tapering plan back in 2017, they used a two-prong approach of raising the FED Funds rate and reducing the monthly printing by $10 Billion every three months (i.e., roughly $3.3 billion per month). The result of … [Read more...]
Why Hasn’t the U.S. Dollar Experienced Hyperinflation?
I recently answered this question on Quora and thought I'd share the answer here as well. Why hasn't the U.S. dollar experienced hyperinflation? That is an excellent question. As we can see from the chart the FED has engaged in 4 major phases of Quantitative Easing (QE) where they drastically increased their “assets” and one phase of Quantitative Tightening (QT) where they tried to decrease their assets. FED assets is sort of a euphemism for money printing. Basically, it involves creating money out of thin air and then buying something. That “something” becomes an asset on the FED’s books. Prior to 2008, the primary thing the FED bought was U.S. Treasury debt i.e. Treasury Bills, Bonds, … [Read more...]
Is the FED Tightening or Is Hyperinflation on the Horizon?
Recently a prophecy has been trending on YouTube. In it, the possibility of major upheaval in November is mentioned, combined with the possibility of hyperinflation. As I've mentioned before, beginning in March 2020, the FED created massive amounts of liquidity through Quantitative Easing in an effort to combat the monetary effects of shutting the country down due to the virus. If that is combined with a reduction in the quantity of goods and services created due to the virus or riots shutting down the means of production we could see hyperinflation. So that would play into fulfilling that prophesy. Back on April 1st, I wrote an article entitled Will the $2 Trillion Covid-19 Stimulus … [Read more...]
April Inflation Near Zero
The U.S. Bureau of Labor Statistics (BLS) released its April Inflation report on May 12th, 2020, for the 12 months through the end of April 2020. Annual Inflation Down Sharply... Again! Inflation fell sharply to 0.33% in April from 1.54% in March, 2.33% in February and 2.49% in January. CPI Index in 258.115 in March fell to 256.389 in April. Monthly Inflation for April was -0.67%, March was -0.22%, February was 0.27% typically January through May are highly inflationary so this is VERY unusual. The FED has massively cranked up the "printing presses" using "Quantitative Easing" in an effort to stimulate the economy in the wake of COVID-19. FED Funds Rate down to near … [Read more...]
Inflation Expectations and the Massive Fed Stimulus
Inflation is loosely described as a general economic state of rising prices. In February 2020, the US inflation rate dipped from a high of 2.5% in January, to 2.3%. Assuming the standard of steadily increasing prices, driven largely by food, fuel, and living expenses, one can expect the inflation rate to tick higher. Forecasts for April 2020 are at 1.7%. Given that the major drivers of inflation are excess demand (demand-pull inflation), or cost-push inflation, current conditions based on Coronavirus quarantines have created a murky demand climate. Oil Prices and Inflationary Expectations All major US indices, including the Dow Jones Index, have plunged precipitously. Stock portfolios … [Read more...]
Will the $2 Trillion Covid-19 Stimulus Cause Inflation?
The current round of massive Corona Virus easing began Monday March 16th, 2020, with the FED buying $40 billion in Treasuries and then buying another $50 billion in Treasuries on Tuesday. By Thursday morning, it had upped the plan to $75 billion PER DAY and added $10 billion in mortgage securities. By Friday morning, the Fed had decided to buy $107 billion worth of Treasuries and mortgage-backed securities. In its first week, the FED purchased $317 billion worth of assets, which is slightly faster than the Fed balance sheet grew at the height of the 2008-2009 financial crisis. Initially, the Federal Reserve estimated purchases of $500 billion but FED chief Jerome Powell said the initial … [Read more...]
January’s Monthly Inflation 0.54%
The U.S. Bureau of Labor Statistics released the Annual Inflation Rate data for the year through the end of January on February 14th 2018. Annual inflation was 2.07% in January down from 2.11% in December CPI-U up from 246.524 to 247.867 Monthly Inflation for January 0.54% compared to 0.57% in January 2017 Next release March 13th Monthly Inflation is High, But... Typically the monthly inflation rate is highest during the first quarter (January through March) and lowest during the last quarter (October through December). January 2017 had inflation of 0.57% and so January 2018's 0.54% is right in line with that (resulting in annual inflation of 2.07%). However if … [Read more...]
More Quantitative Easing in the Cards?
For some time we've been saying that the FED is addicted to Quantitative Easing (QE) and that it wouldn't be so easy to kick the habit. Then last week we told you that there are signs that the Deflationary roots go deep and the only thing keeping the economy on a steady keel is all the money being created by the FED. But all that funny money is eroding the foundations and the FED can't keep it up forever. Up until now every crisis required a bigger and bigger entity to step up to the plate and assume the debt. At this point the only entity bigger than the FED left to step up is the World Bank. So when the FED runs out of bullets it will be the last round of musical chairs. But at this … [Read more...]
Is the Federal Reserve Right About Inflation?
The Federal Reserve The Federal Reserve serves as the Central Bank of the United States, and whether you realize it or not, it plays an active role in the lives of every American. It makes decisions about monetary policy and interest rates that have a direct impact on the market and an indirect impact on everyone. The FED uses inflation targets to determine how much they can devalue (inflate) the currency. Many people believe that they created a massive money printing scheme cryptically called "Quantitative Easing"since QE1 converted almost worthless mortgage backed securities into currency. The Fed regularly issues statements about how inflation isn't really as bad as everyone says it … [Read more...]
Commodity Prices Falling Despite QE
Traditional wisdom tells us that when the money supply expands the price of commodities rises. Today Robert Prechter takes a look at what has actually happened to commodity prices since 2008 during a period when theoretically the FED has been pumping up the money supply. ~Tim McMahon, editor Commodities Falling Despite QE: What Does That Mean? Robert Prechter: "Charts tell the truth. Let's look at some charts." By Elliott Wave International During QE3, the latest round of the Fed's quantitative easing, the stock market rose. We all know that. But did you also know that commodities fell? That's right: QE3 had zero effect on commodities -- or maybe even a negative effect. In … [Read more...]
