ZIRPocalypse

A few weeks ago, I made a post on here suggesting that a fed funds rate of 8% would be needed to address 8%+ inflation. You could hear a pin drop (not that my posts are ever popular) — at the time the economist consensus in the press was about 4%; it’s now about 5% — this will trickle up with time.

With respect to mathematical differentials, it is still that simple. If you look at the twentieth century, a 1:1 relationship between the fed funds rate and inflation rate was expected. It’s Volckerism, and it worked, and it will work again — especially now when CPI is “underweight” on collected data.

Everything is a symptom of being in a #zirp environment for too long — a failure to understand this relationship, as well as the media’s over-reliance on sentiment and message control over facts and consistency — because when you don’t value the future over the present, what do you value?

Business leaders particularly those with institutional investors should be taking a look at equity turnover rather than the myopic internal metrics that most VC-backed leaders consider to be meaningful KPIs. These have had their day. Lower growth and more obstacles will increase the hurdles for all businesses, particularly those used to cushy “non-zero-sum” highly correlated environments like B2B SaaS. There will only be so much growth to go around.

I encourage you to take a look at the historical data so that you can get a taste of reality as well:

• https://www.thebalancemoney.com/fed-funds-rate-history-highs-lows-3306135https://www.thebalancemoney.com/fed-funds-rate-history-highs-lows-3306135