Originally posted at Capitalstool.
This chart illustrates the point that the Fed doesn’t set rates by waving a magic wand and saying, “Abracadabra, rates go up.” When the FOMC pronounces a rate hike, it’s because the market has already moved. The 13 week T-bill is the bellwether.
The Fed does set rates, but not by these pronouncements. It sets them by controlling the supply of money. It only pretends to control rates directly, while pretending that ending QE, or starting QT is secondary. Nothing could be further from the truth. Rates are the meter of monetary conditions, not the cause. I chronicle this ongoing saga and tell you what to expect next and how to play it, here.
