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Diary of an End-the-Fed'er

ResponsiblyIrresponsible
Posts: 12,398
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8/30/2015 8:32:27 PM
Posted: 1 year ago
Monday: hurrdurr, I miss the olden days when candy bars cost a nickel, Bretton Woods was a thing, gold coins were currency, and financial markets knew they're place. I'm going to go preach this message to the choir--and possibly at a counter-conference to the Fed's annual Jackson Hole Symposium and their wine-drinking, high-browed elitists and their "models"--and hold stand-ins until everyone heeds my warning. Hyperinflation is coming! Buy gold and silver!

*Fast forward one year. Headline PCE inflation is 0.3 percent year-over-year and commodities, including gold, are tanking*

Monday: I promise, it's coming! You just wait! Buy gold and silver. Your portfolios will thank me later.

*Fast forward two years. Headline PCE inflation is still crap -- and near zero -- because the lingering impacts of a dollar appreciation, falling oil and commodity prices, and a Chinese slowdown impact prices with a considerable lag.*

Monday: I know all of you who listened to my pristine advice have lost a whole lot of money. Your institutional credibility, unlike mine, has probably tanked, and I'm sure your wives have left you for other men who don't have the IQ of sandpaper. But, for those of you who haven't abandoned the cause, I urge you to march with me. End the Fed! Sound money for America!

*Fast forward to Monday, August 24th. The Dow opens 1000 points lower*

Monday: See? I told you there a bubble! Hahaha! I might have been wrong on hyperinflation, because inflation is near zero. I also might have been wrong on the housing market; it seems to be growing anemically. I also was wrong on long-term interest rates. Not only do deficits seem to be under control, with the CBO recently slashing $60 billion off its projection for the near-term deficit, but long-term interest rates are falling. But I was right on one thing: equity valuations were too high! We have a bubble! The Fed cannot ever normalize monetary policy. Even Larry Summers and Narayana Kocherlakota agrees with me: the next move is QE4. After that will be QE5, and QE6, and QE5000. End the Fed! This is a proud day for America!

*A few days have passed, and despite ongoing volatility in global markets, stock appear to rebound strongly*

Monday: Ah, not only is the government rigging its inflation numbers, but now the exchanges are publishing artificially high valuations. I'm going to get to the bottom of this. End the Fed! They will never normalize!

*Now we fast forward to the September 16-17th FOMC meeting, where there remains uncertainty about whether the Fed will commence normalization for the first time in 9 years.*

Wednesday: Much to the chagrin of financial markets and goldbugs alike, the Fed published this update to its policy statement:

"To reflect ongoing progress toward the Committee's objectives of maximum employment and price stability, the Committee today decided to take its first step toward normalizing the stance of monetary policy by increasing its target range for the federal funds rate to 1/4 to 1/2 percent. The Committee affirmed that the overall pace of policy normalization will be gradual. In determining subsequent changes in this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation."

(I'm pretty good at Fed speak, right? I bet that sounded sufficiently vague ;) )

*Financial markets completely tank*

High-Browed Fed Economists: Come on, you emotional arsholes! You aren't helping the cause. You can't bloody tell me you didn't see this coming. We sent our buddy, Jim Bullard, to tell you to fear bubbles!

Goldbug: I'm speechless.

Moral of the story: The goldbug story is unfalsifiable. Every time the story contradicts their narrative, they either pivot, change the goalposts, or deny reality, like denying the validity of government data. The Fed often follows their mindset more than they think, and it's a destructive notion conducive to prolonged malaise.
~ResponsiblyIrresponsible

DDO's Economics Messiah
Wylted
Posts: 21,167
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8/30/2015 9:54:31 PM
Posted: 1 year ago
I don't even know how you got access to my diary, but I'd appreciate if you wouldn't copy it word for word on a public website.
Greyparrot
Posts: 14,282
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8/30/2015 9:56:51 PM
Posted: 1 year ago
Isn't like gold a cause of deflation? I mean, we gets more peoples and technacology but we don't gets more golds.... and isn't deflation ultra-bad if you has debts?
ResponsiblyIrresponsible
Posts: 12,398
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8/30/2015 10:22:22 PM
Posted: 1 year ago
At 8/30/2015 9:54:31 PM, Wylted wrote:
I don't even know how you got access to my diary, but I'd appreciate if you wouldn't copy it word for word on a public website.

Don't blame me, bro. It leaked along with the September 2012 Minutes! #Sorrynotsorry
~ResponsiblyIrresponsible

DDO's Economics Messiah
ResponsiblyIrresponsible
Posts: 12,398
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8/30/2015 10:25:02 PM
Posted: 1 year ago
At 8/30/2015 9:56:51 PM, Greyparrot wrote:
Isn't like gold a cause of deflation?

That was certainly the case during the Depression. The thing with gold is that price swings would be far more volatile and unpredictable, particularly because the pi^e (inflation expectations) component of the Phillips curve would fall out. But, yes, a gold standard would more likely than not be highly deflationary.

I mean, we gets more peoples and technacology but we don't gets more golds.... and isn't deflation ultra-bad if you has debts?

Yup, though the one caveat I'd add is that we wouldn't want to reason from a price change. Indeed, deflation -- or disinflation -- is negative, but downward movements in prices driven by technology advancement aren't, in and of themselves, bad insofar as total-dollar spending doesn't actually change. In this case, deflation would be caused by a severe contraction in the money supply, and thus in demand, so yes, that would be highly destabilizing because prices are still sticky.
~ResponsiblyIrresponsible

DDO's Economics Messiah
Wylted
Posts: 21,167
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8/30/2015 11:38:17 PM
Posted: 1 year ago
At 8/30/2015 10:22:22 PM, ResponsiblyIrresponsible wrote:
At 8/30/2015 9:54:31 PM, Wylted wrote:
I don't even know how you got access to my diary, but I'd appreciate if you wouldn't copy it word for word on a public website.

Don't blame me, bro. It leaked along with the September 2012 Minutes! #Sorrynotsorry

Your hash tag makes me think you're not actually sorry :( what next are you going to leak my Ashley Madison account information to my Fiance?
ResponsiblyIrresponsible
Posts: 12,398
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8/30/2015 11:46:02 PM
Posted: 1 year ago
At 8/30/2015 11:38:17 PM, Wylted wrote:
At 8/30/2015 10:22:22 PM, ResponsiblyIrresponsible wrote:
At 8/30/2015 9:54:31 PM, Wylted wrote:
I don't even know how you got access to my diary, but I'd appreciate if you wouldn't copy it word for word on a public website.

Don't blame me, bro. It leaked along with the September 2012 Minutes! #Sorrynotsorry

Your hash tag makes me think you're not actually sorry :(

Na, I was making fun of a leak probe at the Fed that took place right before QE3, so obviously the financial-market participants involved stood to gain from it. Currently, the Fed is ignoring a subpoena from Congress to release documentation related to that leak because it would "obstruct an ongoing investigation." The hashtag referred to the Fed at present.

what next are you going to leak my Ashley Madison account information to my Fiance?

I wasn't going to, but now that you mention it, that sounds like a splendid idea.
~ResponsiblyIrresponsible

DDO's Economics Messiah