The federal reserve looks carefully at the Personal Consumption Expenditures (PCE) price index when weighting inflation data.  The Bureau of Economic Analysis just released the PCE index for June [DATA HERE] and the results show a 6.8% increase in June from a year ago, the largest jump in four decades.

Wage growth in the second quarter (April, May, June) was generally strong, rising 1.6%.  However, it now looks like the consumption index and the wage indexes are creating their own inflationary spiral.  In addition to supply-side inflation, driven by Joe Biden’s energy costs, the labor costs are now increasing substantially which adds costs on the production side of the economy.

As wages go up to keep pace with supply side inflation, the prices of goods and services produced/handled by those workers also increases.  This is the inflation spiral that can get out of hand quickly.  The major concern (not necessarily expressed by pundits) is the inability of any institutional economic response to offset the originating inflation caused by the energy policy.  The economic team is pretending supply-side inflation created by energy policy doesn’t exist. They are only directing attention to demand side inflation.

As long as energy policy keeps driving the price of electricity, gasoline and petroleum products higher, workers need higher wages.  Those wage increases, while significant in scale, still lag the rising originating prices of the goods; and the wage growth adds to the final costs. Inflation then becomes structurally embedded, hyper-inflation begins.  This looks like the current situation.

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Hanover, a city in the northwest of Germany, has become the first major metropolitan area to try and reduce the use of natural gas by removing hot water from public buildings.  The move comes as natural gas supplies from Russia are reduced to 20% of capacity.  Germany is attempting to fill up storage facilities of natural gas in order to survive the winter.

Germany, together with several European countries, are telling their citizens to expect large increases in their electricity bills as energy costs continue to skyrocket.

Germany does not have any LNG terminals to receive shipments of natural gas into ports, they are dependent on pipelines from Russia.  They are urgently trying to reduce the current amount of natural gas being consumed.

(Via Daily Mail) – […] Other desperate gas-saving measures include switching off public fountains and blacking out night-time lights on major buildings such as the town hall and museums. The city’s mayor, Belit Onay, spoke of an ‘imminent gas shortage’ that meant they had to reduce the city’s energy consumption by 15 per cent.

[…] There will also be a ban on portable air conditioners, heaters and radiators among the general populace as the average German begins to pay a price for standing up to the Russian dictator.

[…] Germany, like most of Europe, has been enjoying a hot summer which should soften the blow of the cold showers, but public officials are introducing the measures now in fear of what awaits them when the season turns.

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The energy crisis in Germany is now a confluence of terrible events that will snowball well into next year.

The world’s largest chemical company, BASF, has announced they will cut down the production of ammonia in order to use less natural gas.

In the short term this will help Germany build up natural gas supplies to survive a cold winter with predicted rationing still planned.  However, in the long term the shortage of ammonia means less fertilizer which will mean future shortages and increased costs for farmers; ultimately creating lower yields next year.

FRANKFURT, July 27 (Reuters) – Germany’s BASF (BASFn.DE), the world’s largest chemical company, is cutting ammonia production further due to soaring natural gas prices, it said on Wednesday, with potential ramifications from farming to fizzy drinks.

Germany’s biggest ammonia maker SKW Piesteritz and number four Ineos also said they could not rule out production cuts as the country grapples with disruption to Russian gas supplies.

Ammonia plays a key role in the manufacturing of fertiliser, engineering plastics and diesel exhaust fluid. Its production also yields high-purity carbon dioxide (CO2) as a byproduct, which is needed by the meat and fizzy drinks industries.

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There is less pretending in this segment, but the core of intent is still missing.   As soon as Ms. Bartiromo can admit the monetary policy is specifically designed to create lower economic activity, she will be able to reconcile the policy conflicts which she still views as hypocrisies.

While not outlining the motive, in the segment beginning at 1:07 Ms Bartiromo does a good job outlining the current state of the economy. WATCH:

Comrades, prior to the Joe Biden economy the average American worker was earning 29 onions per hour.  After, the Biden economic policies were put into place, the average American worker is now earning 11 onions per hour.

