I’ve been watching the slow-moving market train wreck over the last week, along with anecdotal reports of weak demand coming in for nearly everything from housing and autos to a buildup of oil inventories (9.88 million barrels worth in excess domestically according to Reuters!). If the problem is not tighter money domestically, I’ll eat my hat.

Even if I were to suppose that the Fed didn’t actively tighten policy and the root tight money problem is coming from elsewhere, like perhaps the ECB, the domestic impact has the Fed’s nagging inflation ceiling problem written all over it, likely focused on opportunistic prevention of an upside breach at the expense of potential GDP with TIPS spreads showing 2.05% (adjusted to ~1.55% for PCE – the official index). Where is the off-setting defense of the upper side of the target when it’s still behind after a decade of undershooting??

Simply put, we do not need this. It’s been estimated that about $1.4 trillion in market value has been destroyed in the last week alone; not chump change that is easily exchanged for some vaguely defined benefit. Even in IT terms, based on a target of a medium-term average of 2% PCE inflation, we do not need this; and it’s hard to imagine how this outcome is consistent with the Fed’s recent rhetoric of questioning the wisdom of the Phillips curve war on employment and growth. The consistency of the situation with rhetoric is even harder to imagine when taken together with current multiple headwinds conflating toward the side of negative: Trump’s trade war, lack of a Brexit deal and May’s embattlement, tight money in the euro zone (according to Lars Christensen, it’s been a problem for months), etc.…, some of which would naturally cause some reallocation and domestic inflation to rise.

In the past, I was hard on Bernanke and Yellen for, in my view, being quite intelligent individually but knowingly capitulating to and aiding monetary extremism in deed and in public forums. What we have now in the current crop of fedsters is probably even worse than huge on intellect but weak in character because they publicly admit the problems of monetary extremism and say they want to do better only to abort what was an excellent start toward turning over a new leaf and getting legal in managing monetary and credit aggregates commensurate with the economy’s long term ability to produce – as [in consequence of such] to promote full employment, stable prices, and moderate long term interest rates.

Allowing or perhaps causing a big hit to progress toward the target that is already undershot against the backdrop of current goings on in the real world with scarcely any peep from anyone at the Fed or any noticeable policy backstop is just more of the same damaging, backward medicine – kill the flowering fauna while magnifying drought.