Over the past few years, the “market” has developed a knack for rising in spite of disappointing economic news. Before CPI reached 2.5%, we usually characterized it as “bad news is good news.” In other words, a moribund economy increased the odds of maintaining or even expanding the most accommodative monetary policy of all time.
But, inflation changes things by laying bare the negative implications of easy money and easy credit. It might be acceptable if hard economic data were keeping pace. But, it’s not.
Trump will speak to the nation tonight and, given that he’s smarter than the rest of us (except, perhaps, when it comes to healthcare), will explain how the laws of mathematics can be suspended for the next four years. The “market” might even respond favorably — which would simply mean that USDJPY, CL or VIX-driven algos have kicked into high gear. But, at the end of the day, it simply doesn’t add up.
If he gets his way, we’re heading into deeper deficit spending — but, this time, with $20 trillion in debt and rising interest rates. What could go wrong?
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