Repeating myself, I have never actually seen a “soft landing”…. The concept is like the concept of “socialism”…. Sounds sorta good in a vacuum but not in the real world. Nice theory with no realism of workable success. The thought of selectively slowing things, but not ALL things, is tantamount to losing weight in the belly….only happens when one loses weight everywhere…Targeted economic slowing is like targeted weight loss. Only a myth….
The idea that interest rates (aka cost of money) will stay higher for longer is a theory I not only subscribe to, but relish. Why…. Simple answer is long term stability. When the money supply is used to fix problems (like Covid or the 2008 real estate bubble bursting), its usually not a viable long-term solution. Flooding the economy with money, only to remove the same money later, isn’t a recipe for sustainable growth. Giving people money to stay home and hide from the Delta variant, only to take it back later, would not seem to be good long-term economics.
As the broken record, we repeat our mantra to anyone who will listen. Mainly… the Fed is doing the right thing, and we applaud them for it. Rather they do it right and take as long as needed than get it wrong and have a much bigger problem. The politicians can rail about “shrinkflation, corporate greed, or any permutation of inflation” but the Fed is the good guy in this movie. Prices went up because of imperfect fiscal and monetary policy and we all had a part to play in that….
Our view on rates….. for entertainment only… is this….. We are in the 6th inning of the tighter monetary policy cycle. The rise in interest rates is (probably) done but the draining of the money supply is still in full momentum. The Fed has reduced its balance sheet by about 16 percent from the high. This basically means it has reduced total money supply by about 6 percent. We expect another 12 to 15 percent to come out of the money supply before this is all said and done. That part of the process takes time and is the most delicate. So far, so good.
On the bright side, savers are getting a return on cash. There are tons of alternatives to leaving your cash in a bank savings account and getting bupkis…. One can shop CD’s, get a decent money market, or the mother of all…. Slam good returns on the Treasury Direct program. Just like old times, short term savings is rewarded. Economically, nothing in our thoughts or projections has changed. We are still patient and still optimistic. In life, patience is a virtue (or so I’m told) and good things take time.
As always, thanks for reading. If you have any questions, concerns, or just want to chat….don’t hesitate to reach out.
Ed, Frank, & Tammy
Edward Stiles
200 N Union St.
Kennett Square, PA 19348
cell 610-745-1931
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