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THIS WEEK’S EDITORIAL
ATTENTION MR POWELL — YOU MAY BE INCREASING CPI INFLATION AND THE RISK OF RECESSION: Dear Jay Powell,
If the rise in current CPI inflation is caused principally by rising energy costs and significant supply chain disruptions (reduced supply of goods), then raising interest rates may not solve the inflation problem. In fact, it may do the exact opposite and increase the CPI inflationary pressures.
This is contrary to conventional economic wisdom which tells us that all CPI inflation, no matter the circumstances, will be quelled by higher interest rate settings. And this is the mantra of central banking, generated by the economic dogma of most higher- educational institutions and followed by all modern conventional economists and central bankers. BOOM wishes that economic life could be as simple as that.
Unfortunately, when higher financing costs are combined with higher energy costs, those price pressures can be rapidly transferred to consumers especially if the supply of goods in the real economy is contracting at the same time.
Currently, in the advanced economies, because of higher prices the demand for energy is now falling rapidly and recessionary fears are increasing. Simultaneously, consumers are becoming more fearful of future job uncertainty.
All of this complexity is seen as only one problem by central bankers. They only see a rising CPI inflation number. If everything starts to look like a nail and all you have is a hammer, then readers will know what happens next.
The other consideration is the fact that oil, natural gas, corn and wheat prices in the United States are now falling fast. BOOM described these substantial falls in last week’s editorial. The US Gasoline price (Continuous Contract at CME) has fallen 43 % since June 13th — a sure sign of massively decreased demand.
When all of this is considered, it becomes obvious that central bank policy must rapidly adapt to rapidly changing circumstances. Thus, BOOM demands an immediate cessation of interest rate increases from all central banks as a matter of extreme urgency, especially in the US where the Atlanta Fed GDPNow calculation is forecasting a recession and where the entire US sovereign yield curve is now flat and could invert if overnight rates are increased any further.
MR POWELL — TALK TO THE WHITE HOUSE AND THE STATE DEPARTMENT: Jay, Jerome, BOOM also demands that you as Chairman of the Federal Reserve immediately talk to the White House and State Department and stress that any extension of the war in Ukraine via further weapons shipments will damage the US economy very seriously indeed. Why? Because it is clear that any furtherance of the war there will lead to a rebound in energy prices. Thus, to continue the war in the Ukraine is a folly that the US economy simply cannot afford.
PLEASE LOWER THE DOLLAR AS WELL: Current US monetary policy and foreign policy are also simultaneously strengthening the US Dollar against almost all other currencies. The outstanding exception is the Russian Ruble. This has the effect of exporting CPI inflation to the rest of the world.
The resultant global CPI inflation will cause an even faster recession to occur in many nations. For example, China just announced a 2.5% contraction in their economy for the last 3 months. If such a global recession occurred combined with global CPI inflation, it would be a bad outcome for all nations, including the United States.
If you won’t act as BOOM requests Mr Powell, can you please arrange for some other adults to be sent to Washington DC urgently? Those adults need to put a stop to current Federal Reserve monetary policies and a stop to American foreign policy initiatives in the Ukraine. The future well-being of the US economy is at stake here.
POLITICAL INSTABILITY IN WESTERN EUROPE CONTINUES: Political instability is continuing in Western Europe. Mario Draghi, Prime Minister of Italy, submitted his resignation to the President of Italy last week. The resignation was rejected by the President but the inherent instability of the Government must eventually result in yet another general election.
Also last week, the President of France, Emmanuel Macron, tried to push a Vaccine Passport initiative through the French Parliament but failed. He has no control over the Parliament now so it was an effort guaranteed to fail. Clearly, his power to influence the future of France is severely damaged.
Draghi and Macron are seen as WEF (World Economic Forum) placements by some commentators. So these developments appear to be further evidence for the rapid decline in WEF influence in world politics. Even Tony Fauci has (finally) admitted that the Covid vaccines may not be effective at preventing infection or transmission of the virus. And the general public’s appetite for “boosters” is severely on the wane.
Wait and watch for more Western leaders to be rendered obsolete or to be defeated in the near future and, by the way, that admonition includes the leaders of the United States. They cannot continue to stagger ever onwards with threats of viruses and extended warfare in Ukraine while maintaining any pretense of world leadership.
SAUDI ARABIA TO JOIN BRICS PLUS IRAN, TURKEY, EGYPT, ARGENTINA: Another Geopolitical development that occurred last week is worthy of the attention of BOOM readers. Rumors are spreading that Saudi Arabia, Egypt and Turkey are all considering a move towards joining the BRICS organization of Brazil, Russia, India, China and South Africa. The BRICS are currently considering applications from Argentina and Iran to join.
Saudi Arabia has started lecturing the US in regard to its failures on human rights. Saudi Crown Prince Mohammed bin Salman was reported as commenting on US “mistakes”. He said “….. regrettable incidents took place and other journalists were killed in other parts around the world”. “The United States also made a number of mistakes like the incident of Abu Ghraib prison in Iraq and others.” And “trying to impose those (US) values by force could have the opposite effect, as happened in Iraq and Afghanistan, where the US was unsuccessful“.
If this is all true, then we are seeing a decisive move away from US global hegemony. Negative posturing from US allied G20 Foreign Ministers at the recent meeting in Indonesia did not help.
In response, China produced an interesting map which was published on Twitter. It showed the world as “The International Community” with all nations on Earth in red.
But below it, there was another map labelled as “The International Community” according to Western mainstream media”. That map showed the following nations only in red — the USA, Canada, Australia, the UK, Western Europe, Japan and South Korea. All other nations were in White and thus not a part of “The International Community” according to Western mainstream media”.
