You don’t have to worry about that recession anymore. The White House fixed it.
And by “fixed it” I mean it just changed the commonly held definition of a recession.
On July 1, a Virginia law extending and expanding a sales tax exemption on the sale of gold and silver bullion and coins went into effect. Ending the sales tax will relieve some of the tax burdens on investors, and take a step toward treating precious metal bullions as money instead of a commodity.
Putin is causing inflation. Greedy corporations are causing inflation. COVID-19 caused inflation. We hear all kinds of reasons for the recent spike in prices. And now we have a new one. It’s the millennials’ fault.
This is all wrong and it illustrates the problem with redefining inflation to be something it isn’t.
Retail sales rose 1% in June after a 0.1% decline in May. Mainstream media breathlessly reported that the jump in retail spending “eases” recession fears.
Does it though?
The federal government ran an $88.8 billion budget deficit in June. That was up nearly $22 billion from the previous month, according to the latest Monthly Treasury Statement.
And this is supposed to be good news.
Fed Chair Jerome Powell and other members of the central bank have continued to talk tough about fighting inflation. But I’m pretty certain that in private, they were desperately hoping to see some cooling in the inflation data so they could start backing out of the ring. With a recession pretty clearly on the horizon (if not already here), you can bet that the central bankers don’t want to keep tightening monetary policy.
They didn’t get their wish.
Air is hissing out of the housing bubble faster and faster every week.
Pending sales plunged in June and the inventory of homes on the market jumped as mortgage rates continue to rapidly rise.
After the June FOMC meeting and the Fed’s 75- basis point interest rate hike, I argued that the central bank is totally winging it. Reading between the lines in the minutes from that June meeting seems to bear this out. The Fed appears to be in reaction mode. The question becomes what will it react to next? How long will the hawks keep flying as the economy tanks?
On July 1, the Federal Reserve Bank of Atlanta lowered its Q2 GDP projection to -2.1%, officially forecasting a recession.
So, much for Jerome Powell’s “soft landing.”
Well-known investment advisor Rick Rule said the Fed will chicken out on its inflation fight.
Rule runs Rule Investment Media and formerly served as the president and CEO of Sprott US Holdings Inc. In a recent interview, Rule said that the Fed could get inflation under control with significantly tighter monetary policy for a sustained period of time. But he said he doesn’t think the central bank has the wherewithal to follow through when the economy starts to crash.
