Below we track how the Powell Fed serves as a contemporary weapon of mass destruction.
Powell’s so-called “war against inflation” will fail, but not before crushing everything from risk asset, precious metal and currency pricing to the USD. As importantly, Powell is accelerating global market shifts while sending a death knell to the ignored middle class.
Let’s dig in.
The Fed: Creators of Their Own Rock & Hard Place
In countless interviews and articles, we have openly declared that after years of drunken monetary driving, the Fed has no good options left and is literally caught between an inflationary rock and a depressionary hard-place.
That is, hawkishly tightening the Fed’s monthly balance sheet (starting in September at $95B) while raising the Fed Funds Rate (FFR) into a recession was, is and will continue to be an open head-shot to the markets and the economy; yet dovishly mouse-clicking more money (i.e., QE) would be fatally inflationary.
Again, rock and a hard place.
What’s remarkable and unknown to most, however, is that the Chicago Fed recently released a white paper during the Jackson Hole meeting which says the very same thing we’ve been warning: Namely, that Powell’s WMD “Volcker 2.0” stance (arrogance/delusion) is only going to make inflation (and stagflation) worse, not better.
To quote the Chicago Fed:
“In this pathological situation, monetary tightening would actually spur higher inflation and would spark a pernicious fiscal stagflation, with the inflation rate drifting away from the monetary authority’s target and with GDP growth slowing down considerably. While in the short run, monetary tightening might succeed in partially reducing the business cycle component of inflation, the trend component of inflation would move in the opposite direction as a result of the higher fiscal burden.”
In short, Powell can’t be Volcker.
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