US market fantasyland: Good news is bad news

We live in a strange world where good economic news is perceived as bad, and bad economic news is good.

In this episode of Midweek Money Metals’ Memo, host Mike Maharrey provides some examples of this strange phenomenon, and then explains why this is going on. It all boils down to the market’s addiction to the drug of easy money.

Mike starts the show by explaining how a prevalent Keynesian myth about the cause of inflation is one of the underlying reasons the markets currently respond to good economic news as if it were bad. He also explains how the government and its supporting cast in academia have redefined inflation adding to the confusion.

Mike cites the January jobs report as an example of the good news is bad phenomenon and makes the case that we probably shouldn’t put a lot of stock on these government numbers to begin with.

He then takes the conversation in a more macro direction, arguing that market response to economic news reveals exactly what is driving the economy. It’s not economic growth or fundamentals. It’s Federal Reserve monetary policy. He uses an analogy, comparing the markets to a drunk alcoholic at the bar.

Mike then pivots to talk about Jerome Powell’s recent 60 Minutes Interview, seizing on the Fed chair’s claim that problems in the commercial real estate market won’t significantly challenge the banking system. In a nutshell, Powell insisted everything is fine. Mike points out the parallels between Powell’s comments this week and Ben Bernanke’s claim that the subprime mortgage problems were “contained” back in 2007.

Mike closes out the show talking about last week’s Fed meeting and the market reaction to Powell’s relatively hawkish stance. He cites the market response as more proof that the economy is desperate for a return to easy money, and he once again made the case that this debt-riddled economy can’t function in a high interest rate environment.

Mike ends the show with a call to action to prepare for what’s coming. He points out that silver is effectively on sale right now and suggests it might be a good option for protecting your wealth in the turmoil that’s on the horizon.