The Federal Reserve operates on the false claim that economic growth causes inflation.
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When rising costs show up in every class of goods, it is easy to call it inflation. Wages are up. Taxes are up. Energy is up. Services are up. Medicine and health care are up. Food varies by season, but wages, taxes and energy costs push it up.
Technology has created new classes of ‘necessary utilities’.
People pay as much for data and communication as they used to pay for a car payment.
Cars cost more than houses did 30 years ago. Houses and land are beyond the reach of most people. There is a shortage of available homes. This means there is pent-up demand.
Lower rates and that demand would break through to the market.
We’ve been here before. There is some reason to be cautious of a white-hot economy and market. Nothing goes up in a straight line forever. Eventually, there is a crash. Then pain. Then a hangover. Then, it begins all over again.
Scarcity of goods and services causes inflation. The Fed reduces money by increasing interest rates. Less money they think balances the chase of money after goods and services. They are wrong. China can send us all the KIA’s and cellphones we would ever want to buy, tariffs or no tariffs.
Eventually, there is a crash.
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There is a crash when the Federal Reserve causes it.
Economic growth doesn’t cause inflation.