Does the Fed want to get on the horse? Not really.
The Fed talks a good game. But if you compare their mistakes in the 1970s with the ones they are making today, you just shake your head. The 1960-1970s were a period of monetary RESTRAINT compared to the 2000-2021 time frame.
For example, let's look at the difference between inflation and the Federal Funds rate. By changing the Federal Funds rate, the Federal Reserve attempts to speed up or slow down credit and economic growth. That's why the Fed cuts interest rates during recessions.
But where should rates be during an expansion or with high inflation? Come on, you know. Higher. Today they are still zero.
Currently, the difference between Inflation and Fed Funds is 6.7%; that exceeds the 1970s peaks by about 2%!
Who benefits? Debtors, governments, corporations, and speculators. Who suffers? Bond holders, wage earners, and savers.
How Washington addresses inflation is the key to your portfolio performance in 2022.
Robert Lloyd, CFA®
Chief Investment Officer
Lloyds Intrepid Wealth Management
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