Posted on 06/18/2022 5:32:33 AM PDT by MtnClimber
Mohamed El-Erian, a Blooomberg Opinion contributor, cracks me up in his efforts to avoid speaking directly. Generally, El-Erian knows the situation, he was one of the first to identify the issue with inflation in March 2021. However, he continues avoiding any mention that the U.S. economy is already in a negative position for growth.
Consider this…. In this interview El-Erian says he believes the Fed will flip-flop and lower rates in reaction to what is happening in the economy. Keep in mind, the only reason for the Fed to reverse rates so quickly is if the economy is already in a demand side contraction and the latest .75% increase in rate is being done into a negative GDP environment.
Of course, the reality is exactly that. The U.S. economy is already contracting, mostly because of inflation chewing up the supply side, and the Fed is factually raising interest rates into an economy already in a demand side recession. But everyone must pretend that’s not the case, so here’s El-Erian saying Jerome Powell is going to end up reversing himself, flip-flopping, which doesn’t make sense if you don’t first establish that the economy is right now shrinking as he speaks. WATCH:
How can it go any lower? Geez!
Federal government borrowing used to be Long term debt. They shifted it to short term debt to make it cheaper on the books. The government wants its free money borrowing power back and we haven’t even gone past 2% yet! Same as tech stocks. One percent money was low enough that they could borrow one dollar for every one dollar of stock sold. They didn’t need earnings or profits. Speculative value would pump up stock values to 10% over last quarters price. They then use that 10% money to pay the 2% borrowing, making an 8% profit on nothing that really exists. 5% money will make that game difficult.
Promoting any and all Mohammads in any way is problematic.
El-Erian saying Jerome Powell is going to end up reversing himself, flip-flopping...
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The odds of that are close to 100% IMO. Powell will fabricate a bogus rationalization that enables him to declare a watchful “victory” against inflation in order to justify the flip flop. Prolly under the guise of something like a “measured pause”.
The government wants its free money borrowing power back
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Of course it does. How else will they buy votes, pay off their friends, and enrich themselves? It takes a steady stream of borrowed money to do that.
Everybody is bitching about gas prices, but WTI crude is down $13 per barrel from $123 in 9 days. At that rate of decay, oil could be at $90 by mid July. Target and Wal-Mart are marking down or liquidating inventory nobody wants. The Fed will pivot and almost no one sees it coming.
layoffs at tech/slowed housing and mortgage apps/slowed retail demand/manufacturing down - this is Joe’s amazing economy. if we’re not already in recession, these higher rates will tip it that way.
btw El Erian gives more pointed specific advice to paying customers, only hints of general direction to mass audience.
At this rate they will be giving it away in the fall. Oil is the only inflation. The dollar is not weak against the YUAN, YEN, EURO, gold, bitcoin or anything else other than the American worker and a gallon of gas. If your product requires either of those two things to make it and bring it to market then it cost more. But otherwise inflation does not exist anywhere else. The dollar is very strong. In fact stronger than in many years. The printing of dollars has not caused inflation.
One thing you might do is let drillers drill and pipes pump. Then half the inflation goes away.
My wife and I really have a low cost of living. There is very little we buy or need to buy.
A couple of years ago I said to her, holy cow if the whole country spent money the way we do, they economy would collapse.
And here we are...
I predicted they would flip flop weeks ago.
Things are weird right now. I actually pulled the trigger yesterday to get my 250 gallon “job site” gas tank filled, even knowing the price might go down. The reason is that there may be a real risk that we end up with gas lines again. So I’m willing to take the $250 risk to ensure that we have plenty of gas to get to where we go around where we live. And 250 gallons would last us months, or longer, even if that’s the only gas we can get our hands on.
I think it’s much simpler than that. Leftists bank on the oh so short attention span of public educated Americans.
If they “make it all better” by lowering rates, and costs are already heading downward, they look like hero’s and especially if gas goes down in cost. That way it looks like “ole Joe told those mean greedy oil giants and now he won’t let them charge us too much. Now it’s fair!”
Do they have enough time to give the appearance of “fixing” everything by November? We shall see.
I think think the .75 rate increase last week was kind of a Jedi mind trick. The Fed was on track to do 1.00 over June and July. But I think they did the .75 in June and coupled it with some tough talk knowing there would be no July rate hike. The bond market seemed to understand all this since long bond rates went down slightly.
There are many currencies that are pegged or (in the case of the YUAN and YEN) virtually pegged to the dollar. Those countries will face a problem if interest rates move higher from here. China, most of Africa, Asia, South America are not equipped to raise rates like that. They will have to drop their peg. Then you will see inflation everywhere but here. Zero interest rates are dangerous. It causes things like the Chinese army and Russian Billionaires. Interest rates keep people honest. I would hate to owe someone money right now. And I would hate to depend on people paying me back a loan.
I mostly agree, but I don’t think they’ll entirely skip July. Maybe .25%.
All complete opinion of course.
“Promoting any and all Mohammads in any way is problematic.“
This one has the experience.
Don’t think he’s right about this situation however.
I thought when powell spoke yesterday morning he might say they would slow the increase to let it soak. Instead he said the equivalent of Forest Gump on his run.
https://www.youtube.com/watch?v=pKKmzmeU5-0
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