The Federal Reserve has proven they are devoid of credibility when it comes to their advertised mandates of full employment and price stability. What the Fed is good at is the same thing it has always been good at…blowing bubbles and serving the interests of Wall Street banks. Thus it should come as no surprise that many of the clueless PhD economists working for the Federal Reserve are calling for an uptick in inflation in 2018. You know, because the labor market is so “tight” and current inflation is still tepid.

The Fed of course needs more inflation because that’s what the FIRE sector demands in order to keep the debt bubble inflated. More debt serfs means more money for Wall Street’s looting mechanism and asset strip-mining operations. As Charles H. Smith eloquently put it, control fraud is the core of our political system. And who feeds the money laundering machine of our bankrupt political apparatus better than the Federal Reserve, the dope dealer of choice for Wall Street and America’s criminal banking sector.

The Fed’s centralized control of America’s monetary system isn’t about democracy or “full employment”. It’s a con game of the worst order where crooked, conflicted white-collar professionals dance and sing on your favorite cable news program touting American exceptionalism and the merits of meritocracy while they loot your pension and load you up with debt. It’s where private equity and big finance go to dance while you are busy figuring out how to pay your mortgage and credit card bills.

The first week of the year is starting off as one might expect with stocks shooting higher and bond yields failing to play along. Today we received the first look in 2018 of the balance sheet unwind. It appears the Fed is poised to join the Chicken Shit Club with their rather skittish pace of securities sales. The first SOMA report of 2018 shows a measly $6 billion of “normalizing”. One could get the impression that the Fed doesn’t want to upset the stock market bubble.

The Federal Reserve has so far failed to live up to their projections for unwinding that massive balance sheet. If they do decide to catch up to their lip service to the real economy, things may not go according to plan. There is a plausible case to be made that bond yields could fall with the Fed’s balance sheet normalization. It appears the Fed has lost control of the market, at least on the long end of the yield curve. Pretty shocking yes, I know. But then again, we are talking about an army of elitist Wall Street tools who worship at the altar of an economic fallacy.

There are a number of reasons why inflation may not pick up during 2018. One of the primary reasons why inflation is likely to remain subdued is the fact that the Fed seems oblivious as to what inflation for real people actually entails. The Personal Consumption Expenditures (PCE) index is a miserable way to gauge inflation that people are dealing with because it doesn’t include home prices or asset prices. The BLS’s use of Owners Equivalent Rent (OER) is equally useless, failing to capture real-world conditions on one of the biggest monthly budget busters for Americans.

A falling yield curve should not be surprising as the Fed attempts to hike rates, primarily because the divergence between what the Fed professes to believe and what they really do is a chasm as wide as the Grand Canyon.

Nope, No sir, No inflation here…

Denton County TX Home Price Inflation