Hawks or Chickenhawks?

Fed Reserve Governor Lael Brainard sounded hawkish on Tuesday, promising to “Ramp Up” the inflation fight. But the actions of these FEDS make you question whether they’re Hawks or Chickenhawks.

Cue up: Foghorn Leghorn of Looney Tunes fame.

“Boy, I said, Boy, You’re about as useless as a back pocket on a T-Shirt.”

And useless is a good description of most of these Fed Reserve governors.

Example:  Brainard said the Fed would raise rates methodically and shrink its balance sheet at a “Considerably” more rapid pace than it did in the previous cycle.

But…and this is a Very Big Butt…

They can’t rapidly reduce their balance sheet.

Why?

If they do, the whole financial system collapses.

Huh?

Brainard also acted tough (Hawkish) by throwing down the gauntlet and quoting former Fed chair Paul Volker.

But people forget how Volker pushed interest rates to 20% in the early 80s to rein in inflation.

And now with rates at the lowest in 5,000 years can you imagine what would happen if rates were to follow the Volker strategy?

Are They Hawks or Chickenhawks?

The Fed can talk about balance sheet reduction all it wants. But talking and doing are two different things…

Bottom line, it ain’t gonna happen.

Why?

Because the FED Banksters created these massive bubbles.

And they – like most politicians – will NEVER admit guilt.

And speaking of politicians, both parties demanded the Fed fund their insane spending sprees for decades.

Why?

To keep the illusion of prosperity going.

In the process they became the great enablers.

Ironically (or NOT) payback for TRILLIONS $ in debt is now coming due.

As a result, inflation is here to stay.

Who is going to buy all of these bonds?

In order to shrink their balance sheet, the FED needs to dump Trillions of bonds.

But that creates a big problem.

Supply and demand dictate that as the Fed dumps bonds onto the market, supply will rise and the price will fall.

As a result, yields will rise.

But this creates another big problem for the US government.

Rising interest rates mean Uncle Sam’s borrowing costs rise.

It’s similar to your bank raising the interest rate on your mortgage causing you to pay more every month.

So, the US government will have to pay more to finance its debt.

That means it will have to borrow more.

And that means even more bonds on the market.

It’s a vicious circle.

But it’s proof that the chickens have come home to roost.

Calling all chickenhawks!

One thing for sure is the markets will respond accordingly.

So, how are you prepared to deal with it?

Find out in our April edition of “…In Plain English” (HERE).

Share this with your friends…especially if they ever watched Looney Tunes cartoons.

They’ll thank YOU later.

Remember: We’re Not Just About Finance.

https://www.financialsmatter.com/category/in-plain-english/

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