Evergrande is saved, Fed still pumps cash

SO, Evergrande is seemingly ‘saved’ and the Global Financial Crisis Version 2.0 Confucian-style seemingly averted.

The massed ‘minds’ of the US Fed have been meeting – virtual reality style – in Washington and at 4am Thursday morning down under time, as the sun starts to peep over from New Zealand, chairman Jerome Powell will make a similarly momentous statement.

He will confirm the Fed will leave its official interest rate at zero and also keep the virtual reality printing presses whirring along, pumping out yet more hundreds of billions of dollars of the ‘free money’ that’s been pumping up share and property prices all around the world.

Happy days are not so much here again but confirmed to continue with a – these days, somewhat tatty – blue-chip US government guarantee.

The – vintage only, of course – Champagne corks will be popping on Wall St; only the very best cocaine will be rolled out at the eastern end of Long Island this coming weekend.

That word in the second par was used very advisedly. No, not the ‘minds’ in quotation marks, but ‘massed’.

You’d be surprised at just how many people it takes to arrive at and deliver a Fed decision.

The minutes of the last meeting, in July, showed that in addition to the 11 actual ‘voting members’ of the FOMC (Federal Open

Markets Committee), a further 86 people drifted in and out of the – virtual – reality room.

If you needed any single image to capture the decline and fall of the US in mindless, suffocating bureaucracy, that does a pretty good job for me.

A total of 97 people – maybe next year it’ll be over 100 – needed just to decide to literally do nothing and then to implement the decision to do nothing.

That’s, two ‘decisions’ – to keep the Fed’s official interest rate at the zero it’s been pretty much since 2008, apart from a brief period where it went to 2.25 per cent; to keeping printing $US120bn ($165bn) a month of ‘free money’ that’s been done since 2020.

If there’d been any ‘thought’ of ‘tapering’ that money printing, it would have been well and truly stifled by the one-day drop on Wall St earlier in the week, combined with the ‘good’ inflation figures the week before and the ‘poor’ jobless numbers the week before that.

Inflation for the month of August – they do monthly, we, sensibly, only do quarterly – printed at ‘just’ 0.3 per cent.

That was ‘only’ an annual rate of 3.6 per cent.

The Fed’s supposed to be mandated to keep inflation at just 2 per cent – even the lowest monthly number this year was nearly double that annualised.

This meeting the Fed will also release its latest forecasts for inflation for this year and next.

Unlike our Reserve Bank there isn’t just ‘the’ Fed forecast, but amalgams of all the individual forecasts of the 11 voting members plus those of the other nonvoting FOMC members.

As I’ve pointed out, all of them – repeat, all of these supposed ‘experts’ – have utterly failed not only with their forecasts, but to even see the actual inflation happening around them, in real time.

In March, the average of the 20 or so predictions was 2.4 per cent inflation for 2021; the single highest prediction was 2.6 per cent.

In the eight months so far, inflation has already added up to 4.5 per cent – it’s on track to approach 6 per cent for the year.

Curses, missed, by just that much.

But, relax, Powell says, all those price rises are going to disappear come January.

You might say that Beijing and Washington have joined hands across the Pacific to keep the party going.

They’ll keep building ghost cities in China; they’ll keep pouring 150-proof financial hooch into the Wall St punchbowl.