PROFESSOR MARTY MACLARY: Professor Marty Maclary, is a British-American surgeon, professor, author and medical commentator. He practices surgical oncology and gastrointestinal laparoscopic surgery at the Johns Hopkins Hospital. He is Mark Ravitch Chair in Gastrointestinal Surgery at Johns Hopkins School of Medicine, and teaches public health policy as Professor of Surgery and Public Health at the Johns Hopkins Bloomberg School of Public Health. Last week, he wrote this important message to the world of Medicine and Public Health —
“The official public health response to Covid has undermined the public’s belief in public health itself. This is a terrible outcome with potentially disastrous consequences. For one thing, because of these sloppy and politicized policies, we run the risk of parents rejecting routine vaccines for their children—ones we know are safe, effective and life-saving.
The leaders of the CDC, the FDA and the NIH should welcome internal discussion—even dissension—based on the evidence. Silencing physicians is not “following the science.“ https://www.commonsense.news/p/us-public-health-agencies-arent-following?utm_source=email
In economics, things work until they don’t. Until next week. Make your own conclusions, do your own research. BOOM does not offer investment advice. SUBSCRIBE – FREE AT BOOM: http://boomfinanceandeconomics.com/#/
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BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY: LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans). https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how global banking systems really work. https://www.youtube.com/watch?v=EnC1UlnFLyI
AND Watch for 4 minutes, this Bank of England explanation: Money is essential to the workings of a modern economy, but its nature has varied substantially over time. This video describes what money is today. https://www.youtube.com/watch?v=ziTE32hiWdk
Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models. EMAIL: gerry {at} boomfinanceandeconomics.com
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Powell and the other cretins associated with the FED talk about their “tools” like it’s some magical box of many different useful implements.
They have 1 tool and that “tool’ is debt creation.
Debt creation in larger quantities and increasing exponentially or the system crashes as all Ponzi schemes must.
Crises’ are created to justify more and more debt production.
The FED recently announced a new “tool”. Buying UNLIMITED amounts of Bonds. Translation: another “tool” to purchase infinitely more debt that we ultimately get saddled with. Debt, far beyond your eyeballs.
At this point it’s hysterically funny only as a black comedy.
……and this debt translates into inflation also beyond your eyeballs.
The “system” is like expecting one can stuff an inflated basketball in a 4″ pipe. And Biden is like the basketball in that turds that big don’t pass in a 4″ pipe.
Everything you wrote is Truth and you can bet your ass everything the FJB Administration says is not so clever Propaganda. I have a Theory about the US Job Quitting Frenzy. Intelligent workers know that the Economy and Wall Street Securities will Crash probably within a year so they would not receive their life time promised Pensions. Instead of just taking that loss, they are quitting their jobs, applying for their retirement in a lump sum, and praying the Market survives 90 days. They plan to pay off all their bills, sell their house in the suburbs, move to a rural area and live off Social Security, etc. This is causing a critical employment shortage in professions like Medicine, Education, Trucking, Railroading, Airlines, Retail, Services, Finance, etc. The Fed is printing trillions of dollars to keep the financial institutions afloat, allow their agents to buy tons of PM paper ETFs to push the paper prices of PMs down, and the Plunge Protection Teams to buy Securities like crazy; this is all adding to inflation but that supports their “Operation Weimar Germany” currency Reset Plan. The Oligarchs are baiting several Useless Idiot traps and I believe they will spring them before 8Nov2022; with 88% of Americans opposed to the government’s direction, there just aren’t enough Useful Idiot voters dead or alive to steal the next election.
Great analysis rhs jr – and what about the Boomers too?
“A record-high 11 million jobs are waiting to be filled across the U.S. This boom in available openings? You can thank the Baby Boomers. According to Pew Research Center, the rate of retirement in Baby Boomers has accelerated since the start of COVID-19 with almost 29 million boomers retiring in 2020 – An increase of more than 3 million from 2019. With 75 million Baby Boomers retiring by 2030, The Great Retirement is looking to supersede The Great Resignation as the biggest hiring trend for 2022. Here’s what you need to know:
And CHS had a good article the other day:
http://charleshughsmith.blogspot.com/2022/01/the-real-revolution-is-underway-but.html
Thanks for the “I quit” studies; they showed some folks were “burned out” with the rat race, many wanted a better job and pay, and 20% quit to avoid the Shot; I’m pointing to something new and different: the fear of an imminent crash and the total loss of their Pension money if they stay; & social chaos in blue cities. I believe urban folks fear all kinds of new panics (inflation, shortages of food & fuel, cash, water , utilities; race riots, diseases, wars, etc) are imminent and are quitting to escape blue cities.
Yes agreed, some are but don’t you think most are blissfully unaware of what we all know here at TBP?
Here’s a good McKinsey report on job quitting today – gives another perspective:
https://www.cnbc.com/2022/07/20/40percent-of-us-workers-are-considering-quitting-their-jobs-soon-where-theyre-going.html
Funny, my reply is gone. I had said a new reason is cropping up: a lot of people are quitting to get out of Blue cities ASAP because they feel economic and social Chaos is imminent, and that their lifetime Pensions would disappear so they are quitting and applying for their retirement in a lump sum (after waiting the required 90 days). They plan to pay off all their bills and move to a rural area.
Your first reply is here now.
Yeah, I see. WTH? I swear it was gone! You’re not Paranoid if somebody might be messing with you! PS: If somebody doesn’t know something is wrong with the government, society, economy, liberals, etc, by now, they are an oddball for sure .