Monday, December 6, 2021

The road to retirement: the Fed grabs the attention of investors

Over the past few years, the term gaslighting has become a popular way of describing an attempt to manipulate someone’s perception of the world into questioning their own reality. It is constantly being used by people in positions of power to garner support for the agenda. Let’s take a look at how gaslighting can be applied to the way the Federal Reserve System (“FRS”) communicates with investors.

During the first nine months of this year, Fed President Jerome Powell argued that inflation is “transient.” Ironically, Powell never defined the timing. Using open language, he could try to counter public fears that once inflation takes over, it will be difficult to get rid of. Moreover, the Fed does not have a good history of forecasting inflation, and it knows it. So it was a stretch to say with certainty that it was transitory.

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Photo by Ellen Yaskol.

Charlie Farrell

Then, in late September, Powell said the current inflation was “disappointing,” and blamed supply chain problems for it. And he said that he sees a solution to these problems. Well, he needs to see what most S&P 500 leaders do not see. In the income statement, companies highlight supply chain problems. Business leaders do not fully understand what is happening and cannot accurately estimate when they will be corrected. By saying he sees their solution, Powell creates a vision of the solution that doesn’t reflect what business leaders are experiencing on the ground.

Then, in October, when inflation was more firmly entrenched, Powell said the most likely scenario is a return to an inflation “trend” as supply chain problems resolve on their own. However, he does not offer real timelines or proofs of how supply chain problems will go away. The reality is that the Fed has little understanding of what is hampering the supply chain and the attendant labor shortage problem. Undoubtedly, what is happening is unusual and unprecedented. But don’t expect the Fed to admit it. The Fed should look as if it were all-knowing and all-seeing. Gaslighting helps achieve this goal.

Then we have the mother of all inflation cuts, which is what happens in the housing market. As you may know, the formula used to calculate housing inflation in the CPI is quite confusing. According to this formula, housing inflation for the last year is about 3%. However, anyone who has recently tried to buy a house or rent an apartment knows that housing inflation is likely to be in excess of 10%. Given this discrepancy, one might think the Fed might say, “Heck, our housing inflation figures may not reflect what’s going on.” But you don’t hear that.

The purpose of highlighting these issues is to help investors understand that the Fed has an agenda. And when influencers have an agenda, don’t expect them to point out the many ways they can be wrong. The Fed’s current agenda is that inflation is not an issue and will soon disappear. But consumers are seeing significant inflation everywhere: cars, homes, rentals, gas, utilities, food, insurance, travel, healthcare and the list goes on. To reassure investors, the Fed is reluctant to acknowledge what we are all seeing.

Nation World News Deskhttps://nationworldnews.com
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