Bill Ackman, the founder of Pershing Square Capital Management, tweeted that if the Federal Reserve doesn’t interfere with Inflation; the stock market could crash.
In Ackman’s words, “Inflation is out of control. Inflation expectations are getting out of control, markets are imploding because investors are not confident that the Federal Reserve will stop Inflation. If the Fed doesn’t do its job. The market will do the Fed’s job, and that is what is happening now.”
He added, “The only way to stop today’s raging Inflation is with aggressive monetary tightening or with a collapse in the economy. With today’s unprecedented job openings, 3.6% unemployment, long term supply/demand imbalances in energy, ag, and food, housing, and labor, and with the wage-price spiral that is underway, there is no prospect for a material reduction in Inflation unless the Fed aggressively raises rates, or the stock market crashes, catalyzing an economic collapse and demand destruction”.
Ackman and Schiff
Ackman is one of the many concerned about the Fed’s ability to aid in Inflation. Peter Schiff, the economist, doesn’t believe that Fed is the solution to Inflation. He said, “Don’t try to figure out why Inflation is so high now, but why it’s been so low in the past. Once you understand how Inflation entered the economy and the long lag between rising asset prices and rising consumer goods prices, you’ll understand why high Inflation is here to stay.”
Various current and past Fed members have waffled and made statements recommending a moderate rate hike. As well as a pause in the crash. Ackman explained the Fed has indeed lost credibility due to its Inflation. There is no economic pattern for using 200 to 300 basis points of fed funds to combat 8% inflation. And 3.6 percent unemployment.
In Ackman’s words, “Current Fed policy and guidance are setting us up for double-digit sustained inflation that can only be forestalled by a market collapse or a massive increase in rates.” Schiff is less hopeful about the Fed fixing the situation. Bill Ackman seems more optimistic that the Fed could prevent the stock market crash.
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