Federal Reserve Chairman Jerome Powell delivers testimony today before the Senate Banking and Finance Committee. During his statements Powell says, “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.” Powell continued, “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.“… “We will continue to make our decisions meeting by meeting.” … “Although inflation has been moderating in recent months, the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.”
Everything about the testimony to the Senate, and almost everything within the questioning as presented, ignores the key and central component that inflation is being driven by energy policy. The scale of the pretending around this issue is jaw dropping.
Western governments, including the U.S. through Joe Biden, have limited and curtailed the production and exploitation of Oil, Coal and Natural Gas. At the core of the inflation within those same governments, this is the issue at hand. Energy prices have skyrocketed, driving the cost of everything through the roof. The central banks are raising interest rates in an attempt to shrink the economy to match the drop in energy production. This is their monetary policy (interest rates) attempting to support economic policy (Green New Deal / Build Back Better).
There are no lines for consumers in the U.S and Europe of people buying durable goods, electronics or shopping for non-essential items. Prices on the products within the durable goods economy are not being driven by excess consumer demand. There are not 25% more people buying lemons and milk than this time last year. The prices for goods in general, and for essential goods specifically, have risen as an outcome of the input costs around energy skyrocketing.
Everything is impacted by diminished energy production, and losses in infrastructure due to drops in investment, that contribute to the efficiency of energy distribution. Oil prices have jumped, gasoline prices, diesel prices, natural gas prices and electricity prices have all skyrocketed.
With those raw material production policies, farming costs, fertilizer costs, cooling and heating costs, electricity costs, home heating costs, transportation costs, packaging costs, storage and warehouse costs, refrigeration costs and everything impacted by major energy costs have increased. This is the main driver of consumer inflation.
When Jerome Powell says they are raising interest rates to “cool the economy,” the raw truth behind the statement is the central banks are trying to reduce the western economies in order to meet the diminished energy production created by policy. If they can make the economy smaller, less energy is needed….. and this should stem the rising costs from limiting the resource development.
Their problem is that baseline energy demand remains high. This is keeping energy prices high…. this is keeping inflation high. Their approach to continue raising interest rates, will only work if they achieve an economic outcome similar to the pandemic lockdown period.
Yes, excessive money does create devalued money, which in turn does create inflation. However, in the current inflationary dynamic it is not excessive money in the hands of working-class people that is driving high demand for goods. All of the consumer and sales data show that cash carrying consumers are not chasing limited goods. Consumers and workers are trying to afford essential goods and services that have increased in price as a result of energy policy.
Every economic analysis that does not take this majority factor into consideration is either: (a) making a mistake; (b) being intentionally obtuse and willfully blind; or (c) intentionally not discussing it because the motives of the analyst are to support the climate change agenda.
Once you accept that energy policy is the majority driving influence of current inflation (6.4%), then you can estimate how much economic damage will be needed in order to drop energy demand to a level that matches the diminished energy development, production and investment.
Real inflation is around 20% currently…. it was well over 30% before. Rates need to be above the inflation rate in order to try and stop the rate of Bidenflation.
Not really. Eventually, rates will surpass the ability or willingness for people to pay, then they’ll flatten. The clowns raising rates will then proclaim that they’ve slain the beast of inflation. Meanwhile, economic activity will have dropped to the floor.
I’m afraid we have much bigger problems than merely energy at this point, especially with oil down to a relatively cheap $77 a barrel.
Money is still being poured into the system at an unprecedented rate. This won’t curtail until the effective Interest Rate approaches the effective Inflation Rate. The spread is much larger than anything we ever saw in the 70’s, that’s the direct consequence of the massive issue of FIAT MONEY (Fake Money). It’s very important for people to understand the deviousness of “Modern Monetary Theory.” I pick it as the main culprit of all our problems because it keeps the crooks in business so to speak. There’s never any day of reckoning. For example, if you don’t have Quantitative Easing you don’t have Joe Biden to begin with. Quantitative Easing is the source of all their power and control. They can buy people off through all levels of society wherever they need the influence. Advertising for example, is the largest Subsidized Industry in the United States – look what that’s done to the media.
I bet the Oil Companies were subsidized for shutting down their operations as another example – anything it takes for them to get what they think they want is what they’ll do with Easy Money.
