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Pride and Prejudice
Fed to "proceed carefully" and Americans to keep their opinions to themselves...
Bill Bonner, reckoning today from Poitou, France...
Of course, you already know the news. Bloomberg:
Fed Signals Higher-for-Longer Rates With Hikes Almost Finished
Federal Reserve Chair Jerome Powell made clear Wednesday the central bank is close to done raising interest rates, but his colleagues delivered the message that resonated: Borrowing costs must remain higher for longer amid renewed strength in the economy.
After a series of rapid rate hikes over the past 18 months, the Fed can now “proceed carefully,” Powell said — a sentiment he repeated at least a dozen times Wednesday …
And of course, you know too that this is all nonsense. Is inflation going up or down? Jerome Powell will find out at the same time as the rest of us. And if it goes up substantially, he will have to raise rates, whether he wants to or not. For now, he will follow; he won’t lead.
Out of Control
The Fed is not really in control. Not now. But it has to appear that it is pulling the strings and turning the knobs. And those things have effects of their own. Investors will buy…or sell…depending on which way they think the wind is blowing.
The real test…the moment of truth…will come when asset prices start to go down in a hurry. Then, the Fed will have a real choice – either lead, or follow. Inflate or die. It will then either follow deflating prices with lower interest rates. Or, it will panic and lead the way into a more dangerous inflationary cycle.
We will see.
In the meantime, here comes news from Hollywood Unlocked:
Rolling Stone Co-Founder Fired From Hall Of Fame Board After Saying Black Artists Weren’t As Articulate As White Stars
Wenner was discussing his new book. He made the mistake of speaking his mind. For his interviews, he thought the white music greats were more forthcoming.
He apologized later, but the harm was done. In America, saying what you really think is verboten.
Too bad. Prejudices are helpful. They economize time. And they help organize things in an orderly, agreeable way. Imagine that you are looking for an investment advisor. You talk to a young man who is dirty, smelly and uses foul language. For all you know, he may be the greatest investor of all time. But your prejudice tells you to keep looking.
We take great pride in our prejudices. And since prejudices have fallen out of style, that is, since so many people seem to have a prejudice against them, we rise with a contrarian view.
A Matter of Preference
We like baked onions. We are not fond of fish, generally. When we see a nice, ripe apple on a tree, it gives us a good feeling. A snake – even a harmless black snake – does not.
We all have prejudices – ideas, tastes, preferences about the way things are…or how they should be. The whole progress of humanity depends on them. Some things are good, desirable, worth cultivating and working for…even dying for. Others aren’t. We must choose. We must discriminate. A woman chooses the most desirable mate she can get. A man chooses the best value auto he can afford. We develop prejudices – often unconscious ones – as a kind of shorthand or algorithm to guide us.
Imagine, again. You are a member of a primitive tribe. Another tribe, your hereditary enemies for generations, suddenly appears, girded for battle, near your camp. As far as you know, they have come bearing gifts…wishing to sit around the campfire with you, singing songs of friendship.
But you have a bias. You believe they can’t be trusted…you think they have come to kill you and turn your wife and children into slaves.
You could be mistaken. Maybe you’re ‘just prejudiced.’ But the cost of being wrong will be high…probably fatal. Prejudice could save you.
Marketing, politics, marriage, work, religion – at some level, all are just a clash of prejudices. Nobody knows the future. Nobody knows what God wants. Nobody knows what is ‘best.’ We all have to guess, by generalizing…stereotyping…and discriminating. And together, through trial and error, mistake, misfire, and misjudgment we stumble along.
In a banned episode of The Simpsons, Homer decides he needs financial help. “I want a Jew,” he says. Maybe Homer didn’t know it, but Bernie Maddoff was a Jew. It didn’t matter. Homer was just giving voice to a popular, but now forbidden, prejudice: Jews are better with money than goyim.
But what we are all most prejudiced about is ourselves. Musk oxen prefer the company of other musk oxen. Elk, geese, penguins – all stick to their own kind. Even slime molds seem to have an affinity for other slime molds just like themselves.
And when we look in the mirror, we wonder how any race could be as fetching as we are. If we were Chinese, we would think the Chinese were superior. If we were Italian, we’d likely think Italians had some edge. Jews…Blacks…every group develops a kind of pride in itself…and prejudices towards others.
Poor Jan Wenner apologized later, but the harm was done. In America, recognizing your own prejudices is unpardonable.
More to come…
Joel’s Note: Long time readers will already be familiar with the phrase “higher for longer.” In fact, it was the title of a column we published in these very pages… back in September of last year!
“No, it’s not the name of Snoop Dog’s new album,” we joked at the time, “it’s what we’re forecasting the Fed will do with interest rates in the face of persistent, decidedly non-transitory inflation.”
And lo! Here we are… twelve months on… by told by the jefe himself…that rates will, indeed, be higher for longer. Huzzah!
Not that Mr. Powell has every been “ahead of the curve,” so to speak. The man who gave us “transitory inflation” is still battling to get that toothpaste back in the tube. The Fed’s core measure for August showed the biggest increase in 14 months… and that’s on top of the steepest rate hike in living memory.
What now? Is it “inflate or die,” as we’ve been chorusing… or inflate and die, as some have put it? We’ll have to wait and see.
Meanwhile, Dan and Tom are polishing the new BPR Doom Index V2.0…
“The idea behind the Doom Index,” mused Bill when he introduced the very first iteration more than a decade ago, “is to measure the tension in the system and get a better idea of when the rubber band is going to snap.”
Dear readers know full well the kind of “tension” of which Bill speaks. It’s the chasmic divide between the Wall Street economy and Main Street reality… between D.C. politics and what folks in America’s cities experience on a day to day basis… between what the mainstream presstitutes spout of an evening and what working Americans see and hear with their very own eyes and ears…
“We're focused on the real economy,” explains Dan, “instead of the fake stock market. As such, we're concentrated on the price and flow of the 'master economic resource,' energy. The 8 indicators in the new index are almost all related to the flow of energy in the real economy, from extraction, to transport, to use (this is a faint echo of how the Transports, the Utilities, and the Industrials work in Dow Theory)…”
The new index – Doom 2.0 – will feature prominently in next week’s Monthly Strategy Report, available to subscribers. If you’re not already enjoying all our member’s research, feel free to get “ahead of the curve” and join us, here…