Federal Reserve Chairman Jerome Powell insists the central bank can fight inflation because the economy is strong. President Joe Biden keeps telling us the economy is strong. The talking heads on CNBC insist the underlying economy is strong. In a recent podcast, Peter Schiff talked about the economy. As it turns out, it’s not so strong.
When we got the March CPI data last month, the mainstream crooned that it looked like we were at peak inflation. This was wishful thinking. The April CPI data that came out this week, along with the producer price numbers, indicate that we’re still climbing that inflation mountain. In this episode of the Friday Gold Wrap podcast, host Mike Maharrey digs into the data and discusses how it could impact the trajectory of Fed monetary policy and the economy.
Last week, the Fed raised interest rates by 0.5%. It was the biggest rate increase since the year 2000. But it was hardly aggressive in light of the current bout of inflation. Not only that, Jerome Powell took a future 75 basis point hike off the table. In his podcast, Peter Schiff argued that no matter what the Fed does, it has already lost the inflation fight.
The Fed hiked rates 0.5% this week in an effort to stem the inflation tide. But the economy already looks shaky and the central bank has barely started this inflation fight. Friday Gold Wrap host Mike Maharrey breaks down the messaging that came out of the Fed meeting and concludes the central bank is getting closer and closer to a crossroads. What will the central bank do? And what will it mean for the economy?
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?
Bonds continued to get hammered. On Tuesday morning, the yield on the 10-year Treasury rose above 2.9%, and the yield on the 30-year is knocking on the door of 3%. Since bond yields rise as bond prices fall, this indicates a serious decline in the bond market. In his podcast, Peter Schiff said that at some point, the market is going to actually crash.
It appears talk of less loose monetary policy has pricked the bubble. Peter Schiff talked about it in a recent podcast.
We’ve seen a significant rotation out of the overpriced, high-risk momentum stocks that enjoyed the benefit of the bubble. They are now collapsing – not because the Fed has actually tightened monetary policy, but just because it talked about it.
With 2021 now in the rear-view mirror, I believe that future financial historians may regard it as the year of peak speculation.
While the history of American markets is littered with periods of irrational exuberance, none of those episodes can really match the current market for outright delusion and the blatant disregard for basic investment discipline.
Last week, the Fed sped up its timetable for tapering its asset purchases and raising interest rates. While this represents a slightly tighter monetary policy, it’s far from truly tight. And yet, the central bankers at the Fed and a lot of people in the mainstream seem to think these small steps will tame the inflation dragon. In fact, this slight tightening is a little like taking a pea shooter to a bazooka fight.
Despite finally acknowledging inflation will likely runner hotter and last longer than expected, there is still widespread belief that it is transitory in the long run. After all, we had a couple of decades of tame inflation, and that’s now viewed as the norm. In this podcast, Peter Schiff explains why the only thing that’s transitory is the era of low inflation.
The stock market rallied early this week with receding worry about the omicron variant, but the specter of Federal Reserve monetary policy tightening remains. In his podcast, Peter Schiff talked about the anticipation of the Fed’s fight against inflation and explained why it’s a fight the central bank can’t win.
