The Federal Reserve’s statement last week about what’s causing inflation was very interesting. One part is that the effects of their monetary policy are just starting to be seen in the interest-rate-sensitive parts of the economy, which are housing and equities.
Powell has also made various references to Russia’s military operation in Ukraine as a chief reason for inflation earlier this year but purposefully left it out this time.
In the beginning, Powell was adamant that the supply chain issues were the root of the inflation we’re facing and that these were transitory. Next, it was Russia’s energy disruptions that created this along with Omicron. Powell is now saying enough is ENOUGH.
Russia isn’t an excuse anymore because the United States is facing a bigger issue than that. Powell isn’t pointing to Putin anymore — he is pointing to Biden and to Washington.
The demographics of the working class are screwed up, and the labor shortage is real.
Powell didn’t want to shift the blame away from the administration because the problems are domestic. It’s up to the government to create incentives for people to rejoin the workforce.
Courtesy: Zerohedge.com, Bloomberg
When he was done talking on Wednesday, I heard everyone and their mother say the same thing: the battle isn’t over, but we can see the light at the end of the tunnel – A SHORT SQUEEZE!
Smart Money isn’t that confident, so they’re not positioned at all.
They missed this January rally, but Friday’s jobs report tells you the FED’s tightening isn’t reaching the demographic segment that its policies are aimed at.
If you remember 2009 through 2011, the FED wanted to induce the middle class to borrow again, but zero interest rates didn’t persuade them.
Today, higher interest rates are trying to convince Americans to slow spending so companies won’t have to hire so much, but the service sector is overflowing with activity!
Again, unintended consequences will emerge, creating the next bubble.
Courtesy: Zerohedge.com, Bloomberg
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It’s as clear as day that what comes next is a major recession!
Some of the data I’m watching, though, is not conducive to a major recession, but I can’t ignore what’s right in front of me, which is this chart predicting that when the curve steepens the economic machine will drown.
What does one do in this situation? On one end, the Federal Reserve tells you financial conditions are improving and inflation is slowing. On the other, the charts are screaming that there’s a recession.
Here’s how I view this whole situation:
Imagine you are rich. Your son is 18 and you’ve given him a generous allowance for months but he’s blowing through it like crazy. You love him and want to teach him a lesson.
You tell him that you will be giving 30% less for the next few months, but he doesn’t change his ways and keeps spending, calling your bluff. Finally, after more intervention, he starts to change his ways, but then you tell him that he needs to get a job.
He doesn’t care about anything else; he isn’t getting a job!
That’s where we are right now. No matter how high the FED threatens to raise rates, the shortage of workers is not going to change.
Greed prevails because the market and the average person both believe the government will come to the rescue when push comes to shove.
You can’t blame Putin for the nanny state because it’s the Deep State system that’s at fault.
You can already see that the yield inversion is setting up an incredible rally in precious metals!
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