Inflation Hysteria No.2 (TIPS, Swaps)

It was only three years ago, so you’d think narratives today would at least try to account for relevant recent history. If that prior first fit of inflation hysteria had a birthdate, it would’ve probably been December 18 or 19, 2017. On the former, the US House of Representatives passed their version of the Tax Cuts and Jobs Act (TCJA); the latter, the Senate voted for same over the arcane parliamentary objections of the body’s arcana Parliamentarian.

Over the next several months, though, true hysteria followed. And for all the same reasons: currency destruction.

Money printing and positive economic numbers. Combine those two things, and they don’t even have to be concurrent, as late 2017 proved, and the whole world simply believes there’s no other way forward. Reinforced by only one set of media messages – crafted under the unitary tutelage of central bankers doing the, wink, wink, money printing – an inflationary fire of recovery can only be just one spark away.

In December 2017, explosive debts introduced by TCJA were going to be that spark.

Central bankers themselves are always careful not to tip their hand too much, projecting forward using more modest language so as to set only the direction of media expectations and let the financial press take if from there. Once set in motion, officials have learned to sit back and watch the narrative explode; in this case, into pure, undeserved hysteria.

The process had begun before TCJA was anything other than a bill under Congressional consideration. On December 13, 2017, for example, then-Federal Reserve Chairman Janet Yellen merely stoked the coming with innuendo by confirming what “everyone” had already been thinking:

Changes in tax policy will likely provide some lift to economic activity in coming years. The magnitude and timing of the macroeconomic effects of any tax package remain uncertain.

A few months later, as Inflation Hysteria #1 was reaching its absolute peak insanity, Kansas City Fed President Esther George provided its rationalizations while skillfully seeming to remain detached from them:

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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