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Jumpin’ ju-ju-bones, CTH did not expect the BEA to admit the U.S. economy was in recession.  CTH originally predicted the BEA would use lower import data as the primary tool to modify the GDP result.

Factually, in this report, import data -in combination with lower consumer spending- was the primary sector that led to the result.  However, even with drops in the valuation of imports which lift GDP calculations, the economy still contracted.

Things must be much worse than officially admitted (details below), if the BEA is going to admit things are bad.

Gross Domestic Product (GDP) is the dollar value of all goods and services produced in the economy, minus the dollar value of goods and services we import. The percentages discussed are percentages of change over time.

The Bureau of Economic Analysis (BEA) released their first estimate of the second quarter GDP [Data Here] reflecting a 0.9% drop in U.S. economic activity. The second quarter contraction follows a 1.6% drop in the first quarter, which means we now have two consecutive quarters of declining economic activity, the technical definition of a recession.

The two primary data points which show the economic contraction are: (1) Lowered consumer spending; and (2) much lower imports as a result of lower consumer spending on durable goods and non-essential items.  High Q1 inventories of goods were also flushed out by companies and not replaced.  Starting with the consumer spending, here’s the data [Table-2, BEA report]:

Consumer spending, also called “personal consumption expenditures” declined 1.08% for goods overall in the second quarter.

Consumer spending represents two-thirds of all GDP in the United States.  Americans buy lots of stuff, and when Americans stop spending on goods the economy stalls.  As you can see in Table-2, consumer spending on goods dropped 1.08% and spending on services increased 1.78%.  The net difference is 0.70%, a massive drop in consumer spending compared to prior quarters/years.

The next component with major impact is the result of the drop in spending.

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Two weeks ago, CTH warned everyone that Joe Manchin’s torpedoing of the $500 billion Green New Deal senate spending program was a head fake; he was always going to sign up to expand the control of the federal government over energy use.  Today Manchin and Chuck Schumer made it official.

The people operating the “energy transition” levers will get $370 billion to spend on bigger windmills, more solar panels and new energy programs to eliminate coal, oil and natural gas.  They will pay for it by raising taxes and hiring a new army of IRS enforcement officials.  In exchange for his vote, the federal government will pay increased health insurance subsidies for West Virginians and pass out lower priced medications.

There you go. Exactly as predicted.  Energy inflation will continue as the energy transition becomes a permanent feature.  Ironically, Joe Manchin made them change the name to “The Inflation Reduction Act,” and pushed the effective dates for all renewals past the 2024 election (where he plans to be a candidate against Gavin Newsom).

WASHINGTON – Joe Manchin and Senate Majority Leader Chuck Schumer on Wednesday reached a deal on a bill that includes energy and tax policy, a turnaround after the two deadlocked earlier this month in talks on Democrats’ marquee party-line agenda. In a joint statement, the two Democrats said the legislation will be on the Senate floor next week. It includes roughly $370 billion in energy and climate spending.

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While admitting that consumer spending had dropped; and while admitting that production of goods and services had “slowed significantly”; and while admitting that consumers have “lower real disposable incomes and tighter financial conditions; and while stating that “activity in the housing sector had weakened”, housing purchases have fallen; and while accepting that “business fixed investment seems to have declined in the second quarter,” Fed Chairman Powell announces his intention to continue targeting excessive demand.

If we accept that monetary policy can only impact the demand side of the economy (regulatory policy impacting the supply side); and if we accept all off the currently existing realities of a declining demand side, as outlined by Powell; then you might wonder what excessive demand is it that he’s targeting?   The answer to that question is the secret sauce.  They want less energy demand.   WATCH (2 mins):

The federal reserve, just like all the central banks around the collective western alliance, is trying to reduce the economy in order to reduce energy use.   This is the monetary policy side supporting the Build Back Better, Climate Change, regulatory policy side. {Go Deep}

They cannot admit openly what they are doing, but the bankers are trying to help the globalist politicians by shrinking their economy.  Raising interest rates into preexisting economic contraction is against their legislative mandate, because it only leads to unemployment and a smaller economy.

