Senator Manchin Hammers on Powell to Back Off Money Printing, as Biggest “Inflation Momentum in 30 Years” Might Derail Democrats’ Spending Priorities

Giving political cover to the Fed to tamp down on inflation. Which fits neatly into my theory.

By Wolf Richter for WOLF STREET.

Joe Manchin, Democratic Senator from West Virginia, sent a letter today to Fed Chair Jerome Powell in which he, after the required good-job and thanks-for-saving-the-universe-as-we-know-it, hammered on Powell to get off the money-printing binge that is causing “the most inflation momentum in 30 years.”

“With the recession over and our strong economic recovery well underway, I am increasingly alarmed that the Fed continues to inject record amounts of stimulus into our economy by continuing an emergency level of quantitative easing (QE) with asset purchases of $120 billion per month of Treasury securities and mortgage backed securities,” Manchin wrote.

“The Fed has sustained $120 billion per month in asset purchases since June 2020, despite increasing vaccination rates to combat the virus and additional fiscal stimulus from Congress in the ARP,” he wrote in the letter.

“The record amount of stimulus in the economy has led to the most inflation momentum in 30 years, and our economy has not even fully reopened yet,” he wrote.

“I am deeply concerned that the continuing stimulus put forth by the Fed, and proposal for additional fiscal stimulus, will lead to our economy overheating and to unavoidable inflation taxes that hard working Americans cannot afford,” Manchin wrote.

“I urge you and the other members of the Federal Open Market Committee to immediately reassess our nation’s stance of monetary policy and begin to taper your emergency stimulus response.”

“[I]t is imperative we begin to understand that long term policy responses tailored for an economic depression, like the Great Depression and Great Recession of 2008, may not be what is required for today’s economy and could result in higher than desired inflation if not removed in time.”

This letter – the fact that it was written at all and released – is interesting because Republicans in Congress have been hammering on Democrats for their efforts to pile massive fiscal stimulus spending on top of an already over-stimulated economy. Republicans have started to put Americans’ growing pain and misgivings about this surge of inflation, and the loss of the purchasing power of their labor dollar, at the feet of the Congressional Democrats.

Republicans are doing so not because they’re opposed to inflation or money printing, far from it, but for political reasons.

And now, the first big-name Democrat has given the Fed political cover to taper its asset purchases and tighten its monetary policy and tamp down on inflation so that inflation, and the damage it does to working Americans, won’t give Republicans a crowbar to derail the Democrats’ top spending priorities.

Manchin’s letter fits neatly into my theory, expressed in the illustrious WOLF STREET comments on July 29, when I wrote in reply to Marco, among other things:

“Biden is going to BEG Powell or successor to jack up interest rates to get this inflation under control. Inflation is going to mess with Biden’s agenda. People are going to get pissed. Maybe that’s what Powell is waiting for, that Biden begs him to act.”

So now we have the first such action. It’s not “beg.” It’s the terms “urge” and “imperative” and “increasingly alarmed” and “deeply concerned.”

My theory is – and Treasury Secretary Yellen foreshadowed this when she said on June 6 that higher interest rates would “actually be a plus for society’s point of view and the Fed’s point of view” – that the White House is fishing for tighter monetary policy, including (somewhat) higher interest rates, to tamp down on inflation in order to allow the deficit spending priorities to not be ripped apart by concerns over inflation. My theory may still be proven wrong, but Manchin’s letter was a quicker and bigger step in that direction than I’d expected.

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  274 comments for “Senator Manchin Hammers on Powell to Back Off Money Printing, as Biggest “Inflation Momentum in 30 Years” Might Derail Democrats’ Spending Priorities

  1. Ernest says:

    But the second the market drops 20% they will pivot and go back to OPS normal, no?

    • RightNYer says:

      Dropping 20% still puts us significantly higher than it was in February of 2020

      • KPL says:

        The Fed does not seem to look at it that way. They just act like they cannot handle a 2% drop let alone 20%. That is a big ask – watch a 20% drop and do nothing. The scar of 2008 remains is my guess.

        Mark my words – As soon as the market drops 2% The Fed members will all come out in droves (one member will be trotted out everyday giving a speech somewhere) and make cooing noises.

        • Old School says:

          Fed cannot miss many more times to taper. Powell should come out today and say we got the million jobs we wanted and will start tapering today.

