Economist Nouriel Roubini says Federal Reserve is going to “wimp out” on the inflation fight and that will lead to a dollar crash.
Roubini is the Professor Emeritus at the Stern School of Business, New York University. He recently appeared on Bloomberg Markets and Finance to talk about threats to the global economy.
Roubini predicted the housing bubble would pop in an IMF position paper in 2006. When asked if we were there again, he emphatically said, “Yes.”
The Treasury added $341B of debt in August. This was the largest increase in the debt since January and is more than 10 times larger than the increase in July. Another major occurrence was the increase in short-term debt. The Treasury increased Bills by $210B, the largest increase since June 2020. This is a move that runs counter to the recent months where the Treasury has been actively decreasing short-term holdings.
The Treasury increased the total debt by $125B in May after a brief drop in April. This brings the total debt increase so far in 2022 to $880B. More importantly, though, the cost to service the debt is exploding. Total annualized interest has increased by $40B or 13.5% since the start of the year!
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.
The US Treasury added $111 billion in debt during March. Meanwhile, rising interest rates are already creating problems for Uncle Sam. Annualized interest on the US debt has increased by over $16 billion in just six months. Following is an analysis of US debt holdings.
In January, the US Treasury realized its first surplus in 2.5 years.
The surplus was short-lived.
The Treasury went in the red by $216.6 billion in February.
Debt issuance by the US Treasury has fallen since the binge in December when the Treasury had to replenish its “extraordinary measures” stockpiles (government employee retirement funds) after the end of the “debt ceiling” debate. Still, issuance remains relatively high.
The Treasury added another $278 billion in debt during February. Similar to January, the Treasury stopped converting short-term to long-term debt Instead, it increased Bills by $94 billion, more than any other security type.
Even with the taper, the Fed continues to expand its balance sheet. And it’s not tapering the purchase of mortgage-backed securities (MBS) nearly as fast as advertised.
Another hotter than expected CPI print in January put even more pressure on the Federal Reserve to do something about inflation. Suddenly, there is talk of a 50 basis point interest rate hike at the next FOMC meeting.
But “doing something” is is easier said than done, particularly in this zombie economy.
The Federal Reserve still seems to be hoping that inflation will just go away on its own or that it can jawbone it down by projecting a few little rate hikes. But the Consumer Price Index data keeps dashing its hopes. In this episode of the Friday Gold Wrap, host Mike Maharrey talks about the January CPI and the Fed’s proposed “fight” against inflation. He also discusses the demand forecast for silver this year.