Sunday, March 12, 2017

Janet Yellen is partly to blame for Donald Trumps election victory

In fact it's been these low rates that are actually one of the reasons the economy has been so weak. This benefits the financial markets, it benefits the stock market, it keeps it propped up at artificially high levels, but it undermines the real economy. That's why so many Americans are hurting and why so many voted for Donald Trump.

What's appropriate and what the Fed is going to do are two totally different things. The Fed is going to raise interest rates as slowly as they can possibly get away with, and at some point they're going to have to come up with an excuse why they're going to stop raising rates, and why they're going to cut rates again and why they're going to go back to QE.

All of this is inevitable. But even if the Fed does nudge interest rates up a little bit more before they reverse course, it's not going to matter.

Inflation is headed up, not just on the consumer level but…inflation rising faster than any rate hikes we might get from the Fed. So real rates are going to be falling even if the Fed raises nominal rates.