Just In Case You Think The Fed Has A Clue

Via Global Macro Monitor,

This should dispel the notion…

Watch Jay Pow stumble over this question of why they are buying $40 billion a month in mortgages when there is a dearth of supply in housing.

Yikes @RudyHavenstein pic.twitter.com/50XeVGJhVL

— Tyler Neville (@Tyler_Neville_) April 28, 2021

Can’t wait to hear the Chairman justify zero rate policy and deficit monetization with inflation roaring at > 5 percent. It would be entertaining, if it weren’t so damaging.

The price of Lumber is 5x higher than it was 10 years ago.

Fed: “Ignore, Just Transitory.” pic.twitter.com/ffR2CKvvQZ

— Charlie Bilello (@charliebilello) April 29, 2021

Where To Inflation?

Here’s a pretty good theoretical model (follow the entire thread) estimating that U.S. inflation may reach double digits by Q1 2022. One of the premises is that monetary authorities have no way out of this rabbit hole and are constrained by the risk of severely disrupting financial markets in an asset dependent economy.

Recall our view that deflation/inflation is a corner solution and Wall Street’s “Goldilocks” scenario is still just a marketing gimmick. Deflation as markets try to move back to mean valuations – a lot lower – or inflation, and lots of it.

19/n

What this simulation tells us is that we should see a very, very sharp increase in US inflation in the coming months and inflation could be heading above 12% by the end of the year.

— Lars Christensen (@MaMoMVPY) April 29, 2021

h/t CG

Anyone with a better model, lay it on the table. Stop with the “fake news” or “don’t worry” nonsense. CPI prints > 4 percent in May and you heard it here first.