The Fed Grants… but the Bond Vigilantes Withdraw

The Fed Giveth…and The Bond Vigilantes Taketh Away

Greetings, Investors! It was fitting that the Federal Reserve saved its most consequential F.O.M.C. meeting of the year for now, as we get set to turn the calendar to 2026.

As always, I joined The Prospector Podcast’s Michael Fox to break down the Fed’s actions this week — and more — as the central bank added a couple fairly notable moves to the planned menu.

You can listen to what’s at stake RIGHT HERE, or by clicking the above graphic.

In short, the Fed indicated the “hand” it intends to play as we move forward; and — if I may say — nicely summed up its role in the 2026 battle ahead that will be explained by my theme for the coming new year:

A “Golden Age” … OR an Epic Bust?

(Much more on that to come between now and the beginning of January!)

Jerome Powell & Company, of course, were expected to deliver their “hawkish” cut on Wednesday and did so.

And — especially with several members of its board a little queasy about the move — Powell was also expected to indicate that this week’s rate cut was going to be it for a while.

Powell explained the rationale for that, too.

No surprises on either count.

But here’s what the Fed also delivered that (for a moment, anyhow) gave Wall Street (and metals bulls) some early Christmas cheer:

–> The effective start of a new Quantitative Easing (Q.E.) Program.

and

–> The removal of any limits to its repo market activities.

I explain both in my visit with Mike as well as the implications for the markets going forward.

As I have been discussing for weeks now — together with sending all of you numerous items that explain all this — the Fed has found itself over the last few months in an eerily familiar place:

That is, having to shovel gobs of money into the “inner workings” of the global banking and payments system.

This includes overnight “repo” markets which — too many times recently for the Fed’s comfort — have been starved for liquidity AND have thus “priced” Fed credit above the top end of the fed funds rate.

For those who had forgtten, this all actually started at the time in the Fall of 2019.

I quipped at that time that (as nicely illustrated, as always, by my crack long-time cartoonist Jerry King) the “Helicopter Ben” Bernanke of the past had been replaced by “Cargo Plane Jay” and his need to Inflate or Die.

By early the next year, with the COVID Plannedemic as the proximate new excuse, the cargo planes really started flying.

THE EXACT SAME PATTERN IS BEING REPEATED RIGHT NOW; along with a lot more that I’ll be explaining further in the days ahead, as I in part wrap up how “The Math” (my 2025 theme) is looking as we end this year.

There is one ENORMOUS difference between today’s need on the part of the Fed (and most other central banks) to inflate anew / more aggresively as back in 2019/2020 … and today.

And that is the “resurrection” since then of the famed Bond Market Vigilantes.

In short — as you see via the above graphic along with my commentary on Mike’s podcast — they are quite prepared and able to spoil both the Fed’s plans…and the odds of President Trump’s “New Golden Age.”

I’ve been telling you for many weeks that what’s been going on in Japan is a warning of worse to come; including for the U.S.

You’ll soon be finding out a lot more about all of that…but WE will be prepared.

Stay tuned…and stay close!

All the best,

Chris Temple
Editor/Publisher