        • Nick Kelly says:

          ‘And now, the first big-name Democrat has given the Fed political cover to taper its asset purchases’

          Manchin said he wants to taper stimulus, if this equals or permits Biden to beg the Fed to jack up interest rates, it will be a first.
          Biden, being basically centrist and rational, might be willing to take on the left wing of his party, who outnumber Manchin 20 to 1, for a very gentle, soft landing, but he sure as hell doesn’t want a recession on his watch.

          Here is where I differ from the thesis that Biden wants a big increase in rates: in this far- gone, long standing, easy money addiction, normalizing the cost of money to anything like the average of the last 100 years, is ‘cold turkey’. It will be painful.

          Sure, eventually the middle class will be better off, but so far ‘short- term pain for long- term gain’ is not a winning political formula.

      • Old school says:

        Fed monetized a lot of debt and took stock market from 2200 to 4400 in 16 months. Why stop here? How about another 15 months and 8800? Who needs to work? Who needs to save?

        • RightNYer says:

          All that really did is transfer the wealth from those who held dollars to everyone else.

          Eventually, you’ll run out of the former, and the dollar will become worthless.

      • Christopher spisak says:

        I think your really onto something there Wolf!!! Powell could very well be waiting for them to BEG him to let rates rise. Powell is probably just slow playing it until that time comes. And if so he wnt b considered the BAD guy either….Biden n his administration will!!

    • nnn says:

      FED is a criminal enterprise

    • a guy from Toronto says:

      yep. I agree with Wolf’s view, but there is no chance of going back.

      Inflation or devaluation, we are loosing purchasing power either way.

      • Joe Saba says:

        well then you my friend says – you lose

        like other 99.9%
        only super connected get to survive

    • Julius Caesar Wannabe says:

      Until the music stops. In other words, Pax Americana goes the way of other empires.

    • Old School says:

      When I plug interest rates in to a fundamental model I use I get SP500 worth about $1650. Increase rates by 1% I get about $1325. Whatever the market is trading on a 1% increase in rates is going to take some air out.

    • Old School says:

      Citadel front ran the market all the way up and they will front run it all the way down, but then the SEC will put regs in place and they can spend the rest of their life counting their money from the island.

    • Old School says:

      The tell is “begin to taper”. Stimulus isn’t over til purchases are at least completely stopped and interest rate increased above inflation rate, not to mention decreasing size of balance sheet to say $2 T. If all goes well that’s going to take til 2030. Old Joe and country Joe will both be retired by then.

  2. Aaron says:

    Let’s assume that the US borrows $100. Let’s assume it borrows at 5% interest. Let’s assume that the Fed remits to the Treasury the Fed’s obligatory payment after all their expenses…by law. For sake of argument, let’s call it negligible – a generous assumption. Let’s just assume the US borrowing cost is still just 5% (as assumed…very generous).

    Next, let’s assume that on average the US is able to collect an average of a modest 10% on the increased nominal value from income taxes and capital gains (which is obviously a very modest assumption based on the max income tax and capital gains rates).

    Does anyone not see how this can, and will go on, into perpetuity?

    The US is generating revenue on every single Fed Note they borrow by taking the purchasing power of every person who is holding Fed Notes in any form.

    There is nearly zero probability of the Fed raising interest rates by any material amount, which would cause credit to contract. If the Fed were to do so, they would either need to be prepared to buy any and all distressed, and underwater, collateral at ridiculous prices; or alternatively, be willing to watch a credit contraction devour everything they have been attempting to abate for the last 30+ years.

    That is not speculation, but monetary fact. This endgame is not new to political society. It has played out since the dawn of humanity.

    • Maximus Minimus says:

      It’s a self -manufactured straight jacket. The pile of accumulated debt, private and government, will drive bankruptcies. Hardly what the political party in power wants. The natural instinct is to kick the can down the road. There is no adult in charge.

      • Housepoor Millenial says:

        So what’s going to happen? If inflation is not persistent, I understand they will keep everything as is.

        If there is permanent inflation above 2%, will they choose to raise rates or let everyone become extremely poor?

        I wonder

        • Old School says:

          The Fed are mostly academics and think they are fine tuning the economy. That is about all you need to know. They have theories about how it is all supposed to work. It never works out like they tell us it’s going to. Is it ignorance or intentional?

      • roddy6667 says:

        This accumulated debt, from individual to municipal to state to federal, is what makes America too expensive for manufacturing. This is why the jobs will never come back. Ever.

        • kam says:

          If debt was the impediment to manufacturing jobs, then China would stop manufacturing.

        • Wisdom Seeker says:

          One person’s debt is another’s asset. Debt doesn’t raise prices or “make things too expensive”. Kam’s right about China too.

