Blain’s Morning Porridge/Bill Blain/5-4-2022
“Central Banks have one real job: avoid inflation! It’s here, and the consequences will be devasting as conventional rate-hiking wisdom is used to fight a wholly exogenous supply-side shock. There may be alternatives, but ‘credibility’ is everything to Central Banks.”
USAGOLD note: Having lived through a time when the Fed did lose credibility (the 1970s) and the pain Paul Volcker had to inflict to win it back (and the length of time it took to achieve it), one is forced to consider if present day financial markets and economy could survive a repeat. “[Y]ou can feel the whole economy shudder as folk contemplate the implications of higher rates on the value of their pensions and homes,” writes Blain. “The smarter ones are more worried about job security than at any time during the pandemic. I am terrified what it may mean for my family. I fear our economies lack the resilience we had back then.” Having been there, we do not see him as being unreasonable.
