Conclusion:
"By now it should be apparent that we can’t keep going like we have been, with the Fed continuing to raise interest rates as the economy stumbles towards recession. The signs of a faltering economy are everywhere, as we have described — continued high inflation, especially food and energy, that is not reflected in the Fed’s preferred inflation index, the core PCE; rising inflation expectations; dissipating consumer confidence; an imminent collapse in consumer spending, notwithstanding the “Black Friday” bounce; a plunging PMI and an inverted yield curve, both reliable recession indicators.
Regarding what the Fed does or doesn’t do, the problem is the central bank is using the wrong numbers. If the Fed is under-estimating inflation, as we believe it is, then everything it does to control inflation will likely be wrong as well. This includes raising interest rates.
The Fed can only push interest rates so high, without blowing up the Treasury and being forced into an aggressive bond-buying program (QE), thus accelerating inflation. The irony is that in trying to bring down inflation through interest rate hikes, the Fed, because of the high debt levels, will fail, and will be forced into a loose monetary policy involving interest rate cuts and QE.
Between de-dollarization and investors fleeing Treasuries, it appears likely that the US Federal Reserve will eventually have to take over buying the debt, issued to finance the federal government’s expenditures.
With over $31T of debt, the US government budget is at great risk of running unsupportable deficits if interest rates continue to increase."
Also:
5 Reasons Why Food Will Get More Expensive (From May, 2022)
https://aheadoftheherd.com/5-reasons-why-food-will-get-more-expensive/
Just got my CC bill. I had our grocery budget down to $400/month for the two of us. While buying the same stuff (even with modifications) our grocery bill (which includes household items and house pet supplies; hunting dogs are in another category) has DOUBLED, and some house pet supplies have been cut back (you get 1/2 a Milk Bone, now!) or I’ve switched to some cheaper brands on items.
I know many of you are seeing the same.
All I know is that Paul Krugman says the Fed Reserve is doing everything perfectly right...which means we are about to explode in an undesirable, probably debilitating, financial crisis!
But what do I know? I have never won a Nobel prize in economics, so...
Transitory...
The Feds are a criminal enterprise and this is their sucker punch to make you use that crap digital control system.
“Inflation” refers to the money supply. Price hikes are a result of the devaluation of the currency supply that is inflated. This blogger - and most everyone else - wrongly conflates the two.
They’re not wrong. They’re just lying.
It is actually pretty simple: Inflation is caused by too many dollars chasing too few goods.
You can either create more goods—something the government cannot do. I guess the government could ease import restrictions and incentivize companies to be more productive. But these were not the reasons for supply shortages.
Second, the government can suck dollars out of the system. This is done through taxes and interest rates.
The Fed will have to keep raising rates until they are at or higher than the PPI which is the wholesale inflation rate. At this stage it looks like the two lines are going to cross at around 5-5.5%.
There are a lot of causes for this stuff. But the solutions are much, much simpler. And none of them are “pleasant.”
Moppet head should explain things better, me thinks.
Because the Fed DOES NOT HAVE THE TOOLS to fix the stupid policies of the Biden Administration!!!!!!
Food for thought
Communists back in the sixties felt the surest way to take American into the communist world was by debasing the currency and bankrupting the country.
It’s in the Alinsky playbook.
Ask Hillary and the obamanites.
At the risk of oversimplifying things, rising costs of necessities means less disposable income. This essentially means fewer people purchasing discretionary goods.
With credit cards at all time highs how much longer can people keep buying non-essential stuff?
At some point a weakened consumer demand is going to slow down the economy and the Fed will be forced to pause, thereby allowing inflation to revive. JMHO
i remember the 13% inflation number
the prime went to 21%
people were taking out negative amortization mortgages
the payment didnt cover the interest
so they owed more on the house each month
based on 8% inflation
prime would have to go to 13%
Fedgov debt was less than a trillion in 1980
and a 2.5 trillion economy
now we have 31T debt and a 22T economy
26 months ago none of this was happening then Biden and chaos crew showed up.
Nothing is going to get better for the next two years seat belts required.
With inflation, there are only two methods that can work as far as I can see. First way is you slow the velocity of money (raise interest rates to get people to save money instead of spending it), which doesn’t shrink the whole money supply but can take enough out of circulation to make a dent in inflation. But as the article notes, this will also slow economic growth and put us in a recession.
The other way is to grow your way out of the inflation. If you lower taxes, cut regulations, etc, to boost economic activity, then it may actually increase inflation a bit as it is going to spur spending at first, but in the long term it will increase production, and that increased production is the only way to stop inflation without causing a recession.
The reason for monetary inflation is government creating more dollars and putting them into circulation. The way to lessen inflation is for government to stop making money out of thin air and giving it away.
My authority on this is Milton Friedman.
Raising interest rates, per se, doesn’t reduce the rate of inflation.
Based on my experience from the late 1970s and early 1980s, look for double digit interest rates…I bought my first home in 1979 with a 11.5% 30 year fixed mortgage. By early 1980 mortgage interest rates were topping 16%. Gasoline prices in the early 1980s were approaching $3…well over $5 in today’s dollars and we stood in lines for our odd even daily ration of gas. Unemployment was headed to the double digits and Jimmy Carter told us the country had economic “malaise”.
We are in for a bumpy ride with two more years of Biden economics and add to the inflation and interest woes will be an energy crunch that will give us fuel
shortages and widespread blackouts. My parents talked about the living in the Great Depression and I guess I will see much the same.
An argument I might add is that inflation has been with us for quite some time, and its taking this long for the numbers to finally verify reality. Meaning 2 to 3% we had in the first decades of the 21st century were completely managed numbers. Shadow stats shows how its done.
Start with ending the war on energy. Within a year and a half prices will come down.