This month’s stock market correction is still fresh in everyone’s mind. Many have even begun to wonder if the era of dark money was truly over.
How will the recent correction affect the Fed’s dark money policies?
The consensus explanation for the correction was that inflation was rising and that would precipitate faster rate increases. The Feb. 2 unemployment report gave the impression that higher worker wages could lead to a higher inflationary trend.
I don’t buy this at all. I believe these fears of inflation are overblown.
As my colleague Jim Rickards has explained, the Feb. 2 report revealed that total weekly wages were actually declining and that labor force participation was unchanged. And the year-over-year gain in wages only seemed impressive compared with the extremely weak wage growth of recent years.
After accounting for existing inflation, Jim argued, the real gain was only 0.9%. That’s weak relative to the 3% or even 4% real wage gains typically associated with economic expansions since the end of World War II.
In short, Jim concludes, “the story about the “hot” economy with inflation right around the corner does not hold water.”
I agree.
Meanwhile, the latest report on U.S Gross Domestic Product (GDP) for the fourth quarter of 2017 was nothing to write home about. At 2.6% annual growth, it was 0.3% lower than expectations. That’s not the sign of an overheating economy. But those in the financial media considered it positive because it showed 2.80% growth in real personal consumption.
But if you look beneath the surface, what you’d see is that consumers aren’t actually doing well across three core areas that “govern the ability of individuals to spend.”
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