Fed Weak: "Interest rate [hikes] simply aren’t working"
Perfect Summer Reading
Hence it’s not just ‘Greedflation’ that has boosted US profit margins and delayed the recession. Interest rates simply aren’t working as they once did.
-Soc Gen
Good morning.
Special Founders Friday. Next week is Fed Week. GS and TD weigh in on that.
On top of that we have 3 heavyweights discussing the current economic situation from different perspectives with slightly diverging opinions.
We are now at a serious crossroads in monetary policy.
The thread running through their work is:
Fed rate hikes have not caused the recession many had feared. Why?
Upon answering that question they give different reasons and responses as to where we go next. Divergences are always interesting and serve as true inflection points for these guys.
Buried deep in these excellent reports are simple and similar theses as to what will force the Fed’s hand which we will summarize this weekend. For now here is a preview and their long-form analysis for weekend reading.
Some concepts discussed include:
The recession is delayed but can be huge if China does not bazooka stimulus
China may need to do a bazooka stimulus soon
Why inflation will base higher going forward- (Hint.. fiscal trumps monetary in Antigoldilocks as we’ve said a billion times)
The recession is delayed because Rate hikes do not work anymore ( see previous hint)
The recession is delayed because the money supply is massive, but is now collapsing.. and that will cause a big dip economically soon.
Plus: FOMC previews from GS and TD and some Moor Tech levels