The Federal Reserve took a more aggressive swing at red-hot inflation at its June FOMC meeting, raising interest rates by 3/4%. It was the biggest hike since 1994. The question is will this be the last swing at inflation?
There is a meme floating around social media that seems to prove greedy corporations – specifically oil companies – are the root cause of inflation.
How does this meme stack up to reality?
Short answer — it doesn’t.
Inflation wasn’t transitory.
And inflation hasn’t peaked.
It’s more like peak inflation was transitory.
There are a number of signals that the US economy is getting weaker even as inflation gets stronger.
In other words, we are hurtling toward stagflation.
Consumer debt climbed to a new all-time record in April as Americans continue to cope with rapidly rising prices.
Total outstanding consumer debt rose by $38 billion in April, reaching a new record of $4.57 trillion, according to the latest data from the Federal Reserve. Total consumer debt was up 10.1% in April. It was the third straight month that consumer debt increased by $30 billion or more.
Average people are worried about the economy. Consumer confidence has been falling. People undoubtedly feel the squeeze of inflation. But despite their general discontent, most people don’t seem to think a severe economic downturn is imminent — despite many warning signs.
Why not?
The Federal Reserve has talked a lot about fighting inflation. But what has it actually done?
In practice, not a lot. It has nudged interest rates up 75 basis points. And while the Fed has ended the massive quantitative easing program that it ran during the pandemic, it pushed balance sheet reduction back from May until June. In fact, the balance sheet has crept upward throughout the entire month of May.
When I was about seven or eight years old, I remember my mom taking me to the bank to open a savings account. She explained that if I put some of my allowance in savings, that money would grow over time.
Well, that doesn’t work anymore.
American consumers are in a sour mood, but they haven’t stopped spending money. The problem is they’re spending money they don’t have. And they’re getting less for it.
Virginia and Alabama both extended their sales tax exemptions on precious metal bullion this year, relieving some of the tax burdens on investors, and taking a step toward treating gold and silver as money instead of as commodities.