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.
Student loan forgiveness has been in the news lately. There are a number of different plans being floated, from blanket debt repudiation up to various amounts, to more limited income-based schemes. But nobody ever talks about a key question: who is going to pay for it?
Well, you will.
The Federal Reserve has raised rates once – a mere 25 basis points (with another hike on the table today). So, it’s just getting started, but has it already popped the housing bubble? It sure looks that way. The question is how long will it take for the air to really start coming out.
As mortgage rates push up, mortgage applications continue to fall. As of last week, applications were down 17%, and at the lowest level since May 2020 when the economy was shut down for COVID, according to last week’s Mortgage Bankers Association’s weekly Purchase Index. The index has dropped 30% from peak demand in late 2020 and early 2021.
Despite all the talk about a “strong economy,” nobody was expecting a blistering hot GDP for the first quarter. The consensus was for around a 1% gain. As it turned out, it was even worse than expected. GDP shrank in Q1, contracting by 1.4%.
Despite the awful number, the mainstream spun it as a positive. Peter Schiff called it an outrageous positive spin on negative GDP and a great example of Orwellian doublespeak.
GDP contracted in Q1. The stock market has been tanking. The inflationary fire continues to burn. As Peter Schiff explained in his podcast, this all signals a recession. And yet the Federal Reserve is on track to raise interest rates. How is this going to work?
Jerome Powell and other policymakers at the Fed keep telling us they can raise interest rates and slay the inflation dragon because the economy is strong. But these central bankers have a long history of being wrong. And as host Mike Maharrey explains in this episode of the Friday Gold Wrap podcast, the recent GDP numbers undercut this latest Fed narrative. He also talks about a startling confession from the IMF director and Q1 gold demand.
Gold demand surged to kick off the year, up 34% year-on-year in the first quarter of 2022.
Total demand came in at 1,234 tons in Q1. That was the highest quarterly demand since Q4 2018, according to the World Gold Council’s Gold Demand Trends report. Demand in the first quarter of this year was 19% above the 5-year average.
The Fed insists it can tighten monetary policy and tackle inflation without hurting the economy. Federal Reserve Chairman Jerome Powell and other central bankers claim the economy is strong enough to handle higher interest rates. Peter Schiff said this is just another in a long line of arrogant miscalculations by the Fed.
Everybody and their brother is an expert on inflation now. And everybody thinks they can pinpoint the reason for rising prices. It’s Putin! Or maybe it’s greedy corporations. Or was it COVID?
As Ron Paul explains, it was none of the above.
The blame for this inflationary fire falls squarely on the shoulders of Federal Reserve Chairman Jerome Powell.
