Elected or Appointed, Our Officials are Clueless

Democracy confers legitimacy upon the elected, not competence. PhDs confirm a lack of real-world experience. [The Rude Awakening] October 24, 2022 [WEBSITE]( | [UNSUBSCRIBE]( Elected or Appointed, Our Officials are Clueless - Let’s revisit rate hikes that are too quick and too steep. - The WSJ finally says rate hikes take time to do their stuff. - Let’s see the housing market and its effect on unemployment. [Biden’s Latest IRS Move Is A Nightmare For Everyday Americans]( Biden has just put everyday Americans like you into his crosshairs. As you’ve likely heard, he’s just signed into law the biggest expansion of the IRS in our nation’s history, adding 87,000 new agents… And many warn these new agents will be used to target regular Americans just like you. That’s why you need to take action right away… [Click here now for the full story](. [Click Here To Learn More]( [Sean Ring] SEAN RING Dear Reader, Good morning on this overcast Monday in Asti. Friday night, Aussie Trav and I headed to Juventus Stadium to see Juve beat Empoli 4-0. Here’s a quick video I took before the match when they were introducing the Juventus players: [pub] Credit: Sean Ring Massachusetts Marty landed in Turin yesterday, so Trav, Pam, Micah, and I went up there to have a late lunch. It’s great when friends from different parts of your life get together and get along. It may be a massive confirmation bias, but you feel like you know how to pick friends well. After lunch and a stroll around town, we drove Trav to the airport for his flight back to Old Blighty. Marty will be here for the remainder of the week before returning to Miami. (He escaped Taxachusetts for the warmer climes of South Florida.) Of course, the conversation invariably turned to the state of the world. But besides our big belly laugh over The Bernank’s Nobel Prize, there was much else to discuss. So, in this Rude, let’s get deeper into the Fed’s policy pickle and the useful idiots justifying it. The Journal Admits Rate Hikes Take Time First, let me preface this section with [a Rude I wrote back on September 23, 2021]( The Fed wants to taper its bond purchases, which currently run at $120 billion a month, before it starts to raise rates again. I think that's smart, but I think they're rushing things. Here's how I would do it. I would taper the bond purchases to zero as they plan to do. I would do that over an extended period because the market cannot simultaneously take the sudden tapering of purchases and an increase in interest rates. I'd stretch out the period to about five years. Yes, I'd make it that long. The tapering acts as a rate rise anyway, as the Fed is pulling money from the market. Once that's done, I would increase rates very gently by 50 basis points every 18 months. And yes, it would take an enormous amount of time for rates to get back to 5% if we did it every 18 months, but that's the kind of drip feed you need in market conditions like this. [SJN] This diagram is from the Bank of England. I redid this chart from their old website. According to them, from the time the Bank of England raises rates to a decrease (in this case) in total demand takes 18 to 24 months. From that decrease in total demand to lowering inflation is another 18 to 24 months. So, all in all, every rate hike needs at least 36 months to have the full effect. Why, then, does the Fed raise rates a quarter of a point every meeting? It wants to be seen to be doing something. That's why. Those little rate hikes don't have time to settle in and affect anything before the next one comes in. This is what creates the conditions for bubbles to pop... and pop they do. If you recall, back at the end of 2018, when Donald Trump was president, Jay Powell tried this once before, and the market fell 20% in three months. It wasn't until Trump intervened directly and said, "I think it's a great time to buy stocks” on Christmas Eve that the market started to bounce back and had a V-shaped recovery. Powell and his crew abandoned the hiking cycle. Because of the Fed's ridiculously loose monetary policy, we are teetering on the brink. Sometimes I look back on my writing and think, “That was spot-on.” So, you can imagine my surprise when I read in [The Journal’s Outlook column]( someone there agrees with me. Finally. The world’s central banks face a nail-biting wait. They have raised interest rates this year at the fastest pace in decades. But those hikes work with what economists call “long and variable” lags so central banks might not know for years if they have tightened too much, or not enough. Why the lag? Interest-rate changes filter through to inflation in a series of steps. The short-term lending rates controlled by central banks steer other borrowing costs in the economy, including deposit and lending rates for households and businesses, with a delay because loan contracts take time to change. Earlier in that [same September piece, I wrote this]( My goodness, do these bureaucrats ever get anything right? You may remember when I wrote earlier this year the Fed's call that inflation is transitory was complete nonsense. I didn't buy it for a second. One of the things that many brilliant economists before me have said is that central banks lose control of interest rates eventually. Of course, the Fed was wrong. Inflation is not transitory. They wait too long. Then they realize they’re behind and hike too much. Rinse, repeat. Meet the new boss. Same as the old boss. But not only do you have to worry about appointed central bankers, but you’ve also got the elected dopes to contend with. Numbskull Nancy Can’t Put It Together This wicked old harpy still doesn’t get it. And the ZeroHedge boys had some fun. [SJN] Credit: [@RNCResearch]( Watch the video after you read this. You’ll shake your head in abject disbelief. From [ZeroHedge]( While appearing on CBS' "Face the Nation" on Sunday, Pelosi said: "When I hear people talk about inflation… we have to change that subject. Inflation is a global phenomenon," adding "Face the Nation” with Margaret Brennan. “The EU, the European Union, the UK, the British, have higher inflation rate than we do here… The fight is not about inflation. It’s about the cost of living." As the Sundance Kid might save said (sarcastically): “You just keep thinking, Nancy. That’s what you’re good at.” [QUICK! Count how many pennies you see.]( [James Altucher]( Here’s why: If you missed out on making a fortune with cryptocurrencies, the recent crash has finally given you your chance to scoop up cryptos for pennies on the dollar. Literally. There’s a cryptocurrency quietly preparing to conquer the marketplace… and it’s trading for 96% below its all-time high. In fact… … it’s trading for the number of pennies you see above. Get your hands on this bargain crypto while you can. [Click here to find out how to make up to an 8,788% return with crypto by 2025](. [Click Here To Learn More]( Raoul Pal’s Housing Data is Scary Raoul Pal, the co-founder of Real Vision and founder of Global Macro Investor, wrote a peach of a piece on LinkedIn. You can subscribe to his [GMI newsletter]( on LinkedIn for free. I won’t copy all the charts in his piece, but I will show you how the Fed’s hasty hikes are crushing the housing market. And as the housing market goes, the economy goes. The below chart shows how the 30-year mortgage increased literally off the chart. (It’s the blue line going down, as it’s inverted on the chart to show its correlation with the NAHB Housing Index.) [pub] The NAHB Index is an indicator of homebuilder sentiment, and it’s been crushed. For the following chart, it shows how the ISM’s manufacturing index is poised to fall off a cliff, thanks to the 30-year spiking so much: [pub] This has driven homebuyer sentiment to a 40-year low: [pub] And if history holds, this means unemployment is about to fly off the charts: [pub] Well, at least the Fed can say they did something after all this: it pricked the bubble of its own making! Do read Raoul’s entire piece [here](. Wrap Up Though the S&P 500 staged a great rally on Friday, we’re nowhere near out of the woods, according to the macro picture. We may rally, of course, but I think any rally will be short-lived, however substantial it may be. We haven’t begun to feel the real effects of these rate hikes. And if history rhymes again, it’s time to stay defensive. Until tomorrow. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. 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