Another release of Fed minutes with no answers. Big surprise. It’s been six years of waiting for the Fed to tell us that we are no longer living under “exceptional economic and monetary conditions.” It’s been six years of waiting for a true economic recovery, instead of unsustainable and stupefying housing, bond, and stock market bubbles. And it’s been almost a year that we have been waiting for the Fed to raise interest rates by just 25 basis points.
You would think that at this point the Fed could at least show us the courtesy of telling us what the hell they plan to do going forward, so we can plan our lives accordingly, but apparently not.
Should I buy a house now with my wife and infant daughter? Not if the Fed is going to raise interest rates! But, is Grandma Yellen going to raise interest rates? Who the hell knows?
Should I borrow money to expand my business right now? Not if the Fed is going to raise interest rates! But, is Grandma Yellen going to raise interest rates? Who the hell knows?
Should I continue to pour money into my 401K when the market is trading at an insane PE multiple? Not if the Fed is going to raise interest rates! But, is Grandma Yellen going to raise interest rates? Who the hell knows?
Should I take out a huge loan on a new truck at these ridiculously low interest rates? Not if interest rates are going to rise! But, is Grandma Yellen going to raise interest rates? Who the hell knows?
Should I sell everything and run for the hills? Frankly, who the hell knows? Grandma Yellen apparently thinks that we have no need to know what is going to happen in the capital markets until the day before she and her minions make up their minds, so any planning for the future is blatantly and hilariously impossible.
In the name of all that is holy and good, how does Grandma Yellen expect us to make decisions about our futures if we have not even a remote glimmer of what she is going to do about interest rates? Is she really obtuse enough to think that insane levels of money printing and mind-numbingly low interest rates alone can “prime” us into spending our way to recovery? How dogmatic and egomaniacal would Grandma Yellen have to be to think that the economy could revive without any sense of direction about what she and her minions are going to do about interest rates?
The truth of the matter is that normally functioning capital markets, and most specifically the markets that involve lending money for interest, are all about future expectations. A man loans money to a corporation because he believes the corporation will make enough money in the future to pay back the loan, plus interest. A man loans money to another man to buy a house because he believes that the borrower is creditworthy enough to pay back the loan over time, plus interest. A man lends money to a government because he is sick enough to believe that the government he is lending to won’t default on its bonds at some point.
Given this stupidly obvious truth, the fact that Grandma Yellen can’t bring herself to tell us what the hell she is going to do reveals that she does not understand even the banal foundations of normally functioning capital markets. She is absolutely terrified of the effect her decisions are going to have on the markets, and so she cowardly does nothing while promising to act “when appropriate.”
Meanwhile, those of us whose lives and paychecks don’t depend on a government paycheck, unlike Grandma Yellen, hover in an awful purgatory where our entire lives can change in an instant because a cowardly academic grandmother refuses to tell us what is going to happen.
Needless to say, that’s not capitalism, and that’s not freedom. What it is is a form of monetary totalitarianism that “Uncle Joe” Stalin himself would envy.