47,800,000,000 Reasons to Put the Fuel Can Down.

I like a roaring fire as much as the next guy, especially when it’s as cold as it is right now. But there is a big difference between a nice fire and an out-of-control forest fire.

With inflation going up at the highest rate since the early 1980s, the Fed is choosing to make it worse. They have announced that they are going to continue their Quantitative Easing in the next few weeks to the tune of $47,800,000,000. The Federal Reserve Bank of New York states on its website, “The Desk plans to purchase approximately $20 billion (Treasury Securities) over the monthly period from 2/14/22 to 3/11/22.” It also states on its website, “The Desk plans to conduct approximately $27.8 billion in agency MBS purchase operations over the period beginning February 14, 2022, on FedTrade.” This makes no sense at all.

One of the tools the Federal Reserve uses to increase the economy is Quantitative Easing. This policy is intended to accelerate a weak economy much like throwing diesel fuel on a brush fire in hopes that the economy will warm up and run well on its own afterward. But it’s just foolish to pour more diesel fuel on a fire that is already running too hot.

The whole point in Quantitative Easing is to make the economy grow hot. It puts more money in the market so businesses and individuals will borrow more money from banks and invest more in the economy. It usually makes stock prices go up as well since bonds become a less attractive investment. The result is stimulation of the economy.

Our current inflation rates tell us our economy is running too hot and by continuing their Quantitative Easing policy will only make inflation go higher. It’s hard to fathom why they’re doing this unless it’s just to save face.

My wife tells me that I write too much about the Federal Reserve, but right now they are negatively affecting the stock market and economy. Many analysts believe this is an amazing public failure for the US central bank.

To add to the absurdity, the Federal Reserve’s Chairman Powell is being renominated by President Biden to continue running the Federal Reserve. Do they not have performance reviews in government?

My dad was the volunteer fire chief of our town when I was growing up. One day I got a little too aggressive with adding fuel to the trash I was burning, and the fire spread to the woods behind our house. My dad was not happy about having to leave work to be called out in the fire truck to his own house to put out a fire. (I might add here that my dad believed in spankings.)

So, Chairman Powell, I speak with experience when I say put the fuel can down when the fire is already hot.

Have a blessed week!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Independent Advisor Alliance (IAA), a registered investment advisor.

IAA and Fervent Wealth Management are separate entities from LPL Financial.