The fact that the voting members of the Federal Reserve are divided over a June rate rise is ridiculous.
With a balance sheet of nearly $4 trillion, zero growth as measured by GDP and an inflation rate of 1% — these bankers have to see it’s impossible to do a rate rise without cratering the economy.
I’m not speaking of equities — which would crash — but the overall US economy would fall into a deflationary spiral even if Yellen & Co. issued a symbolic 25bps move.
The reason I mentioned equities above is because many believe if stocks are rising the economy is good.
The Fed believes that Americans are naive on economics — which may be true — and that creating bubbles in markets is the best way to calm the family discussion over the kitchen table.
So if the Fed is data dependent as they have said. Then the data from the Dow Jones industrial average or S&P 500 may be far more important that and jobs report or durable good orders.
NY Fed President Bill Dudley said as much yesterday.
It appears the EU has the same playbook as stock exchanges across Europe hit all-time highs.
As I have said before, Quantitative Easing is really about easing concerns over the next economic crash and not fixing the problems that have brought us here.