The tardy Fed and the new macro
In 2021 and 2022 we called the Federal Reserve"tardy" on several occasions as they doggedly held to their"transitory" inflation stance long after reasonable people would have given up on such a notion. In this May 2, 2022 article we noted that they had finally started to move… too late.The CNBC article from which the above photo came noted that Ms. Brainard said the Fed could start reducing its balance sheet as soon as May at"a rapid pace".
The Fed's balance sheet, you ask? Well, it's not a pretty sight as the Fed of today continues to cobble away at trying to fix the grossest distortion to date in its inflationary monetary policy. The 2008 spike, which seemed extreme at the time, is nothing compared to what went on in 2020.But it is not just the balance sheet that was put in an extreme condition. The M2 aggregate of money supply also makes the previous gross panic of 2008 look like a little blip .
The bullish Inverted Head & Shoulders pattern shown on the yield is the mirror of the bearish H&S that showed up on the long bond. A hysterical bond bear market spiked yields up and through the previously limiting moving averages and well Dorothy, we're not in Kansas anymore.
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