The Federal Reserve states that its goal is to promote employment and economic growth while regulating inflation. As if it is as simple as pulling levers, tweaking a few knobs and dialing up just the right amount of inflation per unit of economic growth. The hubris and ego involved here is incredible.

For the last several years global macro dynamics had allowed the Fed to operate in a highly inflationary manner, while inflation’s effects discretely festered in areas of the ‘services’ economy (like healthcare, regulatory entities, real estate, leisure and hospitality and certain food items). It became clear to me that despite commodities driving down the raw costs of doing business, inflation’s effects had embedded in the services economy when my trash hauler informed of a rate increase due to regulations in the services chain, despite the crash in fuel costs. That is just one little example. Larger examples infect the entire economy.

According to Bloomberg the bond market is not buying the Fed’s rate-hike stance.

Fed Dots Don’t Connect for Bond Traders Scorning Rate-Hike Path

“Bond traders are losing confidence in policy makers as markets convulse and economic growth slows.”

I think bond traders are right to lose confidence in the Fed but the theme of this article implies they are losing confidence for the opposite reason than might actually be the right one once this deflationary phase has run its course; that would be a highly technical economic condition we call…

Chickens coming home to roost…

The notion of bad deeds, specifically curses, coming back to haunt their originator is long established in the English language and was expressed in print as early as 1390, when Geoffrey Chaucer used it in The Parson’s Tale:

And ofte tyme swich cursynge wrongfully retorneth agayn to hym that curseth, as a bryd that retorneth agayn to his owene nest.

Or to modernize it a little…