Those Blithering Idiots! (Or If You Prefer, The Fed...)

Look, The Fed is enemy number one of sound monetary policy, while Congress and the President are enemy number one when it comes to rational fiscal policy. So, that's the setup. But it gets worse: this time it's different they'll tell you but, of course, it ain't -- just like it wasn't any different in 2000, 2008 or during the recent ill-fated marijuana stock run up and ultimate crash and burn.

You simply can't repudiate the business cycle: that means booms followed by busts, followed by booms, period. It also means that balance sheets count ahead of anything else: you know, those quaint metrics otherwise known as revenue, free cash flow, profits, earnings and dividends. That's what is supposed to drive markets, not artificial sugar high injections of counterfeit money made up out of thin air by The Fed. 

Point is, liquidity is lunacy in horrible fiscal times like today but liquidity makes markets go up until they don't and then it's crash time. Three things have propelled these markets to all-time highs: nightly cash injections, a zero interest rate policy by The Fed and deflation. That's what works, even when it shouldn't.

But sooner or later, fiscal and monetary insanity blows up in your face: Lebanon and now Turkey are but the latest examples where hyperinflation has taken hold, the currency is getting obliterated and money is pouring into the markets and gold purchases. That's always the pattern just before the big bust. Just ask Venezuela, Argentina or Zimbabwe. 

Dominos succumb to inflation, then to hyperinflation and more often than not stagflation. And so goes the currency. Watch out should the EU be next, not to mention the UK. 

Meanwhile, the unprecedented imbeciles at The Fed have a solution for everything: they want to move to increasing inflation in the economy even above a traditional Fed benchmark of 3% and guess what happens then? They can only do that by gradually raising interest rates and that will kill the stock market but good. (See the last round of Fed interest rate hikes that if you yawned, you missed it.)

Absolute monetary insanity. But remember that The Fed's specialty has always been killing off economic expansions so why should this time be any different? As sure as I'm breathing, it won't be.