The madness of markets reached new levels yesterday. The release of “favorable” inflation numbers sparked a sharp price rise across the board pre-market. Yields dropped and stocks and commodities soared. By the close, stock indices cooled, closing between 3/4 and 1% up. Commodities were off their highs but still had significant moves upward.
Graham Summers,in an article appearing on Zerohedge, summarized the madness:
Stocks are exploding higher based on inflation coming in at 7.1% Year over Year. This is apparently great news because Wall Street expected the number to be somewhere between 7.2% and 7.6%.
So, according to those buying stocks today, a 0.1% “beat” on an inflation number that is still north of 7% despite the Fed implementing its most aggressive rate hike cycle in 40 years in is a reason to panic bid stocks higher.
The past forty years or so seems to have conditioned market participants into believing the Fed can rescue this economy. It is the meddling of the Fed over these forty years that has produced our intractable situation. By acting to avoid corrections, the economy has become so distorted that nothing but a major enema will solve its problems. The Fed, by playing economic God, has put us into an impossible situation.
There will be no easy solution to our current mess (which is an accumulation of burying problems for forty years).
Hopium and interest rate manipulations are not solutions. They have always been band-aids that cover problems rather than solving them. Eventually these problems grow so big that they are beyond covering and beyond easy solution.
Bad times are coming! No one alive today has experienced the pain of a true Depression. One is probable and likely unavoidable. We will be lucky if that is all we experience.
What could be worse than a Depression? Hyperinflation! It destroys the value of all currency and savings. It destroys the social fabric and risks serious internal and civil unrest. Hyperinflation solves nothing, produces unnecessary suffering and is eventually extinguished by a Depression. Hyperinflation is like dying twice! First you burn to death in the flames of hyperinflation and then you freeze to death in the despair of depression.
If I have a complaint with Mr. Summers treatment, it is his apparent willingness to acceptance the economic numbers as reported. (I suspect he is as dubious of these as I and others are.) However, I think some doubt should have been expressed.
Why would information produced and controlled by government be trusted? If government routinely breaks laws, violates Constitutional boundaries and lies repeatedly to gain political points, why would anyone believe that they might be “cooking the books” regarding any economic statistics and reports they issue?
Frankly, no one has a reasonable idea of what is happening. That is especially so for our so-called economic policy experts! Has inflation peaked? One data point does not provide an answer, especially when the data is subject to statistical error and abuse.
Be very careful with your money and your investments!