US Federal Reserve

While the US secular stagnation theme was all the rage, until some time in October, the rest of the world couldn't cut rate fast enough.

Submitted by Tho Bishop via The Mises Institute,

It finally happened. The Fed raised interest rates a quarter of a percentage point for the first time in 2016, after forecasting four rate hikes a year ago. The decision was highly anticipated following the market’s surge post-Trump election (Paul Krugman’s biggest miss since the success of the internet).

There is seemingly no stopping the runaway train that is the economic momentum of the past month, as confirmed by the just released Philly and Empire Fed surveys, which printed at 21.5 and 9.0, smashing expectations of 9.1 and 4 respectively, in fact printing above the highest estimate for both reports, and well above the recent print of 7.6 and 1.5. The one blemish was the sharp drop in labor market conditions at the Empire Fed, which saw a big drop in both employment and hours worked.

What is Janet Yellen thinking?

As the Fed wound down its QE program in 2014, the $USD hit liftoff. It has since hovered in the mid- to upper-‘90s.

Throughout this period, anytime the $USD began to move sharply higher one of more Fed officials appeared to “talk down” the $USD.

The reasoning here is simply. A strong $USD crushes corporate profits. Indeed, since the $USD began its bull market S&P 500 earnings have collapsed to 2012 levels.

Submitted by Danielle DiMartino Booth,

“Government is a just execution of the laws, which were instituted by the people for their people’s preservation: but if the people’s implements, to whom they have trusted the execution of those laws, or any power for their preservation, should convert such execution to their destruction, have they not the right to resume the power they once delegated, and to punish their servants who have abused it?”

 

—John Wilkes, The North Briton, October 19, 1762