Fed Hikes, Trump Fumes, and Wall Street Cries: Here Is Who Is Actually Right

The Quarter-Point Hysteria Is Embarrassing

You want to know what I watched yesterday? A parade of financial media personalities clutching their pearls over a 25 basis point rate hike. Too aggressive. Bad timing. Energy prices are high. The economy might slow.

These are the same people who were telling you inflation was transitory two years ago. The same people who said the Fed would pivot by early 2024. Let that sink in before you take another word of their analysis seriously.

Here is what I know. A quarter-point hike on a mortgage you already have does nothing. Zip. Mortgage rates are already at 7.2%. The 10-year and 30-year yields have already moved. The market priced this in months ago. The talking heads are performing for clicks, not informing you for your benefit.

Volcker Was Right Then. The Approach Is Right Now.

Paul Volcker crushed inflation in the early 1980s. He did it by engineering a recession. It was brutal. Businesses failed. Unemployment spiked. And it fixed the problem for a generation.

That is what medicine looks like. I am not interested in watered-down half-measures that string out the pain indefinitely. Neither should you be.

Kevin Warsh was the lone dissenter on this vote, pushing for more aggressive action. The same politicians who accused him of being a Trump puppet during his confirmation hearings now look a little foolish. Warsh was right about inflation when it mattered, and the political circus around the Fed is a distraction from that fact.

A Presidential Statement That Should Carry a Warning Label

I have to be direct about this because I think it genuinely risks making people less informed about their financial reality.

The claim that U.S. interest rates should be 1% or lower because America is the world’s best credit is not economics. It is a slogan designed for an audience that does not want to think too hard. And the idea that a trade deficit is just a “fancy word for loss” is the kind of thing that sounds bold and gets shared widely, but it is factually incorrect and dangerously misleading.

Here is the reality:

• Trade deficits reflect purchasing power. American consumers buy foreign goods because they can. That is not weakness.
• Cutting trade with every deficit country would not add $1.5 trillion to U.S. coffers. It would crater supply chains and send prices through the roof.
• Artificially suppressing interest rates to 1% during an inflationary cycle would destroy the dollar’s purchasing power and torch the savings of every working American.

When economic policy gets reduced to all-caps slogans, the people who suffer are the ones who believed it.

The Practical Truth for Regular People

Here is what actually matters if you are trying to protect yourself financially right now:

• Stop listening to the panic merchants on financial television. The quarter-point hike is not your problem.
• High-interest debt is your problem. Credit cards at 24 to 26 percent are bleeding you. Address that before you do anything else.
• Your fixed income allocation needs a hard look. Rates higher for longer changes the calculus on bonds in a major way.
• Ignore the political noise around the Fed. Central banks that bend to political pressure produce inflation. Every time. Without exception.

The Fed is taking the right approach. It is uncomfortable. It is supposed to be uncomfortable. That is how you fix the problem instead of just postponing it.