When it comes to the economy, inflation, and the Federal Reserve, the mainstream just doesn’t get it.
This headline from Fox Business reveals the level of confusion.
“Retail sales unexpectedly edge higher in August despite soaring inflation” [Emphasis added]
Some things never change — such as the federal government spending more money than it has month after month after month.
August was no different. The US government ran a massive $219.6 billion budget deficit last month, according to the latest Monthly Treasury Statement. That nudged out July as the second-largest monthly deficit in fiscal 2022.
The August Consumer Price Index surprised to the upside, ramping up expectations for another aggressive Federal Reserve rate hike. It also reveals a big problem for the Fed that most people haven’t come to grips with yet.
American consumers continue to cope with rising prices and prop up the sagging economy using their credit cards.
Total consumer debt rose another $23.8 billion in July to a record $4.644 trillion, according to the latest data from the Federal Reserve.
What happens if the Federal Reserve loses money?
The Fed typically earns interest income from all of the bonds it holds on its balance sheet. It also collects fees for services that it provides. Most of any Fed operating profit is remitted to the US Treasury under federal law. That money becomes part of the federal government’s operating budget. In other words, the central bank serves as a revenue source for Uncle Sam.
Did you know the Biden administration is still handing out COVID-19 stimulus money?
In fact, there are still billions of dollars in pandemic aid sitting in various federal and state government accounts waiting to be handed out.
It appears somebody at the Federal Reserve has figured out that the central bank can’t tame inflation, so it’s setting up a scapegoat – Uncle Sam.
A paper co-authored by Leonardo Melosi of the Federal Reserve Bank of Chicago and John Hopkins University economist Francesco Bianchi and published by the Kansas City Federal Reserve argues that central bank monetary policy alone can’t control inflation.
The economy is fine, so we’re told. There is no recession, so we’re told. The Federal Reserve has everything under control, so we’re told. Meanwhile, 3.8 million Americans say they could face eviction in the next two months.
It doesn’t sound like everything is fine.
The dollar index recently hit a 20-year high, so this might seem to be an odd time to talk about a dollar decline. But Rockefeller Institute Chairman and Financial Times columnist Ruchir Sharma recently wrote an article arguing that a post-dollar world is coming.
President Biden is expected to announce student loan forgiveness on Wednesday (Aug. 24). The plan will reportedly cancel $10,000 in student loan debt for anybody making less than $125,000 per year.
A lot of people think this is like waving a magic wand — poof — the debt is gone. But somebody has to pay and that somebody is the American taxpayer.