Inflation is not too much money in the hands of working class people. It’s too much money in the hands of leaches that are not productive that drives Inflation. We are in an Era of unprecedented welfare payments and un-productive job creation. Un-productive job creation and idiotic government regulations are symbiotic and go together hand and glove. Also a “security state” is exceedingly, exceedingly un-productive.
You could print money all day long as long as people are productive with it. Mr Trump knows that, but it has to be steered in the right direction. And it can’t be pro-longed or it will inevitably fall into un-productive uses (Mr. Trump knows this also).
The Fed does not set interest rates, it follows them, that’s really the posture they’ve been in ever since they started this aggressive Monetary Policy.
They haven’t been influencing the system, they’ve been milking it. They can’t do that anymore with visible inflation. See, interest rates are the biggest component of runaway inflation (and inflation is the biggest component of high interest rates). They can’t have the Burlesque of borrowing money at 4.75% Short-term Treasury Bill and lending it to the Banks at 0.00% Fed Funds Rate. That would be so preposterous it would just add fuel to the fire and the Treasury Market would be demanding even higher interest to buy the government’s securities. It’s sort of like how FTX shouldn’t have gone past a 30% reserve requirement. The Federal Reserve would be making the same mistake – they’re at the end of their rope.
I guess the Commies just want The Fed to do it anyway and you could have the fiasco of the government borrowing at 40% interest then turning around and lending to the Bankers for 0%.
I expect when that happens everyone will understand what they’ve done.
Open Market Activities are how the Federal Reserve influence interest-rates, and increase or decrease the Money Supply. Selling bonds they offer them at a higher interest rate and suck money back out of the system. In buying bonds they’re willing to receive a lower interest-rate and inject more money into the system (except if they’ve gone beyond their means and break the system thereby paralyzing the circulation of money and effectively reducing the amount of money in the system anyway).
It’s very important to remember that The Fed only operates in a short-term arena. The Fed Can’t make a dent in the long-term bond market without prohibitively inordinate risk. The main thing the Fed’s doing is signaling the entire complex apparatus – the Fed’s influence is entirely based on credibility. This credibility can only be jeopardized so much.
Mr. Powell has no choice.
At any rate Sundance is right, fixing Energy Policy and making it efficient would be the single most important step toward fixing what could quickly become a Macro Economic disaster. But mostly because it would represent a commitment to repair the entire system. At this point there’s just alot more to fix also.
Good stuff.
Money isn’t being poured into the system at an unprecedented rate. M2 growth has been low or negative for months.
A lot of dedollarization going on overseas bringing more dollars home to the US.
Nice piece of the puzzle!
However, a major, major piece of the dynamic needs to be included. Present economic conditions are the result of economic and policy decisions that accumulated over multiple decades. In particular, FED/political PTB decided to amp up money supply (whether QE or fed spending originated) well beyond that justified by domestic growth (real, productive GDP). What was done? We relocated manufacturing overseas to keep labor rates low AND imported goods much more cheaply. We exported inflation for decades! This was abetted by US dollar position as global reserve currency – more inflation export. We’ve reached a point where there is simply too much debt , unsustainable asset bubbles all during a global downturn.
The piper is about to be paid. The MMT acolytes are about to have their theoretical arses handed to them. The Climate Change clowns who really only masked the huge wealth transfers this system promoted are about to be held to account. The energy scam and its connection to real world wealth/income transfer is becoming more visible.
Are the Russians and Chinese winning the economic war by continuing to pump gas and oil and mining coal while the U.S. and Europe continue to shut down fossil fuel production and a Quixotic attack on climate change by building windmills and installing solar panels.
Short term interest rates, which are set by the Fed, are higher than long term interest rates, which are set by the market. That condition is called an inverted yield curve. An inverted yield curve indicates that monetary policy has been too tight and that an economic slowdown is likely. The last thing the Fed needs to do is continue raising rates. Long term interest rates would be much higher if high inflation were expected to continue because holders of long term debt instruments would require a higher interest rate to compensate them for the negative impact of inflation. That long term rates remain low relative to short term rates tells us that recession/depression is more of a concern than inflation. And the Fed knows this. Sundance’s option “b”-intentionally obtuse and willfully blind-is what is going on. The Fed wants to lower energy demand and wages. It’s cherry picking data to make inflation seem worse than it is so it has an excuse to continue crushing energy demand and wages. Money growth (M2) has been low or negative for months, which is not indicative of future inflation.
and when will wages increase to meet the rising costs of housing, utilities, food, taxes etc.?
