Fed Policy and Monetary Velocity with Dr. Lacy Hunt - Global Macro Update

first LOL
Thank you for these insights.

Excellent. Some fresh and useful ideas.

Love listening to Dr. Hunt. A voice of reason and sanity.

This was an engaging and informative interview. I'd like to have heard more discussion of how the "excess liquidity" economists talk about actually caused inflation. 2.5% mortgage money is an obvious example but bank reserves do not give consumers spending money. Those $2,000 checks certainly did, though, and the Fed can certainly be faulted for not leaning into those. However, much culpability belongs with politicians of both parties.

So in the end he stated that he has little hope that the Fed's mandate of being a lender of last resort will be achieved. I find that to be a grim prognosis implying they will continue to facilitate the governments now perpetual trillion dollar deficits. Politicians will never be willing to stop spending, most of which is unproductive debt. So the problem continues to metastasize. Got it.

Indeed a master's course in half an hour. The right course for the Federal Reserve seems so obvious in Mr. Hunt's comments it's hard to understand how the Fed got so off the rails. Not a very optimistic outlook for what's ahead of us, but it's difficult to find any basis to refute it. Is it correct to believe that in terms of its mandate the Fed has lost it's way, and as Mr. Hunt opines, is not likely to return to it? These interviews provided at no cost by Mauldin Economics, and at bottom I guess, by John Mauldin's decision, are so appreciated. And it seems absolutely necessary to compliment Mr. D'Augustino on the quality of his questions- building on and expanding Mr. Hunt's comments - often bringing them to a level people like me can understand. Thank you.

A clear and simple understanding of the causes and effects of poor US monetary decisions. Dr. Hunt is clear and easy to understand.

thanks.

High regard for Mr. Mauldin, a professional, great interview, and gentlemen. Dr. Hunt: I listen to every interview and am so appreciative of him, he is just one of our best! Thank you both!

Will rates go to 15%, like in the 70's. Mr. Hunt says no...PJS

Just so remarkable that Dr. Hunt continues to remind us that it is people and families who bear the brunt of this.

Another thought. Mr. Hunt went out of the way - and the video highlighted the fact - that the Federal Reserve is 'culpable' for the distress its failure to adhere to its mandate has created for working men and women - the people and families that Marci and John mentioned. But not adhering to its legal mandate has not caused any distress at all for the very wealthy - or even many of us that are fortunate enough to be able to invest in assets. It's feasible - what's your opinion? - that the Fed has intentionally followed during these many months a different mandate; one that we've seen reflected in asset prices at the expense of the majority of our population. There's an old adage that I think may apply here to the Federal Reserve : "By their fruits you may know them." The fed followed a course of action. What segment of our population did it benefit, what segment harm?
Dr. Hunt was obviously upset with the Fed's actions; charging their culpability in the results. But culpability has not resulted in accountability. There has been none. There will be none. For some inexplicable reason (but perhaps you know of one) whatever damage the Federal Reserve inflicts it gets a pass. And nothing changes except a different course of action to moderate the earlier.

I guess it was informative to hear, several times, that the Fed messed up and the odds of a recession are high, but there was no specific talk about what the Fed should do. Dr Hunt said "reduce liquidity" but specifics including amount and timeline were not discussed (or even asked).
Also, how can we. be close to the peak of rates without government interference? It seemed in the past that the economy allocated capital efficiently when the UST 10 year was roughly a few hundred bps about the Funds rate. So at a 2% inflation rate, we should see about a 4% UST 10 year if all is going well. Doesn't seem like we are close to that. The government has really upset that relationship with their balance sheet since the aughts with consequences, some mentioned in this clip. Is this going to continue?

Dr Hunt is a brilliant and compassionate man. I love listening and learning from him. I think my "aha" from this was that the average age of Americans is 38... so over half of the country has no idea what's happening! History doesn't teach the unwilling student, but experience teaches whether you want to be taught or not. Incomes are down, debt is rising, and 180 million people are hurting before we even get to the hard stuff. I'd like for Dr Hunt to replace Jerome Powell and go after Fed Board members who used their FOMC roles to profit millions in insider trading-- that's my two cents :)

Watched an old movie, "Roll Over " ,with Jane Fonda. The plot revolves around a plan to take down the dollar by suddenly demanding a full cash settlement of billions of interest bearing bonds, that could not be met by banks/traders - rather than rolling them over. Made me wonder if such a scheme could play out and if the Fed's recently found authority to print trillions $, is a stick to keep such a cabal at bay ? Could the ECB profit from such an event, using the Euro Dollar - or even such as Bitcoin? Always wonder who funded the awesome advertising/marketing of Bitcoin - Thanks for this great conversation with Lacy Hunt !

