You'd think after writing these columns for more than 15 years you wouldn't have to say something more than, oh, perhaps 10 times in one before the questions changed to new ones.

But the breathless anticipation of The Fed never does change, does it?  Its a great deflection tactic from the various political folks in Congress and Treasury, both of which are the real lever and the MTS, mandated by law, is where you find truth -- after all, it is sort of a transaction log at the summary level for the entire Federal Government much as anyone can produce for their household with Quicken.

Yet the latest Jackson Hole symposium produced the usual people sitting on the edge of their seats with a picturesque background (seriously; if you've not been there it really is very pretty as the Grand Teton National Park is right there) and, of course, all the money that is attendant.  Opulence, of course, is part of the image projection.

Reality is a bit different.  As I've noted many times over the years (and first noticed when I first started caring about such things; being a CEO has a way of doing that since monetary and fiscal policy have outsized influence on all businesses) the Fed, in nearly every case, just follows along with what the market has already done -- and takes credit for it.  This either produces loud cheers or guffaws; the latter are called "mistakes" and the former "wise decisions."

Thus our Fed Chair's Yoda-style declaration that "now the time is" when it comes to rates.

I didn't hear one person note that the IRX, the interest rate on the 13 week T-Bill which reflects what people actually pay in the secondary market (that is, you pay a discounted price on the bill when you buy it and that discount translates into an implied rate of interest) is now sitting right at 5% while the overnight Fed rate is at 5-1/4 - 5-1/2.  In other words the market has already set rates at 5% for short-term money.

But but but but.... you sputter, the Fed sets rates!

No they don't -- but they want you to believe they do, because absent that The Fed's only job is in fact what their job actually is, which is to clear all the transactions between banks and attempt to make sure that they have a marketplace (by providing one of last resort) so any given bank can have on hand what is necessary to clear your check to buy that car or house tomorrow -- and more-importantly, so your employer's bank can pay you and not have it bounce!

Now certainly it is true that The Fed's various governors, when they speak, influence rates.  The spoken word is quite powerful and that of powerful people built up by the media that produces a God-like aura around them can only amplify that influence.  Who remembers the "Briefcase indicator" from the Greenspan years -- before 24x7 Internet and streaming media?  So I do not discount, nor spit upon, the fact that such influence exists -- it clearly does, it clearly moves markets, and it clearly should be paid attention to, if for no other reason than all the other people in the marketplace do.

But the market in fact controls this issue.  And what the market is telling you right now makes no objective sense.  The MTS, for example (now available through July) says that thus far we have run a $1.517 trillion deficit.  That'll be $1.82 trillion by the time we get to September 30th, assuming of course nothing out of the ordinary happens and thus we're 10/12th of the fiscal year in at this point.  GDP at the most-current read is $28.629 trillion, so the government is running a 6.4% fiscal deficit, that is, the Federal Government is forcing 6.4% of real inflation into the monetary system by spending that much in excess of tax and other receipts.

These are mathematical facts; they're not subject to interpretation.

This in turn means the market is in fact, right now despite the claims of many in the media, operating with negative real interest rates all across the curve -- people are being paid to borrow.  That in turn is a boot on the scale of supply and demand because you can borrow $1 million and the cost of doing it is less than the nominal amount you'd have to spend in one year for the same basket of goods and services as a result of said federal government spending.

That is what is causing asset prices to not only rise but maintain their "value" today, and the further you go out the interest rate time structure the more negative the rates are.

This is an utterly nuts thing from an objective analytical basis and yet here we are.  It exists because people in the market have come to believe that this will always be the case and that there are no limits to the profligacy of Federal spending.

But all things in the physical world have limits.  Your life has limits, your credit card has a limit, every single physical thing obeys the laws of physics and entropy and there are no exceptions to this.

Acting as though there are is delusional -- yet here we are.

The real question is "how far away from a complete disaster are we nationally?"

That's a good question -- and I assure you the answer isn't "infinitely far, and it will never occur."

Yes it will, and there is no evidence we are going to change course.