There Are No Hawks On The Fed, Only Ostriches

The Fed cannot spot inflation. Can you?

A Pink Elephant and the Fed

Bloomberg's Peter Coy @petercoy has an excellent article on Fed policy worth a good look: Don’t Think About Pink Elephants or Tighter Monetary Policy

There really aren’t any hawks left on the FOMC,” only doves of different degrees, JPMorgan Chase & Co. Chief U.S. Economist Michael Feroli wrote to clients on Jan. 14, referring to the Federal Reserve’s Federal Open Market Committee. “Monetary accommodation” today is “far greater” than in past decades when the unemployment rate was as low as it is now—6.7% in December—Jim Paulsen, chief investment strategist of the Leuthold Group, wrote Jan. 14.

A hawkish Fed would be jacking up interest rates right now. The Fed might say, as Paulsen writes in his note to investors, that the yield on 10-year Treasury notes is only one-seventh what it was in December 1986, when the unemployment rate was the same.

“Now is not the time to be talking about exit” from bond-buying, Powell said. When the time does come, he said, “We’ll let the world know.

Powell not only opposes raising rates or cutting bond purchases; he’s against scheduling it, talking about it, or even thinking about it too much. That may be sensible advice, but to people in the financial markets who are getting uneasy about inflation, his lack of concern could make them more concerned. Powell is like the psychologist who tells you not to think about pink elephants. From that moment on, some people can’t think about anything else.

Ostriches, Doves, or Monkeys?

The Fed is like a cross between the "See No Evil" monkey and an Ostrich With its Head in a Hole

Ostriches don't really hide their heads in the sand, they bury eggs in the sand. 

In contrast, the Fed sticks its head in the sand, planting seeds of inflation, and cheerfully hopes the seeds sprout. 

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