Federal Reserve Chairman Jerome Powell testified before the House Financial Services Committee on Wednesday (June 21). The Fed chief engaged in some more open-mouth operations, trying to guide monetary policy with words instead of actions.
To understand a few things he said, you have to read between the lines.
Oh, and he also got at least a couple of things wrong along the way.
The great anti-federalist Brutus wrote, “I can scarcely contemplate a greater calamity that could befall this country, than to be loaded with a debt exceeding their ability ever to discharge.”
And here we are.
With little fanfare, the national debt blew past $32 trillion last week.
There is the mainstream and market perception of what going on in the economy and financial system. And then there’s the underlying economic reality. In this episode of the Friday Gold Wrap podcast, host Mike Maharrey talks about the growing divergence between the two in the context of the June Federal Reserve meeting and the latest CPI data.
As was widely expected, the Federal Reserve Open Market Committee (FOMC) put rate hikes on pause at the June meeting, although it indicated we should expect additional hikes before the end of the year.
The question is how long will the pause last and will the next Fed move actually be a rate cut?
The CPI rose in May by 0.12%. Energy accounted for -0.25% of the move. This means without the move in Energy, the CPI would have risen by 0.37% which annualizes to a rate of 4.5%. This shows that inflation is still quite problematic.
How much is the inflation tax costing you?
Based on calculations by public finance economist EJ Antoni, around $7,200 since January 2021 for the average family.
The Consumer Price Index (CPI) increased by the smallest annual amount in more than two years in May.
This means the inflation fight is over and inflation lost, right?
Not so fast.
Despite the high interest environment intended to slow down borrowing, American consumers continue to run deeper and deeper into debt as they cope with sticky inflation.
Consumer credit spiked by another $20 billion in April, a 5.7% increase year on year, according to the latest data released by the Federal Reserve.
The debt ceiling drama ended with fake budget cuts and a shiny new credit card with no limit for the federal government. We can now expect a big surge in the national debt as the US government plays catch up after nearly six months up against its borrowing limit.
So, how might this impact the price of gold?
If history is any indication, it will likely drive it higher.
In this episode of the Friday Gold Wrap, host Mike Maharrey engages in a little “I told you so!” discussing a couple of things he got right, including his assertion that the real problems would start after the debt ceiling deal and that it was important to keep your eye on the commercial real estate market. He also talks about the yo-yoing gold price this week.
