The final minutes of the Federal Reserve meeting for 2019 is very useful because it gives their assessment of the economy and their outlook for 2020. Are you wearing glasses? Is your vision 20/20? Those are good questions, but a better one is do you believe what the Fed says?
Bridge in Brooklyn
If you believe in the minutes of the Fed, you need to read this report. I also have a bridge for sale from Brooklyn to Manhattan. It is another in my ongoing attempt to get the public to understand that we need to End the Fed!
Minutes
First, they said that their policy would be appropriate. This is a great word since it leaves you to go in any direction. If they seek to lower rates, all they have to say is in their estimation that this is appropriate. If they feel a rate hike is needed, again, all they have to say is their decision was appropriate. In other words, B.S.!
They go on to say that they are keeping a close watch on international trade and the global economy that is showing signs of weakness. Dear Reader, their mandate from Congress is to keep our economy growing with attention to unemployment and inflation not foreign policy. It is true that the global economy is effected by our dollar and the Fed is directly responsible for the value in the dollar. However, central banks throughout the world also effect currency values and world trade. There are many other factors, but the Fed never gets into details.
They keep harping on the aspect that our economy fails to achieve a 2% inflation rate. This is their biggest lie as I will point out later. In conjunction with their 2% target, the Fed says that they will leave rates unchanged in 2020. This is another lie as history will show. They also say that they are worried about the lack of inflation longer term. They see unemployment falling even further and GDP growing modestly around 2% with consumer spending holding at 3% into the third quarter.
None of the members, voting or non-voting see a rate cut in 2020. They all agree to watch and provide liquidity to the repo or overnight loans. The Fed has kept the lid on this recent problem. They have reported that they have provided over $365 billion since mid-December into this segment of the market. This action keeps short term rates from rising, but the mass numbers also indicate that something is not kosher. El-Erian believes this action is a form of QE (I agree) and he feels the number is closer to $600 billion. That is a lot of money in a two week span.
What We See
The Fed says that they will address the market in an appropriate fashion. They further say that their will be no rate changes for 2020. This implies that they have supplied the market with the proper interest rates for the current pace of growth into the next year. People, back in October of 2019, the Fed minutes said no rate changes until June 2020. Now, again implying due to their action, no rate changes for the entire year. Let me remind you that in December of 2018 the Fed said that they see a return to normalized rates as they began to hike interest rates. This policy was kept for three months as the 10-Year Bill hit 2.75%. They also reported in March 2019 that they saw interest rates at 3% in 2021. The next month they changed course again. They began to lower rates. The 10-Year Bill is now at 1.92%. I see it testing the all-time low of 1,51%. Our native Americans said it best, "They talk with fork tongue."
They seek to increase their power by touching on foreign policy and the global economy. Power corrupts! This is not in their mandate. They just seek to increase their power over the economy and nation.
They reported that they see a failure in our economy to approach their target 2% inflation. This gets me so angry.
First, they do not include the three biggest needs of everyone and every corporation in America: energy, food and shelter. We need each every day. Let me digress.
Energy: gasoline has been stable with no spikes energy prices. We all need energy. This is good.
Food: prices have declined for eggs, milk and diary in general, however vegetables has gone up in price along with necessary items like coffee, meat and poultry. Overall, prices higher than 2%.
Shelter: the cost to rent eats up to one-half of income in many locations. 44% of households are renters. 71% of wage earners cannot afford to buy a new house. Prices are up and getting worse each year. In addition, state taxes are so high that it caused the federal government to put a cap on this state deduction. The homeless situation is telegraphing us all that our dollar cannot purchase shelter. This is terrible with a worse outlook.
Bottom line: 2 out of three ain't good. Sorry, Meatloaf.
With that said there are many others who see inflation on the horizon of 2020. Among them is Brendan Brown of Macro Hedge Advisors. Of course, bigger names back the Fed like Goldman Sachs. They said and I quote, "The economy is now almost recession proof." If that does not get you worried, how about the following aspects in our economy.
Cable TV = will be up 3% according to Consumer Reports.
Streaming = will rise by 12%.
Housing = will rise another 5.4% from CoreLogic.
Stamps = will rise to .55-cents.
UPS = will cost another 4.9% more.
Sporting Events = Did you see what two pitchers received? Tickets +
Prescription Drugs = up another 4.5% - Medicare = up $9.
Employee Health Insurance = up 5%.
Soda = increased by state taxes around the country.
Cars = up and could go higher due to tariffs.
Global Travel = up 1% to 2% Hotels = up 1% to 3%.
Colleges = State = $11,200 Out of State = $27,120 = up 4%
Nation's Parks = rising $5 to $10 dollars.
All of the above and so much more all say, "End the Fed!"
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