This is Part 2 of the inflation discussion with Steven van Metre and Peter Boockvar with your host Tracy Shuchart. In this second part, they talked about the possibility of the Fed tapering this year or early in 2022. How about the possible rate hike and what will possibly happen in other parts of the world like Bank of Japan and Bank of England if ever this happens? What is Powell doing exactly and why? Is there a possibility of a new Fed chair next year? And what do they think about stagflation?

For Part 1 of this QuickHit Cage Match episode, please go here.

Steven van Metre is a money manager who have invented a strategy called Portfolio Shield. He also has a YouTube show that discusses economic data and the news three days a week.

Peter Boockvar is the Chief Investment Officer and portfolio manager at Bleakley Advisory Group. He has a daily macromarket economic newsletter called The Boock Report.

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Show Notes:

TS: Do you see the Fed tapering? And if they do, how much is this going to affect inflation?

PB: I think the Fed will at least start the taper and see how it goes. The thing that is different with this taper is that it’s coinciding with central banks around the world that are also beginning to remove accommodation.

So if the Fed starts to taper in December, which they basically told you that they will, well, the Bank of England could be raising rates in December.

But to Steve’s point about the bottom 50%. Well, if you get a short equity market correction, well, the top 50% is going to feel that as well.

SVM: I don’t think the Fed’s going to do it.

Well, there’s part of the inflation story that almost nobody is looking at. What if the dollar gets up into 96, 97, maybe even close to 100? I mean, we’re talking about destroying the inflation story just from the dollar alone.

PB: The whole purpose of monetary policy is to push the demand side. And if you look at what are the two most interest rate sensitive parts of the economy — it’s housing and autos.

SVM: All we’re debating is, at what point does he back off and quit because he realizes it’s not working? I mean, we can look at the velocity of money and see the monetary policy is not functioning properly.

PB: The Fed has been winging it for decades, and this all goes back to Greenspan.

Then you throw in, of course, the whole social justice. The Feds become the Ministry of Social Justice now and how they view monetary policy. But yeah, to your point, they are winging it. And they’ve been winging it for decades.

SVM: When Powell said, “We’re going to gradually unwind the balance sheet by mid 2022.” I’m like, since when is “gradual” six months. There’s no way this is going to work for you, buddy, but good luck if you’re going to pull it off.