Goldman: The Fed Must Raise Aggressively to Avoid ‘Significant Overheating’

Sometimes I think these economists ingest psychedelic mushrooms before penning this cock-eyed stories. Hang on, let me take this shit serious for a second and stop laughing at it. Okay, I’m ready.

In order to avoid a significant overheating in the U.S. economy, the Fed must cease being the central bank for the world and instead return to their station at central bank for America. Moreover, it’s incumbent upon them to stave off debilitating inflation, affected by a rapidly increasing employment index, by hiking rates FOUR times this year.

“One interpretation of the recent moves by the European Central Bank and the Federal Reserve is that they represent coordinated attempt to ease global financial conditions while avoiding upward pressure on the U.S. dollar, especially against the Chinese renminbi,” write Chief Economist Jan Hatzius and Economist Sven Jari Stehn of Goldman Sachs Group Inc, giving a nod to the so-called “Plaza Accord 2.0” theory.

“To guard against significant overheating, we think that the FOMC would want output and employment growth to slow as we enter 2017,” the economists write. “But this seems inconsistent with the current setting of financial conditions.”

Put another way, if the blowout in spreads and strength of the dollar still hasn’t been enough to stop the U.S. unemployment rate from declining steadily—which implies that growth has been above-trend—then that alone is enough evidence to suspect much more tightening is required to rein in activity to a level at which the economy won’t be running too hot.

Goldman estimates that the Fed will need to carry out four rate hikes this year in order to strike this balancing act and avoid a more brisk removal of monetary accommodation later that could tip the economy into recession.

In other words, the strength of the domestic economy will soon force the Fed to return to being the central bank for the U.S., rather than the world.
“If we are right, the Fed’s willingness to keep policy easier for longer in the name of global policy coordination is likely to be short-lived and the funds rate will rise significantly further than currently discounted in the bond market,” conclude Hatzius and Stehn.

Both Hatzius and Stehn are morons of the first magnitude. These economists at Goldman are delusional, playful thinkers, men clad in velcro hoodies playing with their feces inside of rubber rooms.