Following this morning’s basic admission by Janet Yellen that “no matter what” The Fed is raising rates in December (which was then solemnly supported by an obedient Bill Dudley who “100% agrees with Yellen”), Fed Vice-Chair Stan Fischer, speaking tonight, reaffirmed this belief by, as we detailed previously, telling investors to ignore weak inflation. After San Fran Fed’s Williams admission that “there’s something going on here we don’t understand,” Fischer tonight admitted “US inflation is not as low as you think,” at once contradicting Yellen’s earlier comments and the various market-based measures, while confirming our previous detailed solving of the mystery of the hidden inflation
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Inflation Breakevens are collapsing…(longer-dated near record lows)

Inflation expectations are at a record low… and worse…

But all of that is wrong.. As Stan Fischer admitted tonight:

Wait, what!!??

Having now admitted that all of the above market-based (and survey-based) expectations (and current measures) of inflation are wrong, as we noted previously, depending on the importance of the credit channel, the Federal Reserve, by pegging the short term rate at zero, have essentially removed one recessionary market mechanism that used to efficiently clear excesses within the financial system.

While stability obsessed Keynesians on a quest to the permanent boom regard this as a positive development, the rest of us obviously understand that false stability breeds instability.

It is clear to us that the FOMC in its quest to maintain stability is breeding instability and that previous attempts at the same failed miserably with dire consequences for society. We are sure it is only a matter for time before it happens again.