Be afraid, be very afraid.
No, I’m not talking about the lockdowns in Victoria and NSW; they’re more depressing than fearful, with Premier Gladys finally caving and then caving big-time, channelling her inner Anna; and Chairman Dan channelling his inner, well, inner Dan.
Who else felt as I did, watching his performance – sorry, press conference – on Thursday, that he really perked up at the prospect of returning to work and being able to take the entire state of Victoria straight back into hard lockdown?
No piker he: it had to be the whole state, it had to be the hardest of lockdowns, and certainly none of that softie nonsense entertained in his recuperation absence of 10km and even 25km travel limits – no it was the chairman’s hard 5km limit and just two hours a day out of home imprisonment and so, for many, out of solitary confinement.
I’m a bit hesitant about mentioning it, in case it just slipped his mind, but surprisingly there was no 8pm curfew.
For heaven’s sake, in his absence under his temporary successor, the softly spoken James Merlino, Victorians were even being allowed to go around maskless out of doors!
To misquote the iconic VB ad, you can get it walking the dog, you can get it mowing the lawn, you can get it riding a solitary tractor in the Mallee or walking all alone down a country lane, so you won’t be allowed to get it wearing a mask in Chairman Dan’s bitter Vic.
No, depressing enough as all that is, what you really need to be afraid of is happening on the other side of the Pacific and indeed on the other side of North America.
It is now both blindingly obvious and utterly undeniable that the financial and economic future of the entire world is in the hands of a breathtakingly incompetent Fed, “led”, so to speak, from a spineless chairman, Jerome Powell, at the top.
If it’s not bad enough that this Fed hasn’t got a clue of what’s happening in the US economy in real time, as it’s actually happening; what makes that utter cluelessness so much more dangerously worse is the way the Fed is utterly hostage to its self-imposed obligation to do everything possible to keep Wall Street wealthy and getting always wealthier.
As I’ve explained, ever since the legendary Fed head Alan Greenspan – that’s legendary in his own lunchtime – made his reference in the mid-1990s to “irrational exuberance”, and then immediately backtracked when Wall Street threw the first of its temper tantrums, the Fed has seen its first and seemingly only task to never letting the Dow go down.
The Fed used to be – self – charged with “snatching away the punchbowl when the party got too boisterous”; now it sees its job as hosing in more and ever stronger monetary hooch any time the party shows signs of flagging.
The Fed’s supposed first and easily most important job is, just like our RBA’s, to counter any acceleration in inflation. In the RBA’s case it’s to keep it in a 2-3 per cent range, while the Fed has a specific 2 per cent target.
So the first skill required, one would think, is to actually know what’s happening to inflation – and the Fed of Jerome Powell has demonstrated it hasn’t the slightest clue. Specifically, it can’t even “see” inflation actually happening in real time, far less having the slightest sense of where it might be heading.
And that’s the entire Fed, not just central office or the forecasting back office.
In March not a single one of the 19 Federal Reserve Board and Federal Reserve Bank members saw CPI inflation in the US higher than 2.6 per cent over 2021. The median of their predictions was 2.4 per cent.
In June they somewhat belatedly upped those forecasts: the range was now 3.1-3.9 per cent, the median 3.4 per cent.
Impressively if belatedly catching up with the reality of rising US inflation?
Actually, no. This week we saw CPI inflation in the US has already hit 3.7 per cent in the six months to June. To stress that’s not over the 12 months to June, but in just the six months.
Inflation would have to go straight back to zero and stay at zero for the whole second half of the year and it would still be higher than the median of all these “great” minds predicted just one month ago.
Indeed further, inflation in the six months has already all but reached the highest individual forecast for the entire year. It will go somewhere north of 5 per cent for the year. How much north?
Who knows and certainly not a single one of those “esteemed” controllers of all of our financial futures.
So that’s the first worry; they haven’t got a clue.
The second is that as the Irishman said: facing an accelerating inflation future, you wouldn’t want to be starting from here; with the “here” being zero interest rates and all that massive money printing which the Fed is still doing ($US120bn – or $160bn – a month compared with the RBA’s $16bn).
They “should” be wanting to “start” from around a 2-3 per cent rate and zero QE.
So the first thing you have to worry about is that the Fed will continue to do nothing; the party will continue – and end, in disaster, whatever which way and whatever the Fed attempts to do to keep Wall Street wealthy.
But even more devastating is going to be the journey – the interplay between Wall Street and the Fed in the reality of what’s happening to the US economy.
So, inflation looks bad and Wall Street wobbles, so the Fed hurries to assure “nothing to see here”; or the Fed actually does something, like trim QE and Wall Street plunges and the Fed backs off.
It’s going to be increasingly volatile and the spineless, shameful and basically very stupid Fed is going to make it all so much disastrously worse.