The Two Most Generous Bartenders in History

If nothing else, Jerome Powell and Janet Yellen may very well wind up going down in history as the two most generous bartenders, proving ample liquidity to markets at each and every juncture for a period of years. 

You may be thinking that the current rally in equities, with the broad market refusing to pull back even 2% for nearly one hundred trading days now (not even days, overall, but trading days) is a sign that Powell and Yellen have cracked the code to eternal prosperity and they will be celebrated as heroes for thousands of years to come. 

But if that were true surely prior civilizations would have flourished under the money printing theory--Especially those who were their respective "superpowers" of their time as the United State still is to this day. 

The counterpoint, of course, is that intervening with this amount of liquidity (many trillions of dollars) for an extended period of time leads to mass price distortions across various markets--Stocks, real estate, commodities, fixed income, even currencies.

And, eventually, history teaches us (for those of us who listen) that inflation is the great kryptonite for the money-printing central banker. Inflation is a scourge and has ruined many powerful civilizations throughout history, which is why Powell's policy mistakes over the last few years have such disastrous consequences for the majority of folks in America, and beyond. 

Headed into the FOMC tomorrow, we know it is likely that Yellen, as part of the White House during an election year, will likely keep the pressure on herself to provide liquidity if there is any sign of distress in markets, such as with regional banks.

But Powell still has it within his grasp to dial back any talk of a rate cut this summer. And, in fact, he can show humility and acknowledge the obvious uptick in inflation, raising the idea of a rate hike if necessary. 

I, myself, overestimated Powell's courage last year. To see him back off the rate hikes and then take a victory lap on a supposed soft landing in late-2023 was something to behold. But now gold is waking up, which historically is not something to take lightly. 

As you can see on the GLD ETF daily chart, below, the gold metal is bull-flagging nicely at nominal all-time highs for the yellow metal. Needless to say, as much as crypto may be a great long-term investment, gold still pre-dates Ancient Egypt as recognized currency in the world.

Furthermore, gold itself has come out on top as every single fiat currency the world has seen eventually turned to paper trash. 

Should Powell take the easy way out, again, tomorrow at the FOMC and cower to markets, once again, by promising  juicy rate cuts later this year without giving the proper respect to inflation I expect gold to punish him harshly this time around and not look back. And once the cat is out of the bag with gold, other asset classes should revolt, too, including the bond market, to finally undermine the waning credibility The Fed has been recklessly squandering.