One of our Presidential candidates went down to Mexico yesterday, met with their President, then acted cordial and diplomatic. As soon as he got home, he transformed into a raving lunatic and contradicted practically every shred of diplomacy and good will that he had represented. However, this seems to have become the American political norm. Gerald Celente, founder of the popular newsletter Trends Journal, was recently critical of the Federal Reserve. On Sunday, August 28, NY Fed President William Dudley, the Board’s Hawk Champion from the start, said US central banks should move cautiously before moving rates. This is the same Dudley, who back in May, declared that because the US economy is strong, a tightening in the June/July time frame “is a reasonable expectation.”
Yellen came out of the Jackson Hole meeting saying that conditions are improving, but key targets have still not been achieved. Federal Reserve Vice Chairman Stanley Fischer, on the other hand, immediately gushed that the U.S. labor market is “very close to full employment” and the next interest rate increase may not be “one and done.” Apparently, this is in spite of the fact that 46 million people received food stamps in August, jobless claims jumped up 2,000 this week to 263,000, and the U.S. Manufacturing Index fell to 49.4% in August.
The new approach to any problem appears to be “say it ain’t so” and it won’t be. The media would certainly agree, because they can’t stop reporting on how well the economy is doing. And all of this optimism is doing wonders for the dollar, so by all public perception, the market is at a high and pushing higher, Fed activities have the economy responding and moving forward, and a series of rate increases that will further bolster the dollar and economy are right around the corner.
This is all great material for best-selling fiction novel, but in the business world, it doesn’t fly, or correspond to any set of real numbers. Money must be honest, printing money is a lie, and increasing interest rates will cause the stock market and housing sector to retract, the money supply to shrink, and economic growth to slow. None of this reality is factored into the fiction novel we’re creating. My question is why do we have our sights set so low with this newfound ability to control reality with forceful and confident words? Let’s shoot the moon! Let’s all agree to construct powerful rhetoric promoting world peace.