All You Do to Me Is Talk Talk!

What the Federal Reserve does is more important than what Fed people say.


Mike Maharrey Mike Maharrey
Midweek Memo
January 17th, 2024 Comments

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In this episode of the Money Metals Midweek Memo, host Mike Maharrey discusses the recent dynamics in the precious metals markets, particularly focusing on the Federal Reserve's influence and the price movements of gold.

The episode starts with Maharrey expressing his skepticism towards the Federal Reserve, suggesting that their actions and statements significantly impact the financial markets, often overshadowing fundamental economic indicators. He points out a recent dip in the price of gold and the Dow, attributing it to comments made by Fed Governor Chris Waller, who was perceived as hawkish in his speech at The Brookings Institution. Waller's cautious stance on rate hikes led to market panic, reflecting the market's sensitivity to the Federal Reserve's monetary policy.

This is called “open-mouth operations.” But as Money Metals’ Midweek Memo host Mike Maharrey explains in this episode, what the Federal Reserve does, and the economic context they do it in is much more important than what the Fed people say.

Maharrey then delves into the intricacies of the market's reaction to the Federal Reserve's policies. He argues that the market is overly dependent on the Fed's actions, particularly regarding interest rate decisions. He highlights that the current market is not driven by fundamentals like company value, supply and demand, or the general state of the economy. Instead, it is largely influenced by expectations about the Fed's monetary policy.

The discussion includes an analysis of December's Consumer Price Index (CPI) data, suggesting that price inflation is still high and far from the Fed's 2% target. Maharrey notes that, despite appearances, monetary conditions are not as tight as they seem, especially when compared to historical standards. He cites the 1970s, when interest rates were much higher, to argue that current rates are not sufficient to control inflation.

Jim Grant's interview is referenced, where Grant describes inflation as "endemic" and suggests that the economy is heavily reliant on easy money. Maharrey agrees, predicting that despite current hawkish tones, the Fed is likely to cut interest rates in the near future, regardless of whether inflation is under control. He believes this will be due to a potential crisis caused by high interest rates impacting the debt-ridden economy.

The podcast concludes with a call to action, advising listeners to consider adding gold and silver to their portfolios as a secure asset in uncertain economic times. Maharrey emphasizes the importance of being prepared for potential economic downturns and highlights the need to stay informed about financial news and trends.

SHOW NOTES

CPI Lie! Price Inflation Is Even Worse Than Advertised

Jim Grant: It's Too Early for the Fed to Declare "Mission Accomplished"

Mike Maharrey

About the Author:

Mike Maharrey is a journalist and market analyst with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.