How Long Until Inflation Dies?

Alhambra: A Year Later, The Fact Fedwire Is Still There Tells Us Why Markets Have Done What They've Done

It was around 11:15 in the morning, Eastern Time, an otherwise totally nondescript Wednesday when something went wrong deep inside the computerized guts of the domestic interbank settlement system. No single thing, these settlement processing arrangements are interlocking sets of algorithmic-heavy progressions linking banks, financial markets of very kind, and trillions in volume every day for every possible money and financial purpose.

It was like someone just up and pulled the plug on something called Fedwire. The cascading failure eventually took down or restricted access to another 14 additional services, from FedCash and FedLine to Check 21, even a multiple of tied-in cryptocurrency exchanges such as CoinBase and Kraken were left scrambling by serious processing delays.

What happened?

To this day, no one has actually offered a complete explanation. Or much of one. Officials at the Federal Reserve, Fedwire’s operators, have only said it was some unspecified “operational error.”

A year ago, there was a great disturbance in the financial system. ARKK peaked less that two weeks earlier on February 16.

For the curve to suddenly stop steepening, and then move – for an entire year (tomorrow) – back the wrong way is a substantial and substantially unwelcome development. CPIs to the moon, tapering QE, double taper, now aggressive rate hikes, the world public convinced of a massive wave of inflation, yet for all this time in between flat, flatter, so flattened that just a few days ago parts of the curve nearly inverted (the 7s and 10s have touched on a few occasions now).

It still looks like the worst phase of inflation is coming after a deflationary event. I have been focused in on the stock market because whether by inflation or deflation, stocks were primed for a major correction or bear market.