The Idiot FOMC Minutes Were Released and Boy Were They Idiotic

The theme of the Fed minutes was very explicit: the complete and total destruction of the US stock market.

Let me explain.

They jawboned about hiking rates, wantonly, without regard for inflation targets or growth. They simply want to raise them, just because.

Also, they discussed reducing their $4.5t balance sheet of pure air. It is, by definition, a balance sheet strewn with inflated assets, created wits buying power produced by their own printing presses. Now they want to put the genie back in the bottle. Good luck.

Lastly, they viewed stocks as ‘quite high.’

MOST FED OFFICIALS SAW REINVESTMENT SHIFT WARRANTED LATER IN YR
FED: BOTH TREASURIES, MBS SHOULD BE PART OF REINVESTMENT CHANGE
FED OFFICIALS READY TO CHANGE RATE-PATH ASSESSMENT IF WARRANTED
FOMC TO CONTINUE DISCUSSING REINVESTMENT SHIFT AT UPCOMING MTGS
FOMC OFFICIALS DIVIDED OVER LEVEL OF SLACK IN LABOR MARKET

Key excerpts:

“Provided that the economy continued to perform about as expected, most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee’s reinvestment policy would likely be appropriate later this year.”

“Many participants emphasized that reducing the size of the balance sheet should be conducted in a passive and predictable manner. Some participants expressed the view that it might be appropriate for the Committee to restart reinvestments if the economy encountered significant adverse shocks that required a reduction in the target range for the federal funds rate.”

“An approach that ended reinvestments all at once, however, was generally viewed as easier to communicate while allowing for somewhat swifter normalization of the size of the balance sheet. To promote rapid normalization of the size and composition of the balance sheet, one participant preferred to set a minimum pace for reductions in MBS holdings and, if and when necessary, to sell MBS to maintain such a pace.”

And here’s the money shot.

In their discussion of recent developments in financial markets, participants noted that financial conditions remained accommodative despite the rise in longer-term interest rates in recent months and continued to support the expansion of economic activity. Many participants discussed the implications of the rise in equity prices over the past few months, with several of them citing it as contributing to an easing of financial conditions. A few participants attributed the recent equity price appreciation to expectations for corporate tax cuts or to increased risk tolerance among investors rather than to expectations of stronger economic growth. Some participants viewed equity prices as quite high relative to standard valuation measures.

These statements are all incredibly deflationary.

Naturally, they hedged such statements with their usual boiler plate jargon that promised to rescue the world should things become grave and sinister again. The irony is, it’s their moronic policies that keep causing the boom and bust cycles.

They’re like police officers who go out and burglarize homes at night to justify their existence.

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