Pro Perspectives 8/25/22

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August 25, 2022

We'll hear from the Fed Chair, Jerome Powell, tomorrow morning at 10am. 
He's speaking at an economic symposium hosted by the Kansas City Fed in Jackson Hole, Wyoming.  This is annual event attended by the most powerful central bankers and finance officials in the world, and it has a history of producing significant changes, or hints of changes, in policy direction.
Stocks had a good day ahead of this big event.  And it's because of a combination of two things:  
First, the expectation heading into Powell's speech is for more tough talk on tackling inflation.  Powell's colleagues at the Fed have been working the media, almost daily, for the past three weeks to engrain in the public psyche that the Fed will do more, and will do what it takes to bring inflation down.  With that, there is little risk for a "hawkish" surprise from Powell tomorrow.  Stocks like that.  
Second (reason stocks had a good day), stocks like free money.  And the administration delivered the equivalent of another $500+ billion in free money with yesterday's announcement of student debt relief. 
Just like the Federal unemployment subsidy, pandemic checks and "child tax credit"/direct payments resulted in a boom in asset prices, this move will likely reignite the asset-price inflation fire.  Even Biden himself said this move should be a catalyst for people to buy a house.
So we have the Fed that is pretending to fight inflation. Of course, their words don't match their actions.  And simultaneously, the government is fueling more inflation, with what is now a $1.5 trillion spending binge just in the past month.
With that, curiously (maybe most interesting), the financial media and Fed officials constantly posture and debate over trivial (relative to the scale of inflation) next moves in monetary policy, while ignoring the continued inflationary policymaking on the fiscal side.
That should tell us all we need to know about the real game plan: currency devaluation. 
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