It is said that those who do not learn from history are bound to repeat it. Unfortunately, it would seem that this adage is all too applicable to today’s Federal Reserve – who only last month at the Jackson Hole Economic Summit – vowed to wage their most aggressive fight against inflation, but yet under-delivered when it came to the crunch this week.
Had the Fed learned from the painful inflationary experience of the 1970s, it would not have allowed, as it did over the past two years, for the money supply to balloon out of control and interest rates to become as negative as they still are in inflation-adjusted terms today.
Had the Fed learned from the painful 2008 experience with the bursting of the housing and credit bubble, it would not have allowed even greater bubbles to form in the global equity, housing and credit markets. But instead, it engaged in one of the biggest and most unprecedented money printing programs that the world has ever seen.
Had the Fed learned from both of these painful experiences, it would not have spent the whole of last year playing down the biggest year-on-year rise in inflation seen in more than 40-years – characterizing the record spike as “transitory” and nothing to be concerned about.
Historically, the Federal Reserve has never been right on monetary policy and has a proven track record of setting the economy up for an even bigger crisis further ahead.
It’s becoming more evident, day by day, that the Federal Reserve is fighting a losing battle against rapidly surging inflation and now find themselves spinning the wheels and not even getting close to bending the curve on inflation.
The hard fact is that as long as we have interest rates below the inflation rate, even if they’re higher, they’re still negative – and negative interest rates put upward pressure on inflation. Ultimately, you can’t fight inflation with negative interest rates. That’s like trying to put out a fire with gasoline!
The toxic combination of stubbornly entrenched inflation and slowing global economic growth has left officials facing a situation common to chess players down on their luck – stuck with nothing but bad moves to play.
The Fed’s inflation struggles this year have undeniably bolstered the dollar, exacerbating inflation elsewhere by raising the cost of Commodities which are, more often than not, priced in the greenback.
This is unleashing, a crisis on top of a crisis – with a “reverse currency war”, now in full flow. Central banks across the world are being left with no other choice but to frantically compete with the Fed in order to have the strongest currency – shifting inflation pressures to every corner of the globe.
Getting back to my chess analogy. Trading is just like chess and if you know how to connect the dots, you will realize there is a massive opportunity brewing ahead. Right now, these markets are a traders dream – packed with unlimited money-making opportunities to capitalize on the macro-driven volatility!
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:
Trading has large potential rewards, but also large potential risk and may not be suitable for all investors. The value of your investments and income may go down as well as up. You should not speculate with capital that you cannot afford to lose. Ensure you fully understand the risks and seek independent advice if necessary.