When workers are scarce and the jobs being done are productive and not unnecessary services.
Yesterday, Tom Luongo had a piece on this subject over at ZH. To say that his take on what is going on is radically different from Sundance’s is to put it quite mildly. It’s possible that Powell has more than one agenda in play here. If the WEF is really running the show, why is Japan’s central bank not on board with the Fed?
Powells only job right now is to print more and more money to support this mess:
And how will the Dems finance this debt with inter-bank interest rates approaching 6%? As you point out, it’s the Fed that prints, not the Congress. If Powell is, as Luongo suggests, fronting the NY banks, then the Dems are screwed.
The Democrats are screwed. Their policies will not be funded much longer. That is why Yellen is up in arms, braying about June 30th running out of money at Treasury. Biden is also complaining. When Luongo talks about globalists, he is not just referencing Europeans.
Correct. Luongo’s Theory of Everything holds that Powell is essentially MAGA, not a tool of WEF. Interest rates are being raised to strangle the Eurodollar markets by compelling all USDs to return to shore (and be invested at non-zero rates). All the globalist nonsense has been fueled by the artificially lowered price of capital. JP Morgan/Jamie Dimon on board and other US Banks. Congress will be forced to stop spending. Unfortunately, short term pain is in store for the restructuring now under way that puts America first. Hello SOFR, good bye LIBOR.
Japan has significantly different problems to address.
Well, if they can pursue their own course, why can’t the Fed?
The central banks used to all pursue their own courses (mostly), until the Great Financial Recession of 2008. To save the system, Bernanke lashed all the central banks globally together, so none would fail. Powell is undoing this and letting the chips fall where they may. The European banks have been running negative real rates pretty much since 2008. That is very poor management. The Fed Reserve has been running zero rates, not good, but not as damaging to balance sheets as negative rates. Negative rates are hugely bad for the banks and for consumers. Eats the seed corn.
Not sure it was coordinated or the EU banks had no choice but to follow to protect the euro.
You are correct that Western banks pursued NIRP or ZIRP and money printing for far too long.
I think Luongo is spot on about what Powell is doing by raising interest rates and cutting off the European globalists’ dollar supply. The side effect is the strengthening of the US dollar in the face of global dedollarization. Unfortunately, for the US, high inflation is baked into the cake because of the Great Financial Recession and Covid monetary policies. Biden’s energy policies make it intractable. Powell’s rate raising is also going to force the debt ceiling issue, it squeezes what is available for Congress to spend on Ukraine and the Green New Deal and other nonsense.
None of this makes the Federal Reserve a friend to the common man. They still live rarified existences. Powell and Dimon being on the side of private equity means they are all about making money, they do not have a communist globalist agenda. They are not being run by London money markets or the WEF, unlike Greenspan, Bernanke and Yellen, who paid the international banks every time they held their hands out. Powell has directly said no to Lagarde EU bankster.
I do not see Luongo’s thesis and Sundance’s as opposites, I perceive them as different aspects of what Powell is trying to do with the monetary system. Truthfully, it is better for all of us, if Powell is able to save the monetary system. However, the process will be damaging to all financially in the states. He can’t do it without Congressional cooperation, but he can stem the tide a bit until this administration exits.
As expected? The plan is working. End the FED. These people are not idiots. They are all in on the globalist agenda.
Careful what you wish for. Who would be controlling the money supply if the Fed was taken out of the picture? Do you really, really want the Treasury Department to do this?
PG&E is chatprging me 3x the marketplace cost of Nat. Gas … and the CAPUC just LAUGHS as they are MAKING us stop using Nat. gas.
the creeps running our country are PURE EVIL
Per Bloomberg
Recently, it was revealed that new vehicle average prices have increased by 30% since 2019, costing buyers almost $50,000. Now, Kelly Blue Book says that the average new car monthly payments almost doubled from 2019, reaching a record $777.
Aside from the prices of new vehicles increasing, even the average monthly prices of used vehicles have also seen an increase of up to $544. The $777 average monthly payments for new cars represent almost a sixth of the median after-tax income.
I wonder how many people are still buying new cars at those prices. 30% higher is interesting, but finding out sales are down 25% would be even more interesting.
There are still a lot of new vehicles available for less than $30,0o0, and plenty of unsold 2022 vehicles for less than that. It’s a buyer’s market. $50,000 is a ridiculous price for basic transportation, even in 2023. Shop smart.
