Gold had dropped by over $100 in the last two weeks. Meanwhile, the dollar rose to a 7-week high on May 17. If you’re thinking that this looks a lot like how gold and the dollar moved at the height of the Federal Reserve’s inflation fight, you’re right. That’s because the central bankers at the Fed have stepped up the hawkish rhetoric in the last couple of weeks increasing expectation that interest rates will stay higher for longer.
But talk is cheap. The real question is how will the Fed respond when the bottom drops out of the economy.
On an annual basis, the Consumer Price Index (CPI) increased by 4.9% in April. While that’s an improvement over last year, it’s still not good. It’s more than twice the Federal Reserve inflation target. And as Peter Schiff pointed out during a recent interview with Jesse Kelly, the reality is even worse than the numbers indicate.
Was the producer price data that came out late last week really more good news on the inflation front?
That’s certainly how the mainstream media spun it. But as was the case with the April CPI data, the mainstream spin didn’t necessarily reflect reality.
In fact, there is a pro-government, pro-official narrative bias that pervades the mainstream media, including the financial media.
Peter Schiff appeared on First TV’s I’m Right with Jesse Kelly to talk about the state of the economy, inflation, and the unfolding financial crisis. Peter warned that we’re heading straight toward Great Depression 2.0.
The CPI data for April came out this week. The mainstream spin was that it was more good news for the Fed’s inflation fight. But the actual data tells a different story. In this episode of the Friday Gold Wrap, host Mike Maharrey talks about the CPI report and the disconnect between the mainstream narrative and reality. He also highlights some interesting Q1 gold demand numbers.
The CPI rose in March by 0.37%, which was much larger than last month’s 0.06%. As shown below, this was driven by the energy component flipping from negative to positive.
And there’s even worse news. The math is about to turn on the CPI calculation.
Great news on the inflation front!
At least if you believe the headlines.
For example, “Consumer Prices in April Rise at the Slowest Annual Rate in Two Years.”
But if you read about one inch below the headline, you’ll discover things aren’t so great. In fact, the actual data reveals price inflation is looking pretty sticky.
During his post-FOMC meeting press conference, Federal Reserve Chairman Jerome Powell insisted that the US banking system is resilient and sound. He said this despite the failure of First Republic Bank just days before the Fed meeting. Peter Schiff appeared on the Claman Countdown on Fox News and argued that Powell and others are wrong. He said the US economy is in a financial crisis worse than in 2008.
The Federal Reserve raised rates yet again during its May FOMC meeting. Now everybody is trying to decipher the messaging coming out of the Fed to figure out what’s next. But what if the words Powell and Company are saying don’t really matter? In this episode of the Friday Gold Wrap podcast, host Mike Maharrey talks about the latest moves by the Fed and suggests we should focus on the realities over the rhetoric.
Is the rate hike pause in play?
That question remains up for debate after the May Federal Reserve Open Market Committee meeting.
But when you break it all down, the underlying economic reality is far more important than the messaging coming from Powell and Company. And the underlying economic reality is that inflation isn’t beat and the economy is heading toward a cliff.
