Jerome Powell began hinting that inflation might be a problem last August. In November, Powell retired the word “transitory.” But here we are in May and the Federal Reserve still hasn’t done anything substantive to address the inflation problem.
And now it may be too late. It’s probably time to buckle up for more inflation – and perhaps a crashing economy.
The Federal Reserve came through with the second rate hike of this tightening cycle, bumping up the Fed Funds rate by 0.5%. It was the biggest interest rate boost by the Fed since 2000. But given the extent of the inflation fight, this hardly seems like a bold, aggressive move. In fact, it was a weak swing that looks more like shadow boxing. And one has to wonder just how long the Fed can stay in the ring.
Mostly we get lies, spin and obfuscation from central bankers, politicians and bureaucrats. But every once in a while, one of these people accidentally wanders into the truth.
IMF Director Kristalina Georgieva did just that during a recent panel discussion hosted by CNBC. She conceded that central banks globally “printed too much money and didn’t think of unintended consequences.”
Earlier this week, the yield on the 30-year Treasury rose above 3% for the first time since April 2019 as the carnage in the bond market continues.
Rising yields have put pressure on gold. The yellow metal flirted with $2,000 an ounce but has since fallen below the $1,950 resistance. Once again, investors are fixated on rising interest rates, but missing the bigger picture — real rates remain deeply negative.
Monday was tax day.
I don’t know about you, but my wallet is lighter. As always, I had to write a big check. But I took solace in the fact that I’m helping create a more civilized society!
On July 23, 2020, CNBC published an article by Elizabeth Schulze headlined: Here’s why economists don’t expect trillions of dollars in economic stimulus to create inflation.
That one didn’t age well, did it?
If the Fed is fighting inflation and has ended quantitative easing, why is its balance sheet still going up?
In the week ending April 13, the balance sheet grew by $27.9 billion, hitting a new record of $8.965 trillion. This is up about $3 billion from its previous high in March.
The inflation freight train is still hurtling down the track at breakneck speed.
Everybody expected a big Consumer Price Index number for March. When it was all said and done, we got what was expected. And then some.
Earlier this week, Federal Reserve governor and vice-chair nominee Lael Brainard indicated the central bank will shrink its balance sheet at a “considerably” more rapid pace than it did during the previous cycle. I, Peter Schiff and a few others outside the mainstream have said the Fed won’t be able to do this.
Why not?
The national debt stands at $30.3 trillion and the US government continues to run massive deficits. But does it really matter?
Some people say that it doesn’t because “we just owe the debt to ourselves.”