Basic!! but I need
🤣🤣
The only thing that could save them is if those all cause mortality numbers keep rising. Last numbers from Nov it was still about 30% over normal but I recall it was up in Dec to 43% over normal. If that number keeps increasing at its current rate over the next couple years and it does not level off it will drastically lower demand… Do you think they have planned that far ahead?
Don’t make the mistake of believing they think they need saving. I’m sure most of them are quite pleased with the progress they’ve made towards eroding liberty.
They assume that the deflationary spiral will not hit their finances in a significant manner. In some cases, that would be true, in others, it will not work out for them. They also assume they will never be discovered, or if discovered prosecuted, or if prosecuted, given an appropriate sentence.
Would be interested in Sundance’s take re Tom Luongo thesis that Powell, on behalf of the FED and New York Bankers, is actually trying to eliminate power from corrupt Euro elites (WEF) by ending easy money for eurodollar trades. Luongo argues the eurodollar allowed WEF the economic resources to gain too much influence over US elites, including Yellen and Bernanke, who diluted FED and FED Bank power by sharing it with European central banks.
There is a podcast of Luongo with a Wall St FED expert linked in the below article which is very interesting.
If Luongo is right, we should be cheering on Powell since he’s acting to put WEF out of business. Of course, the downside is that Powell may be engineering a depression or worse a financial system implosion.
Imo, if Powell truly is trying to eliminate WEF’s power I’ll take the risks. If WEF succeeds the outcome would be far worse.
https://www.zerohedge.com/markets/luongo-war-dollar-already-over-part-i
I wonder how many here have even heard of SOFR.
Me today.
Luongo is correct about what Powell is doing to European bankers. Unfortunately, the depression is baked into the cake because of the printing already done by the Federal Reserve. By starving the European bankers of dollars, he is undoing what Bernanke did to get us here (inflationary), as well as countering the impacts of the dedollarization going on globally (deflationary). It is going to be ugly for everyone. But, it stops the WEF’s plans. Also, the death count from the clot shots is deflationary.
Your comment is balanced, WEF globalists want their utopia if it kills all of us. Powell wants to make money and doesn’t care who it hurts. Nobody is our friend, but the WEF globalists are evil.
I read that yesterday. It was a very thought provoking article.
Chicken Little porn from the FED.
Which has a vested interest in seeing Energy Policy driven by preception of limited supply and exploration. To be carried by the middle class because the nightly bootube lying machine tells them.
The USA is a Natural gas superpower of unpresented scale. With not poven reserves but vast stored natural gas that puts the Gulf States and Russia to shame.
The problem of natural gas production is the logistics of storage is problematic and most energy delivery production systems are geared towards demand. Basically what comes out of the ground has to hit the marketplace of demand and sold on a commodities market contract basis is delivery.
That era is over. Period it is a dead horse assumption.
During the fracking era the production ability of natural gas easily out placed demand by a factor in my estimate of 100 to one.
So where was all that gas put?
Yes there is an answer.
Tens of thousands salt mine domes storage tanks.
And further…
A. It is the reason why Putin’s Russia natural gas blackmail of Western Europe has failed.
B. America’s strategic energy producers have actually allowed Western European countries to meet their nature Gas demands and see a contract delivery cost that is less than pre March 2022 costs of gas sourced from Russia.
Again why?
C. While here we are sold a bill of goods telling us all sorts of BS.
It really is a matter of production costs, since really what does it cost for some gasbag to go national TV and spell out scripted lies. Cheap my friends, dirt cheap.
D. So once again does this tap on, tap off natural gas storage supply mean the Federal Govt can sell the strategic oil reserve on the open with zero worries.
E. Take actions to limit natural gas and energy explorations. Simply because said limitations mesh with a new unheard paradigm. The ability to revert back to fracking production capacity that frankly out strips demand but is now not in tune with ability to store the natural gas. Essentially, I do believe USA has in salt mine domes a ten year reserve of natural gas that when globally managed on the world’s energy producing nations. It is understood the USA can with policy reserve action set the price to market for the next decade.
The power of monied lies in action, IMHO.
Thank god Kennedy has a brain or at least he shows it.
German companies are discussing deindustrialization. A large chemical Co (BASF?) is building a huge plant in China, its first.
Other companies considering moving to the US.
