The Fed’s Minsky Moment! Even Top 1% Of Net Worth Is Lower With Fed Tightening (US Industrial Production YoY Goes Negative)

Confounded Interest ^ | 07/18/2023 | Anthony B. Sanders

[Kaiser8408a]

The Federal Reserve, an organization that even George Orwell would find outrageous, is a Minsky Moment Machine!

A Minsky Moment refers to the onset of a market collapse brought on by the reckless speculative activity that defines an unsustainable bullish period. Minsky Moment crises generally occur because investors, engaging in excessively aggressive speculation, take on additional credit risk during bull markets.

And since Covid and the Great Monetary Expansion to fight it helped creates massive inflation and helps the 1% get wealthier and wealthier. BUT as M2 Money growth slows, the 1% are losing their position as top dogs in the economy. Not by much (see pink circle), but a little.

And The Federal Reserve helps create the monetary expansion through low rate policies, fueling credit and asset bubble expansion. Greenspan, Bernanke and Yellen were the masters at creating a Minsky Moment (named after Hymen Minsky, the late Washington University of St Louis economist).

Then we have the latest bit of bad news. US Industrial Production year-over-year of -0.43% as M2 Money growth evaporates.

The Fed’s Powell: Let’s play a game … and make the 1% even wealthier!!!

[Kaiser8408a]

The Fed is something like Franz Kafka would envision.

[TomGuy]

Some speculation that the FED may become a tad more aggressive for the remainder of the year and increase 1/2% next week.

For all the squawking, those of us who have any memory from pre-Carter to GWB see these current rates as closer to normal. It was only with GWB and the real estate collapse that interest rates were lowered to almost zero. Too many got too used to cheap money.