My friend Chris thinks I should be writing about America’s financial mess more. Unfortunately, I just don’t see myself as the guy who can do that knowledgeably. That’s why I sometimes post on these matters—hoping to stimulate insightful comments that I can understand.
Were I Jerome Powell I'd issue an emergency 50bps rate hike right now, along with an immediate order to shut off all asset purchases and roll-overs. He won't do it, but he damn well should because if this data is real The Fed is going to be taking very harsh and very rapid steps.
They have to act forcefully and immediately -- unless, of course, they have information that shows this is a pure Biden-driven "knob-twisting" pack of lies.
Chris is right. You should be writing about the financial mess more often, even if it means quoting others, because it is the key to everything. President Trump had the experience and ability to fine-tune the economy in a pragmatic manner, and of course everybody has a theory as to what must be done, but hard, cold reality is another matter. For some strange reason our current regime seems dedicated to sabotaging all President Trump accomplished in a doctrinaire manner, just as they abandoned Afghanistan for no reason. Going 'green' and making believe you favor the underclass may look good, but when everybody suffers as things deteriorate nobody will be happy. What sustains everything and keeps us a viable nation is GNP, real GNP, productivity. Interestingly, today the government came up with unexpected good news on the economic front. The market did not react favorably. Could be nobody believes the government.
I agree with Chris' monetary analysis, but I quibble with his suggestion that Trump could have made an issue of low rates. $700B came off the Fed's balance during Trump's term. This was made possible only because Trump grew the economy organically by slashing regulations, achieving energy independence, renegotiating multilateral trade deals that were hugely disadvantageous to the U.S., shutting down the flow of cheap illegal labor, and repatriating manufacturing. I was not happy that he never pushed back hard enough on the out-of-control CR process or raising the debt ceiling, but I doubt he could have overcome the Uniparty resistance to either of those. It wasn't exactly as if Trump had enough clout with Republicans to yank away their rice bowls.
1. Fed does nothing, and let inflation rage. Bad politically as wages don't keep up with inflation. Risks the US status as the world's reserve currency. Good news is other areas are in just as terrible shape. Europe and China. Positive is real cost to service US Debt becomes cheaper, and cheaper dollars are used to pay interest.
2. Congress starts cutting costs. Chance of this happening is Zero at this time. Free money is too attractive, and cost is too high politically. Instead I expect more spending to buy the mid terms, and kick the can down the street. Congress has been doing this for years.
3. Fed increases interest rates enough to stop inflation. Result is a recession and popping of lots of financial bubbles due to over leveraging in our economy, from stock prices, companies that are over leveraged going bankrupt, and increase in cost to service the 30 Trillion US Debt.
4. Fed does minimal needed, trying to not cause a recession, but to stop inflation. I don't think this will work, but I see this as most likely.
Coming Soon:
- Food shortages / huge increase in food prices due to increased fertilizer costs around the world.
- China invading Taiwan.
- Iran getting Nukes
- Continued lock downs in China destroying the US Supply Chain from China
- Trump's Social Media launch bypassing the US Media / Internet Censorship
- Economic Growth grinding to a halt. This is already happening. See the huge "Adjustment" just done to the employment numbers. This means the US Economy is hurting.
- More economic damage due to port issues, especially parts. For want of a nail... This is very true in manufacturing. For want of chips, autos could not be finished.
With an economic slow down, there will be deflation pressures.
What I am not understanding, is why is there such a labor shortage right now? How can people afford not to work? And at the same time the amount of openings is going down.
Finance will be to 2022 what public health was to 2020. It's going to be a bumpy ride.
KD today re the employment numbers:
Were I Jerome Powell I'd issue an emergency 50bps rate hike right now, along with an immediate order to shut off all asset purchases and roll-overs. He won't do it, but he damn well should because if this data is real The Fed is going to be taking very harsh and very rapid steps.
They have to act forcefully and immediately -- unless, of course, they have information that shows this is a pure Biden-driven "knob-twisting" pack of lies.
Chris is right. You should be writing about the financial mess more often, even if it means quoting others, because it is the key to everything. President Trump had the experience and ability to fine-tune the economy in a pragmatic manner, and of course everybody has a theory as to what must be done, but hard, cold reality is another matter. For some strange reason our current regime seems dedicated to sabotaging all President Trump accomplished in a doctrinaire manner, just as they abandoned Afghanistan for no reason. Going 'green' and making believe you favor the underclass may look good, but when everybody suffers as things deteriorate nobody will be happy. What sustains everything and keeps us a viable nation is GNP, real GNP, productivity. Interestingly, today the government came up with unexpected good news on the economic front. The market did not react favorably. Could be nobody believes the government.
I agree with Chris' monetary analysis, but I quibble with his suggestion that Trump could have made an issue of low rates. $700B came off the Fed's balance during Trump's term. This was made possible only because Trump grew the economy organically by slashing regulations, achieving energy independence, renegotiating multilateral trade deals that were hugely disadvantageous to the U.S., shutting down the flow of cheap illegal labor, and repatriating manufacturing. I was not happy that he never pushed back hard enough on the out-of-control CR process or raising the debt ceiling, but I doubt he could have overcome the Uniparty resistance to either of those. It wasn't exactly as if Trump had enough clout with Republicans to yank away their rice bowls.
I agree the Fed is trapped.
Options:
1. Fed does nothing, and let inflation rage. Bad politically as wages don't keep up with inflation. Risks the US status as the world's reserve currency. Good news is other areas are in just as terrible shape. Europe and China. Positive is real cost to service US Debt becomes cheaper, and cheaper dollars are used to pay interest.
2. Congress starts cutting costs. Chance of this happening is Zero at this time. Free money is too attractive, and cost is too high politically. Instead I expect more spending to buy the mid terms, and kick the can down the street. Congress has been doing this for years.
3. Fed increases interest rates enough to stop inflation. Result is a recession and popping of lots of financial bubbles due to over leveraging in our economy, from stock prices, companies that are over leveraged going bankrupt, and increase in cost to service the 30 Trillion US Debt.
4. Fed does minimal needed, trying to not cause a recession, but to stop inflation. I don't think this will work, but I see this as most likely.
Coming Soon:
- Food shortages / huge increase in food prices due to increased fertilizer costs around the world.
- China invading Taiwan.
- Iran getting Nukes
- Continued lock downs in China destroying the US Supply Chain from China
- Trump's Social Media launch bypassing the US Media / Internet Censorship
- Economic Growth grinding to a halt. This is already happening. See the huge "Adjustment" just done to the employment numbers. This means the US Economy is hurting.
- More economic damage due to port issues, especially parts. For want of a nail... This is very true in manufacturing. For want of chips, autos could not be finished.
With an economic slow down, there will be deflation pressures.
What I am not understanding, is why is there such a labor shortage right now? How can people afford not to work? And at the same time the amount of openings is going down.