The Fed is in Fantasy Land

Now the other side of the inflation debate. This is from Jesse Felder, who is a top economic thinker and former hedge fund manager.
· He cites Andrew Brigden, of Fathom Financial Consulting, who said, “It is becoming increasingly apparent that the pickup taking place in inflation is cyclical.” Thus, inflation will NOT be transitory as the Fed keeps claiming.
· Felder says, “The Fed believes they can drive unemployment to record lows, support asset markets, and maintain faith in the world’s reserve currency all at the same time. This is a FANTASY.” They can’t do all three.
· If the Dollar keeps falling in value here is what will happen. First, import prices will rise increasing inflation. Second, global investors may lose faith in the soundness of the global currency. Felder says, “Both of these, but more significantly the latter, would risk an inflationary spiral.”· Felder says, “Because once inflation expectations become unanchored, consumer and business behavior shifts and people begin stockpiling things they fear they won’t be able to get in the future due to rising prices or shortages. This pushes up prices further.”
· Do you remember the gas shortages and lines and soaring gas prices of the 70’s? I do and I was a young kid. This is happening already and will continue to happen. I worry we may see 10%+ inflation in the next year or two.
· Felder ends his newsletter with a quote from Peter Fisher, former #2 at the NY Fed who told PBS recently, “I think the odds are very high that we will look back at this as an epic mistake and one of the great financial calamities of all time.”

If Felder and Fisher are correct what should we do? The first thing I think of is buy more real estate at today’s record low fixed mortgage rates and watch your rents and values soar as your payment is locked in.