What If The Fed Is Wrong | The Acquirer's Multiple®

In their recent episode on the VALUE: After Hours Podcast, Taylor, Braziel, and Carlisle discuss What If The Fed Is Wrong. Here’s an excerpt from the episode:

Jake: Then, we have that sort of as an observation. Then, I read Roger Lowenstein had a, I guess, you can call it a blog again of “What if the Fed is Wrong?” is the name of the article. He’s talking about the annual increases in the cost of everything, which are probably, largely related to this supply snafu that we’re running into, but beef is up 20% year over year, furniture 12%, eggs 12%, cars, 10%, clothes 10%, gasoline 50%. We’re talking about like, “Oh, wages are going up” We have this great– everyone’s quitting the great resignation. But actually, in real terms from January to today, real wages are down to two and a half percent. So, I don’t know if wages are necessarily keeping up with this.

Meanwhile, we have another complex adaptive system, which is our whole economy, and then we have this fiat level above that wants to dictate, “Here’s what needs to happen. We’re setting rates for this. We need to have all this stuff happen.” Dude, that’s not how complex systems work.

So, this idea that the Fed is going to engineer a soft landing of all this and be able to raise rates in 2022 or 2023, and thread the needle perfectly between supplies, constraints, and the right amount of money supply to be having circulating around, this just seems like such hubris to me to think that you take a mindset of that this is a washing machine with knobs that you can dial in and pulleys that you can mess with, it’s nothing like that.

That is just totally the wrong model to be approaching this world, and I can’t help that we’re all not going to pay a lot of real physical prices. Well, actual inflation, but also just like the toll of quality of life from people having this assumption that they know the right knobs to turn on a complex system that is incredibly difficult to predict.

These guys, how do they know it’s going to be transitory? They didn’t know that COVID was coming. They didn’t know that the supply chain was going to have problems. They didn’t really know 6% inflation was going to print. They didn’t anticipate this great resignation. They had none of this stuff baked into it. So, why do we think that they’re going to know the answers prospectively from here? I don’t know. I just have to be scratching my head as to why we put much faith in this much power into these kinds of organizations.

Tobias: The articles that I have been seeing are not that it’s transitory now that it is here, but it’s good for you. Inflation is good for you. There’s plenty of articles out there like that now.

Thomas: It’s like fiber, just so good for you. Can’t get enough.

Jake: So, real wage of minus 2.2% is good for me? That’s what you’re telling me?

Tobias: Inflation is good for you. I’ll find some articles and repost them. It’s is funny. I saw that the air quality in Los Angeles is down because of all the ships idling out in the bay. The air quality is [crosstalk]

Jake: So, those are 80 ships apparently off, which is a record and it just keeps building. It’s worse today as it’s ever been. It’s not clearing up. It’s going in the wrong direction still.

Tobias: You can walk to Catalina Island over the shipping containers. You don’t have to take a boat anymore.

Thomas: My kids love it. The giant [crosstalk]

Jake: I don’t know. What do you guys make of this? Am I just like tilting at windmills here and totally off my rocker or are we creating the problems that are going to have real impact?

Tobias: I think you’re exactly right. I think that I’m of your school of thought as well and where–

Jake: This is the problem. [laughs]

Tobias: Yeah, unfortunately, this is complete conspiracy theory podcast stuff where you and I can’t agree with each other and everybody else just tries to be quiet. Let us talk way–

Jake: Let us get demonetize together.

Thomas: Hey, what are you guys agreeing on? You agreeing that inflation is not transitory or the [crosstalk] experiment of monetary policy?

Tobias: Yeah, all of that.

Thomas: Okay. How can anyone not think that at least at least a decent probability of being the case?

Tobias: You go and read any mainstream article out there, nobody in the world thinks this. Well, nobody with a mouthpiece thinks this.

Jake: We’ll cop to it.

Tobias: Yeah.

Jake: What is a trillion dollar or whatever infrastructure, throwing money at it do to solve this problem either? We have a real physical Adams problem in the world that needs to be figured out. It’s a supply chain problem. It’s not a we don’t have enough pieces of paper chasing the supply chain problem.

Tobias: What we need to do is mint the coin. We need to mint a trillion-dollar coin and that will solve the problem.

Jake: What does that do? I don’t understand [crosstalk].

Tobias: It solves the problem.

Jake: Okay. Well, fair enough.

Tobias: You’re not serious unless you’re considering minting the coin. I’m told.

Thomas: I think maybe it’s more of an agency issue, which is like a lot of the people, it’s hard to come out against these things. You talk a lot about momentum. There’s so much momentum behind not this. So, what’s working is working, what’s not is not and if you want to lose your job, you can really stick your neck out there. Now, if you’re a smaller person in the ecosystem, you can probably be vocal on it and it doesn’t cost you as much, but to be big and outspoken against, I’m sure you know– [crosstalk]

Tobias: You don’t get to invited Davos with these kinds of views.

Jake: No. We’re out for Davos for sure. [laughs]

Thomas: Yeah, there goes our Davos tickets. Yeah. I don’t know how someone can think that MMT is not grand experiment. For myself, I definitely think it is. That’s maybe partially why I’m in the crypto but also, I got it in a very backdoored free optionality way. But I’m actually gotten quite interested in gold as well. When you listen to crypto people, especially bitcoiners, most of them, they sound a lot like gold bugs. What I love is they don’t think that either–

The two parties are like, ones over here, ones over here, and they’re like, you listen to one, they’re like, “Uh-huh.” That’s the other one, they’re like, “Uh-huh.” You’re like, “You guys could actually be really be friends.”

Jake: Really good friends if you just– Yeah.

Thomas: Peter Schiff, I think that you guys could actually, there’s a dance here, anyway. But it’s funny to listen to people that are crypto and they don’t think– and the same thing with–

Jake: Yeah, totally.

Thomas: [unintelligible 00:33:40] someone who’s 17 or 20 years old and they’re in the crypto, you just think you basically sound like a 75-year-old gold bug. [laughs]

Jake: Yeah. [laughs]

Tobias: I mean, it’s not wrong. It is funny. It’s funny how, it’s such a conspiracy theory, so far outside the mainstream that you read every day, and don’t talk to many people who disagree. That’s the funny thing. Someone drop in the comments here. Tell us where we are wrong.

Tobias: This wasn’t live, right? We’re just talking. [laughs]

Tobias: No. This isn’t going out [crosstalk]. We’re just talking by ourselves.

Thomas: [laughs] The feed was cut.

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