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Posted in 1 - Liquidity Trader, Fed, Central Bank and Banking Macro Liquidity

These Charts Show You Whether Fed’s Reversal Has Pre-Empted a Crash

The Fed announced at its January meeting that “they panicking” (apologies to Trading Places) and that neither rate increases nor the shrinkage of the balance sheet are on autopilot any longer. The Fed says it will adjust both as the economy and “financial conditions,” aka the stock market, dictate.

So far, neither has given them an excuse to loosen, although the economic priesthood and the Wall Street captured media have repeatedly characterized the economy as “softening.”  Softening is not the same as shrinking. That’s what the Fed is looking for. Although mostly it’s worried about a stock market decline. No sign of that lately either.

The question before us now is whether the Fed’s change in approach will pre-empt the crash I’ve been expecting. Here’s the answer, and I show you exactly why that is.

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