Inflation Surge Pushes U.S. Real Interest Rates Into More Deeply Negative Territory – WSJ

When unemployment falls as much as it has this year and underlying inflation pressures build, you d normally say policy should tighten a little bit or maybe stay the same. Instead, policy has actually loosened, said Jason Furman, who chaired the Council of Economic Advisers during the Obama administration. It indicates policy is overshooting the mark by more than the Fed intended, and that maybe more of a correction is needed.

One measure of borrowing costs and financial conditions tracked by Goldman Sachs has declined this year at a rate equal to the Fed cutting interest rates by a full percentage point, said Mr. Furman.

This helps explain why more Fed officials are laying the groundwork to raise rates to cool price pressures much sooner than seemed likely just a few months ago.

via www.wsj.com

So it looks like the Fed is preparing its long, long overdue tightening. Can they tighten enough to get inflation under some sort of control, or will this attempted tightening, or even just preparing to tighten, crash the asset markets to such an extent that essentially political pressures (from stock market investors, retirement account owners, home owners, to name a few) essentially force the Fed to back off? Experience suggests the latter and as one of the above named parties, I sort of hope they do, even though that way will ultimately doom us. Maybe they can tighten just enough to land this debt-bloated cargo plane of an economy on the short runway ahead. I see no reason to think so, but there always hoping.