Whose Tightening Is It Anyway?

I suppose it’s only fair. After all, they started it. Earlier in the year, Federal Reserve officials including Chairman Jay Powell suggested it was all Trump’s fault. The abrupt difficulties presented by the dollar were, they said, the result of tax cuts swelling the deficit and thereby threatening capital markets with a “deluge” of Treasury bills to digest.

This past weekend, apparently, the shoe was on the other foot. The President was, it seems, under the impression, according to the Wall Street Journal, that Powell was in favor of “cheap money” which is something any President would like. This now “hawkish” stance under the new Chairman is not to Trump’s taste.

President Trump told donors he is unhappy with the Federal Reserve’s recent moves to raise interest rates and raised doubts about the man he placed in charge of the institution, Jerome Powell, people in attendance at a fundraising event said.

It seems quite obvious that the dollar is starting to grab everyone’s attention again. The President has been up to now quite firm about his own economic performance; just look at that sparkling unemployment rate! Suddenly, it’s all Powell’s fault?

That the two have now pointed the proverbial finger at one another simply underscores the seriousness of the situation. Neither man has any idea what’s going on, so it only really matters for where we are in how both are now singling each other out because they realize something is going on.

May 29 has done that. Given last week’s eye-opening TIC figures, we can see why the change in emotion; it was seismic market event, maybe surpassing in some ways October 15, 2014. Even the most ardent of optimists, a category which begins with Trump and Powell, are cracking a little, going from unbreakable confidence to more nervously shifting narratives.

Inflation hysteria is now long dead, as noted yesterday. Nobody seems able to figure out why or what’s wrong, but more and more people are getting the sense that something is.

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