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That was the message from Fed Chair Jerome Powell yesterday as he told the Senate the the Fed would hold interest rates near zero pretty much no matter what and the Fed would keep buying as many TBills as they want to print to allow Infinite Stimulus to keep going well into 2022. “The economy is a long way from our employment and inflation goals,” Mr. Powell said, just days after the PPI Report showed the highest inflation in 20 years. Powell will deliver the same message to the House this morning.
Consumer confidence in the U.S. rose in February for the second consecutive month as Americans grew more upbeat about current business and labor market conditions, the Conference Board reported Tuesday. Still, nearly a year after the crisis erupted in the U.S., the nation has about 10 million fewer payroll jobs than in February 2020. Of course, 1M of those jobs were cleaning offices – they're not coming back…
The Fed’s semiannual report delivered Tuesday said that business leverage “now stands near historical highs” and that insolvency risks at small and midsize firms remain considerable. Noting that asset bubbles triggered recessions in 2001 and 2007-09, Powell was asked if he sees a link between elevated asset prices and the Fed’s easy-money policies.
“There’s certainly a link,” Mr. Powell said. “I would say, though, that if you look at what markets are looking at, it’s a reopening economy with vaccination, it’s fiscal stimulus, it’s highly accommodative monetary policy, it’s savings accumulated on people’s balance sheets, it’s expectations of much higher corporate profits…. So there are many factors that are contributing.”
While the markets recovered on Powell's testimony, they didn't go any higher because, as I said yesterday – what more can this guy say? He's telling you that the Government can spend as much as they want for as long as they want and the Fed will back them up by buying every note they issue and the Fed will continue to lend money at 0% – even though no one in the private sector will do anything close. That's nothing more than perpetuating an artificial environment.…