Peak Fed is upon us.

I have a pretty fair (albeit not perfect) track record for being able to call a likely peak when I see one.   All the signs are in place for a peak in the power of the federal reserve.  The kicker for me today is found in articles like this one where the main stream media would have us believe that the fate of the free world's economy hinges on whether or not the fed keeps or removes the phrase "considerable time" from its FOMC minutes.  I'm sorry folks, the wizard of Oz only seems powerful.  Pull back the curtain and it's just a bunch of old men who are smart enough to hypnotize the herd with funny money and soothing words.  Then they take credit for everything and they take advantage of the belief that their words are omnipotent as if it were the word of God.  Nothing could be further from the truth.

What has caused the herd to follow these con men is the appearance of prosperity that they appeared to control but which was really controlled by the herd the whole time in the form of rising credit.  As people would take on more debt it increased the money supply.  This chased the price of things up (bidding wars on housing, anyone?) and thus required subsequent purchasers to take on even higher levels of debt in order to buy the same goods.  This cannot continue forever.  Soon the service on the debt become significant, even at low interest rates, and the herd decides to stop taking on new debt.   This halts the creation of new money.  Furthermore, the herd begins to pay off the debt it already has (or defaults on it).  This reverses the prior creation of credit based money and is the essence of deflation.  Once the credit portion of the money supply is super-inflated like it is today, there is no choice but to eventually have a massive credit deflation and when that happens there will be not a damned thing the fed can do about it.   Once the herd sees this they will stop paying attention to the fed at all.

We are very, very close to Peak Fed.  The federal reserve will soon lose most or all of its power and in fact will be lucky to survive as a quasi government entity with responsibility for janitorial services.