No Time For Pussyfooting At The Fed

The Wall Street crybabies are just plain pathetic. They are huffing and puffing, ever more loudly by the hour, for the Fed to pause its rate increases at next week’s meeting, when the fact is that the real Fed funds rate is still at its lowest point in the last 40 years!

That’s right. The Wall Street stock gamblers have been marinating in the Fed’s absurdly low interest rates for so long that the do not even know the difference between interest rates that are belatedly ooching back toward a semblance of normalcy and the alleged “record pace” of rate increases by the meanies in the Eccles Building.

As embedded in the chart below, the current Fed funds rate is 4.58% versus a 16% trimmed mean CPI which is still running at +6.5% on a Y/Y basis. That makes for a real cost of overnight money—that is, Wall Street gambling chips— that is still deeply negative after dwelling for years in the free money zone.

The flimsy argument of the Wall Street whiners, of course, is that the Fed’s belated effort to permit rationality to re-emerge in the money and capital markets is causing “financial instability”.

To be sure, we don’t cotton at all to censorship and cancellations. But if any phrase should ever be cancelled, it is the Wall Street canard about “financial instability”.

For crying out loud. Where did Adam Smith, Ludwig von Mises and all the other sound thinkers in between ever say that financial markets are supposed to be smooth as silk and always go up?

The whole notion that financial instability needs to be stopped cold in its tracks by Washington’s money-printers and spenders is about as anti-free market and anti-prosperity as it gets. Always and everywhere, unstable markets are actually trying to correct for errors of judgement and pricing—especially those induced by the central bank’s printing presses.

So when these attempts at corrective purges of unsustainable debts, malinvestment and artificially swollen spending levels are nullified by Washington intervention it only amounts to digging the hole deeper. And after one bailout upon the next since at least the post-Black Monday printing spree by the Fed in October 1987, the US economy’s accumulated imbalances and excesses have reached Brobdingnagian levels.