The Fed

What I'm going to tell you is probably going to go a fair way toward upending your sense of reality and everything you know to be true, at least as far as the markets go.

Think for a second how much mental energy, how many newspaper column inches, how many magazine articles, how many minutes of airtime are totally devoted to speculating on what the U.S. Federal Reserve's going to do to interest rates.

There are journalists and cable TV pundits who spend entire careers covering the Fed. Every time the Fed's Open Markets Committee meets, it's like time stops, and every breath hinges on, "Will they raise rates? How much? How high?"

By statute, the FOMC circus must happen eight times a year, every five to eight weeks. And it's even more frequent (and more protracted) if you count the media monkey circus surrounding it, the arcane rituals of painstakingly parsing out what the Fed is "telegraphing" or how the markets will "react."

And it's all for nothing. That's right. Nothing. It's a sham...

...because the Fed does not control interest rates. And it hasn't for years now.

The witless high priests of "Economism" and the greed-happy gurus of Wall Street preach this constantly as an article of faith: Raising interest rates suppresses inflation.

Here's the thing.

These people couldn't be any more wrong if they made the cable talking head circuit and assured us all that the sun would rise in the west tomorrow.

The truth is rising interest rates help trigger inflation. In fact, inflation and lending continue to increase through most of a rising rate cycle. Borrowers and consumers want to stay ahead of inflation by accelerating their borrowing and spending. Of course, that only promotes inflation. 

I'm going to prove this - all of this - to you beyond a shadow of a doubt, because I don't want you to get sandbagged by what's coming; the U.S. Federal Reserve is wrong, and that means it will be behind the curve until the very end, just like 2008, just like always.

When it's all said and done, when it's all over but the crying, the Fed will be confronted with the obvious consequences of this faulty thinking. It'll deny it six ways from next Tuesday.

It might even get raked over the coals (or ashes) for it, but that'll be cold comfort to people who didn't listen.

But you, armed with the facts, will be safely in cash, ready to move at your leisure.

The financial media are trying to turn the search for a new potential Fed chair into a horse race of some kind.

We'd tell you who we think will win, but the truth is, it doesn't matter.