Still More Perma-Bull Nonsense

It’s probably time to give the wet-behind-the-ears 30-something perma-bulls of Wall Street a break. After all, they have never experienced hard times, and now they get an old duffer like Ed Hyman, Chairman of Evercore-ISI, telling them that the Fed has already way over-tightened and needs to “pause” forthwith.

What’s especially galling about Hyman’s bubblevision chatter this AM is that it was based on a piece of nonsense of the kind that never stops wafting from the financial sickbeds of Wall Street. To wit, he claimed that the “effective” Fed funds rate is actually 7%, adjusted for QT (quantitative tightening).

Oh, c’mon. The Fed’s teensy-tiny draining of its elephantine balance sheet is designed to help enforce its current 4.83% Fed funds rate. After all, they can’t get rates higher unless they drain away some of the massive floods of liquidity that have been pumped into the financial system during recent years and decades.

Indeed, as much as the perma-bulls would like to think that the Fed has a magic rate-setting wand that it waves at will, the truth is that rates are pegged by metering the supply of funds in the bond and bill pits. It’s the law of supply and demand, driven by people who control the only legal money printing press.

So for crying out loud. What Hyman is doing is double-counting the Fed’s belated effort to reverse the trillions of QE that should never have been printed in the first place. His 7% “effective” Fed funds rate, therefore, is not even an analytical error; its intellectual mendacity of the first order.

Nor is that all. Hyman further averred that inflation is cooling rapidly and that the bond market is telling him that inflation is actually racing back to the Fed’s 2.00% target. The implication is that the effective Fed funds rate is way above the emerging inflation rate.

So real rates are soaring. The inflation battle has already been won. It’s time for the Eccles Building to gets its foot off the neck of the Wall Street gamblers who haven’t made a net dime in 18 months.

Well, it’s no damn wonder that the BFTDers keep coming back to the feeding trough over and over. That is, Wall Street has so corrupted language and analysis that it is literally flying blind. These cats have no idea about where we have been and where we are heading because they are mentally enfeebled by the endless flow of the kind of Fed-enabled sell-side casuistry Hyman was peddling this morning.