The Fed is tasked with a dual mandate: to ensure price stability and aim for maximum employment.
But according to Dan Morehead, CEO of crypto hedge fund giant Pantera Capital, there’s a third thing that the Fed has been doing — running a Ponzi scheme.
In his latest Blockchain Letter, Morehead says that the Fed’s “manipulation of the government and mortgage bond markets” is “the biggest Ponzi scheme in history.”
The expert investor even issued a warning on CNBC recently, saying that it’s likely that a “recession is coming.”
Let’s take a closer look at what he means.
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Federal funds rate
Morehead argues that the Fed made a big policy mistake by keeping the federal funds rate too low.
“The difference between inflation (their mandate) and their policy tool (fed funds) is much larger than at any point in history — including the disastrous 1970s,” he writes.
“They left rates at zero. Fed funds were 1.55% before the pandemic. They’ve just gotten overnight rates to back where they were before the pandemic policy eruption when inflation was only 2.30%.”
As we know very well by now, inflation is no longer at 2.30%. The latest Labor Department report showed that consumer prices rose 9.1% in June from a year ago, marking the biggest increase since November 1981.
And even that official reading…