Powell is using the pretense of demand side inflation as a justification to raise interest rates.  It’s not demand driving inflation, it’s the energy policy.

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Imports are plummeting… should be a good thing… trade imbalance shrinks…. that lifts GDP calculations…. but the problem is…

…. Consumer Demand Has Collapsed.

The state of the U.S. economy is not as difficult as the ‘experts’ always claim.  Simple business and checkbook economics always, always, tell you the future. You just have to be willing to accept things as they are, not as you would wish them to be.  Let’s have an honest chat. We need it.

Remember, it was November 2021, and no one was paying attention but retail hiring was negative.  The month before the 2021 Christmas holiday, when historically businesses would be adding people to their payrolls to support the increase in shopping, and retail businesses did no hiring. In fact, 20,000 retail jobs were LOST the month before Christmas.  Retail sales had plummeted. That was a major flare, no one paid attention. Everyone was distracted with the Supply Chain crisis.

Then the fourth quarter 2021 GDP result came in at 6.9%, massively higher than the visible reality on Main Street.  The reasoning was identified as a major increase in the value of inventories. While the Biden administration liked the GDP figure, the existence of the unsold inventory was another major flare.  Add unsold inventory units to the massive inflationary value of those units (+8%) and you quickly see the +6.9% was bad news, not good news.  Major increases in the value of goods have no value unless people are purchasing them.  It wasn’t happening.  Again, no one (except us) was paying attention.

Then the first quarter of 2022 GDP result came back with a negative 1.6% result.  With high inflation those inventories were stagnant.  The eight-percentage point GDP swing from the fourth quarter of 2021 to the first quarter of 2022 was another warning flare.  Again, no one was truly paying attention.  Retail sales -as measured in units purchased- had been in a contracting position since June of 2021, when the stimulus ran out.  However, skyrocketing inflation was hiding lower unit sales.

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According to the International Monetary Fund (IMF) global economic activity, as measured by economic outputs, contracted in the second quarter.  However, when it comes to identifying the cause of the issue, the IMF joins western financial leaders and central banks in playing the game of pretending.

The radical new energy program contained within the Build Back Better agenda, is the root cause of the supply side inflation.  The drop in the production of oil, gas and coal in the same western nations that are following the BBB agenda is origin of the massive spike in energy prices.

Inflation is a major issue, geographically consistent and virtually identical in all the nations who are following the Build Back Better climate change agenda, which is the justification for the energy ‘transition.”  However, not a single leader, central bank or multinational financial institution -including the IMF- will admit the energy policy is the cause of the issue.

(IMF) – The world’s three largest economies are stalling, with important consequences for the global outlook. Inflation is a major concern.

The global economy, still reeling from the pandemic and Russia’s invasion of Ukraine, is facing an increasingly gloomy and uncertain outlook. Many of the downside risks flagged in our April World Economic Outlook have begun to materialize.

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Do they want a civil war?  It might sound good around the DC cocktail party circuit, whipped into a frenzy by the Lawfare crowd, but the outcome would not be in their interests.

Given the severity of manipulative politics and DC based media in the past several years, I would not take the Washington Post article at face value.

WaPo represents the interests of the Intelligence Community side of the deep state apparatus.

Everything the WaPo creatures write is part of an advanced and coordinated DC engineering effort that has multiple motives; the face value of the one they present is never the real agenda.

We all know why they want Donald Trump removed as a threat to their echo-chambered system of corruption and governmental graft.  The entire DC system, including the Stasi DOJ and FBI state police, is based on financial influence, power, greed and corrupt sales of offices.  Donald Trump always represented a disruption to their scheming and conniving systems.  That motivating truth has never changed.

According to the Washington Post, the DOJ is now putting witnesses in front of a grand jury to solicit evidence to support a “seditious conspiracy” charge against President Trump for attempting to overthrow the United States government and Joe Biden.

WaPo – […] There are two principal tracks of the investigation that could ultimately lead to additional scrutiny of Trump, two people familiar with the situation said, also speaking on the condition of anonymity to discuss an ongoing investigation.

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