http://www.zerohedge.com/news/2015-08-19/consumer-prices-rise-slowest-pace-2014-airfares-plunge-car-costs-slide-rents-jump
Oh what shall she do, where shall she go? Now with inflation no where near the desired annual 2%, a rate increase in September is growing harder to justify. And the market agrees, which is why Treasuries and the stock markets have all reacted pretty strongly to the news.
http://www.zerohedge.com/news/2015-08-19/low-inflation-print-sparks-panic-selling-treasuries
Oh my, my, my, this just will not do.
There are, however, a few ways out my dear Janet. Behind door one we have the stand-by of making up or relying on other bogus stats to still justify an increase, with this abysmal number just being a flash in the pan that can be ignored. While I would wager on this one, I think there are a few more stats coming out before the Fed meeting in September that will be equally bad and will be harder to brush off. Specifically:
If these are as bad as I believe they will be, door number one may be locked.
Behind door number two is the old simply not doing the increase yet and telegraphing it will be likely in the near future, like December. This I fear is the most likely scenario.
But then there is good old door number three. This one is the Fed finally fessing up what they already know, that ZIRP and QE are not working as expected and Bernanke is a sack full of doo doo. They can confess their sins and raise rates anyway as leaving them where they are will cause more long term damage from the ultimate recession upon us than the known short term damage from a rate increase. This is the best door, with nice natural wood and brass fixtures and all, but Yellen ain't knockin' on this door any time soon. Folks at the St. Louis Fed, however, are starting to see the light of day:
http://www.zerohedge.com/news/2015-08-19/after-6-years-qe-and-45-trillion-balance-sheet-st-louis-fed-admits-qe-was-mistake
As the St. Louis Fed sees it, all the stuff ZIRP and QE was supposed to bring us - and other countries - just is not happening and there is no proof it ever will. Indeed, they go so far as to say that evidence shows QE has been "ineffective" at increasing inflation. If they CPI number above does not take you there, then just look at Japan for good measure.
Yes, reality is setting in - or at least the ability to speak the truth about it seems to be. Perhaps there is hope after all.
Let me add now, since positing the above this morning, minutes of the Fed July meeting were released and they eased market concerns over any rate increase happening in September, especially with the changes since that meeting dampening inflation expectations even further. Most at the Fed seemed to still be taking a bit of a wait-and-see approach, wanting further employment improvement and higher inflation expectations before raising. If we are like Japan, it could be a very, very long wait.
http://www.bloomberg.com/news/articles/2015-08-19/u-s-index-futures-decline-amid-global-growth-concern-before-fed
And so the stock market has erased most of its earlier losses. Yeah - more continuation of the stupid ZIRP policy that will destroy us! Looks like most "investors," speculators, manipulators, economists now expect door number two as well. What a shocker.
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