What we’re reading (6/15)
“Fed Raises Rates By 0.75 Percentage Point, Largest Increase Since 1994” (Wall Street Journal). “Officials agreed to a 0.75-percentage-point rate rise at their two-day policy meeting that concluded Wednesday, which will increase the Fed’s benchmark federal-funds rate to a range between 1.5% and 1.75%.”
“Inflation Isn’t Going to Bring Back The 1970s” (Ben Bernanke, New York Times). “Besides the Fed’s greater independence, a key difference from the ’60s and ’70s is that the Fed’s views on both the sources of inflation and its own responsibility to control the pace of price increases have changed markedly. Burns, who presided over most of the 1970s inflation, had a cost-push theory of inflation. He believed that inflation was caused primarily by large companies and trade unions, which used their market power to push up prices and wages even in a slow economy. He thought the Fed had little ability to counteract these forces, and as an alternative to raising interest rates, he helped persuade Nixon to set wage and price controls in 1971, which proved a spectacular failure.”
“Bitcoin Came Close To Falling Below $20,000 As Investors Continue To Flee Cryptocurrencies” (CNBC). “Bitcoin plunged as much as 10% to an intraday low of $20,166, according to Coinbase data. It was last trading at $21,544.37, down about 2.6%, around 4:24 p.m. ET. The world’s largest digital currency has plunged nearly 70% since the peak of the crypto craze in November 2021.”
“The Real Problem With Inflation” (Morningstar). “[T]he more insidious effect of rising inflation is that it fundamentally erodes trust. This is a highly destructive force that spills over into many different areas[.]”
“Accounting for (Rule) Differences” (Fisher Investments). “Among the lesser-seen worries in the cornucopia garnering investors’ ire lately hides S&P 500 Financials earnings’ -19.9% y/y plunge in Q1 2022—a highly unusual development during a stretch where most economic indicators are on an upswing and the vast majority of sectors are enjoying earnings growth. The culprit, as The Wall Street Journal examined last weekend, is both simple and complex: A relatively new accounting rule is distorting earnings math bigtime.”
