Floor It Fed

If there was another reason for the Fed to keep its foot ‘through’ the floor, it is the fact that despite a record growth in the Fed balance sheet YoY, CPI (ex food and energy) dropped to 1.7% and missed by its biggest margin in 14 months.

This is the 2nd lowest print in two-and-a-half years. Perhaps most dismally, real hourly wages rose at only 0.9% year-over-year – around half the rate of inflation. Overall, energy costs rose the most MoM (+0.8%) while Apparel fell 0.5% MoM (its biggest drop in 6 months as we suspect the JCP-driven sales deflation has begun already); and given Sebelius’ testimony today we note that healthcare costs are up 2.4% YoY (almost triple the rate of wage increase).

Print ’till you drop, what ould go wrong with that? Except never in the history of the world has this ever worked. So what???

You cannot print gold … Investors be aware of the liquidity trap.


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