By quoth the raven – Zerohedge
The Federal Reserve finally made it official today: in a 9–3 vote, the Fed cut rates to 3.50–3.75% and—more importantly—announced fresh balance sheet expansion through Treasury bill purchases.
Whether we want to call them “Reserve Management Purchases” or use the adult, non-fiction name, quantitative easing, doesn’t change the outcome. Liquidity is being conjured out of thin air again, just as the most indebted federal government in U.S. history needs someone to quietly buy its bills for it.
Rates are lower. QE has restarted. And that reinforces the thesis I explored days ago — economic data doesn’t mean jack shit and there is only one direction for nominal prices to go from here—up.
Let’s not pretend this is about “stimulating growth,” “supporting labor markets,” or any of the other bullshit PR lines Powell is forced to recite at press conferences. The real problem is debt, and it’s too big to be paid back. Policymakers do what every empire on the verge of fiscal reality has always done: they inflate the debt away and hope no one notices until the damage is irreversible. It’s not moral. It’s not elegant. But it’s historically reliable, and crucially, it requires no politician to take responsibility. Inflation isn’t a policy failure anymore. It’s just policy.
If this were a rational, data-driven economy, we would expect monetary policy to respond to actual conditions. But between the last FOMC meeting and today, the Fed has been operating in the dark thanks to a government data blackout. According to ZeroHedge, hard data has modestly outperformed while “soft” survey data has collapsed, giving both doves and hawks enough ambiguity to cherry-pick arguments.
Labor data alone has looked strong enough for hawks to argue against easing. And yet, the Fed eased anyway. The message is obvious: economic data no longer drives policy—the market does. As ZeroHedge showed, rate-cut odds whipsawed wildly based purely on speeches, falling on Powell’s hawkish tone and then shooting back to a “lock” after a single dovish comment from John Williams right before the blackout began. Liquidity now moves faster than the data that supposedly justifies it.
Buried in the Fed’s official language today was the most important reveal: the New York Fed’s trading desk will…(READ THIS FULL COLUMN HERE).