Too much government spending and too much government printing money causes inflation. The rapid printing of money recently ($13T) with no corresponding increase in output is the cause of inflation. All you have to do is watch Milton Friedman videos on inflation and money.
The Fed can buy and sell bonds which temporarily adds or removes money from the system but that only has a limited effect in the short term. The Fed is powerless to remove large amounts of money in the range of $5-13T that is floating around in the economy right now. American (and European) economies are swimming in money right now. Do you know of anyone who put off a large purchase due to high interest rates? People are paying cash for $80K cars and $400K+ houses.
I make good money ($160K salary). I have only been buying essentials for the past 3 years. Basically, only food and utilities and gas. My non-essential spending has totaled about $3000 in the past 3 years. The price of clothing has not changed for me. My electric bill has not changed in 3 years. I live in an apartment and the electric bill has been $35-50/month. My gas bill for heat has been around $50/month for 3 years. I telework 50% now so my gasoline bill has decreased from $80/month to $40/month. My food bill for two has gone from about $350/month to $450/month in 3 years. My rent increased the usual 4%/year, like it has been doing for the past 10 years. My individual energy costs have been constant. My food cost has increased along with vacations (hotel prices increased somewhat for me).
Whenever anyone writes or talks about inflation, I just point them to Milton Friedman and what he says about inflation and money. He nails it in these two videos. There it is in a nutshell.
Milton Friedman – Only Government Creates Inflation – YouTube
Milton Friedman Speaks: Money and Inflation (B1230) – Full Video – YouTube
And stress tests tell the Fed how much punishment can be dished without crashing the banking system.
Watching Sen Kennedy grill swamp creature Powell was hilarious. The cause of inflation is not difficult. Common sense. Powell is just a lying sack of crap and snake oil salesman.
If I recall correctly, Powell was not passing out free money from the Federal Reserve like Greenspan, Bernanke and Yellen did. He was tightening until Covid came along, then, the lockdown and other policies forced his hand. Now, he is undoing the lashing together of central banks that Bernanke did in 2008. Powell obviously does not want the connection made between rising interest rates and people’s financial pain. However, this pain can not be avoided, if the US dollar is to remain valuable.
Biden promised to end fossil fuels. Why is no one tying this to our malaise?
We need to allow the Fed Governors the ability to own stocks again – so they can front run .
They’re all criminals who belong in prison for destroying peoples lives
There is an old saying:
“No shit, Sherlock!”
I wish that I had a head for this monetary policy stuff. Jerome Powell isn’t a stupid man. Couldn’t his explanation for raising the interest rates be a facade for the public, both here and abroad, to cover for the destruction of LIBOR, instituting SOFR and repatriating American Dollars from abroad and to smash the Globalists? I guess the best way to explain what I am trying to express is to read Tom Luongo.
Sundance is missing that this isn’t just about curbing inflation. In fact it isn’t even primarily about that. It is about repatriating offshore / Eurodollars in order to stop the EU from controlling global finance. A City of London-run global bank will destroy US primary banks. The primary US banks that own the Fed are not particularly “good guys,” but they beat the hell out of the EU globalists. SOFR allowed the US to break with the EU-manipulated LIBOR rate setting that dragged the US into whatever interest rate schemes the EU pushed. Now the Fed is setting US rates and the EU can piss off. Powell has to destroy the Greenspan/Bernanke/Yellen “put” so that capital markets reprice to reality. The mal-investment of the past twenty years has enriched the 1%. Time to correct that–even though it will be painful. Without popping the easy money bubbles, the US will be destroyed. It stinks that the only way to do that will be hugely painful for everybody else. Sorry: kicking a substance abuse habit is painful. We’ve got a choice: 1) die 2) go through a miserable withdrawal.
Low interest rates were a problem as they allowed more debt to be built up. Combine that with insane government spending and printing of money, well, here we are . The fools that bought the “covid” lie and now the climate change lie will destroy America.
Tom Luongo has some interesting podcasts about this issue and LIBOR transition to SOFR:
https://tomluongo.me/2023/03/05/war-for-dollar-already-over-no-eurodollar/
Assessment of this counter viewpoint? https://www.zerohedge.com/markets/luongo-war-dollar-already-over-part-i
We truly have idiots in control of the Fed and an administration determined to destroy the U. S. economy to make way for the NWO. Revolution is inevitable.
Liberal economic policy is always about trying to make a square peg fit in a round hole.
“We just need a bigger hole Joe”