All is well in the land of rainbows and unicorns. At least that’s the message being floated from DC and their Wall Street handlers. Apparently the economic “recovery” has been so robust that Janet and company at the FOMC have even starting to unwind that massive hedge fund, even if they are doing so at a snails pace. As Professor Anthony Sanders noted, at the current pace of normalization the Fed will manage to unwind the mess they have created in a mere 7 years.

Despite all of the rhetoric about tax cuts and economic growth, the people running Congress seem to be mired in a case of opioid delusion. This week we learned that the gross federal debt had spiraled to $20.57 trillion and yet the lemmings in Washington want to give corporations a tax break so we can add another trillion to the account deficit. The lesson to be learned here is that it’s all fun and games when you are playing with other people’s money.

For everybody not inhabiting LaLa Land there is the reality of a flattening (and quite soon inverted) yield curve to reckon with. Apparently the knaves and fools at the Fed have been drinking a little too much of their own Kool-Aid. By all appearances it would seem they haven’t completely mastered the art of forward thinking. By pushing on the gas pedal full speed for far too long, all in a ridiculous stunt to make Wall Street scum even richer than they already were, the Federal Reserve has managed to entangle themselves in a nasty little duration trap.

If Janet and company really do decide to march forward with another rate hike come December 13th, the U.S. Treasury bond market is going to get rather interesting. With yield curves continuing to flatten and the GOP apparently hell-bent on making wealth and income inequality in the U.S. even worse than they already are, the U.S. economy is going to be pushing up a steep hill indeed. Comically enough our very own Dallas Fed chief, Robert Kaplan, (yes, another former Goldman alum) chimed in this week with some new Orwellian babble about ‘A Balanced Approach to Monetary Policy’

“In assessing progress in reaching our dual mandate, I am increasingly cognizant of the risks posed by potential economic and financial imbalances. Such imbalances, if allowed to build, have the potential to, at some point, threaten the sustainability of the expansion and the attainment of our dual-mandate objectives.” Gee!, You think?

I was talking with one of my preferred mortgage lenders earlier today. When he asked about a rate lock for a customer, I told him not to bother. Why bother indeed. The fireworks are likely just beginning!