Awesome! Things wont get "choked off" yet by the sounds of it - quote borrowed from the Old Chestnut

Yes, yes, yes. The dual mandate and the end of Bretton Woods (fiat currency) politicized the Fed banking system, creating a symbiotic relationship between Wall St. finance and Wash politics. See where the top financial bureaucrats come from: Government Sachs and Citicorp.

Should the FED exixt ay all?

Analysis of the yield curve is flawed. In 2000, the Fed's balance sheet was well under $1 Trillion, they held NO mortgage securities, and they held little if any long term debt.
Now, the balance sheet is 8.8 Trillion, the Fed owns 2.7 Trillion in long term mortgage paper, 1.4 Trillion in treasuries over ten year maturity. Thus , the Fed has sopped up over $4 Trillion in long term debt, taken it out of the market and thus skewed any analysis of the long end vs the short end, ie the curve.
What would long rates be if that $4 Trillion was out in the market looking for a home?

The mountain of liquidity is a result of the Fed ignoring the signals. There must be hard guard rails. Fed Funds tied to inflation. Money supply tied to GDP.

"The Fed's greatest obligation is to our modest and moderate income families"
Tell that to the pseudo elites, the well degreed but lacking common sense sycophants, (Bernanke, Yellen, Powell) who live in a cocoon, who deal in cocktail parties in the Hamptons, sea food towers at Davos, and fine dining in Jackson Hole as they plan out their "we can't be wrong" game plans. Have any of these decision makers been in a lumber yard or grocery store?
Having real negative rates brings just what we have......too much risk was taken to get any kind of fair return on one's savings. Negative rates dropped the savings rate to 5%. Not hard to figure. But it pumped the assets of Wall Street and real estate specs like those of Blackstone and Blackrock.

The Fed ignored their inflation (stable prices) mandate....
but let's not play their dual mandate game....the mission statement from the 1977 Federal Reserve act says that the Fed must also "promote moderate long term interest rates". (That is the 3rd mandate, conveniently carved out and ignored for its inconvenience)
Moderate = not extreme. The Fed intentionally pounded the long end by buying MBSs and other long paper to, as former Fed Gov Fisher said in "The Power of the Federal Reserve" (PBS documentary) FORCE the investor to take more risk. Thus rates in the long end were sent on purpose to ALL TIME LOWS by Fed policy. This dropped the savings rate, this forced people to seek any type of return and in so doing take too much risk. That was the plan. All time lows in long rates are "immoderate" for they are "extremely low".

No mention of QT which is the shedding of Fed assets. The yield curve must steepen IMO.

Didn't Lacy Hunt say that there would be no inflation as the velocity was so low. All 2021 and early 2022 I listened to him say it was pushing on a string for the fed

Still watching Frank G Melbourne Australia 🇦🇺 ❤️

Dr. HUNT. There is no greater analyst

Understand his viww that fed must prioritise us pi lic interests. This has implicstoons: in exporting us inflation you cannot expect to remain the gloval hegony. Alternative arrangements are being made and will accelerate including in europe. Secondly, you are not immine to the ravagement of the economies which the us dollar takes down. Global depression beckons and then a nwo.

The Fed is complicit. Fire Powell.

wonderful conversation. IF rates arent the key and liquidity is then I'd like to hear more about those mechanics and the implications of QT.

Well here we are a month after this interview and he was very wrong about the long bond being at or near a peak. It was 3.5% then and it went straight up every day to 4.1% today. Very wrong!

I listened to Lacey hunt two years ago and he had such a convincing story, old and wise, no end of facts and confidence. Funny how we’ve had the greatest bond market crash in history since then and he was as wrong as wrong could be. All these finance channels and finance experts are just entertainment, they all make their living selling information not trading on it.

Lacy acts as if the inflation just got away from the Fed. Nonsense- the inflation , especially in housing prices, was intentional.

The Fed does not care about price stability unless it is so bad that it causes riots.

I truly love any interview featuring Dr. Hunt. He is an amazing man. I never fail to be a wiser, more informed individual whenever I listen to this man. Thank-you!