          The lack of US competitiveness is because too many people don’t care enough about optimizing the nation for productivity. Neither government nor the big corporations seem to want the competition (= reduction in power) which would bring productivity back up.

          Think carefully who you vote for, and make sure you know that all votes are accurately counted!

      • VintageVNvet says:

        agree with your concept MM,,,
        only ”issue,” FKA ”problem” is that it is actually and really ”STRAIT” Jacket.
        To consider otherwise is to, at least to some extent, consider that MSM and GUV MINT are straight,,, when, at this point,
        WE the PEONS,,, mostly know full well that both of those vast and increasing entities are neither STRAIGHT nor anywhere close ???

    • Aaron says:

      As an aside, one will have to scour historical documents to find legislators, executives, judges, philosophers, etc,. who will state truths regarding money and currency. Those are the bloodstream of society, and truths regarding them are obscured like a morning fog. Nonetheless, when they are revealed, they are the impetus for monumental reform.

      • Chemdude says:

        If you haven’t seen it, you may enjoy Edwin Vieira, Jr’s writings on the US Constitution and money, “Pieces of Eight.”

    • I’m not following the logic of the first two paragraphs, but I come to the same conclusions as you. I think the Fed is stuck with 0% and I have been using leverage to bet that the yield for the 30 year treasury bonds will go down over a period of many years. I think QE can be ignored for the most part because the Fed is already committed to monetizing all government debt, so any increase or decrease in asset purchases (QE) is mostly noise. The recent rise in CPI is obviously caused by congress voting to put more money into the average person’s pocket, so it seems absurd that a senator would want to put the blame on the Fed. There’s a way to boycott the currency debasement and the increasing wealth inequality, which is for the average person to work and consume a lot less. Even a modest reduction in the consumption of goods and services we don’t really need will probably result in an unstoppable collapse of the whole system because it relies on perpetual growth. But I see people wanting that shiny new car and that shiny new smartphone. You can never stop the spending because more handouts ensure that more stuff gets bought. The only possible boycott involves a refusal to work. I hear a lot of people complain about the lazy bums and the freeloaders, but how many are taking action by refusing to work anymore?

      • Maximus Minimus says:

        You’re correct about the population, the overconsumption/overindulgence can only be stopped by massive tightening as a counterweight to ongoing massive easing.
        Nobody expect the general populus to be self-disciplined .
        It is job of the proverbial adults to maintain the discipline: the job that has remained unfilled for some time.

        • Old School says:

          Being the reserve currency has caused us to raise a generation or two of mostly consumers, but not producers. Not going to be fun if we have to produce what we consume.

        • VintageVNvet says:

          MM,
          1. No ”biggie” if ”over indulgence” or ”under…” ,,, either term is usually a relatively minor/gentle attempt of control. Very similar to the definition of the term ” promiscuous”; that used to be and may still be,
          “Anyone who get’s laid more than I do.”
          2. There is no such thing as ”race” with regard to ”species differentiation”::: “Race”, as is commonly used today almost everywhere, was a creation of the early 1930s era mostly used to justify action regarding who would be eliminated to make some superior species, etc., almost everywhere. A really great American hero, Jesse Owens of Alabama, totally eliminated any real possibility of ”National Socialist” and similar race theory (s);;; that has been confirmed by more recent data indicating without doubt that all other sub species are actually sub sets of the original set of human species genes.
          3. Having been blessed by the presence and firm helpful practices of many competent ”adults” of several colours and socioeconomic situations in my youth, ( neither of my blood parents who were both ”party on” folk/kids from teen to ends),,, and having seen children running screaming away from me because of my colour, I will be happy to testify it, ”race” , is only a social construct;;; unfortunately, originally and even currently used to OK all sorts of behaviours, policies, practices, etc., on all sides.
          4. Clearly the entire concept should go away, along with all the notions that WE The PEONs, in general, should NOT be well informed about any and every thing WE want to know. 5. Thus, very well written and following closely the rules of law and Occam, several Amendments are needed ASAP. 6. 6. And thus AMERICA proceeds, as has been done previously, to increase focus into NOW, while keeping clearly helpful precedents intact.
          7. As Edridge Cleaver ( A later 20th Century acute observer and accurate policy suggester, { for youngsters who may knot know him} ) said, ”If you’re not part of the solution, you’re part of the problem.” A clear and concise summary of the likely eventual conclusion of any problem preventing progress of WE The PEONs.

      • Ensign_Nemo says:

        There were a huge number of people who retired early during the COVID shutdowns. That’s the functional equivalent of refusing to work anymore. There are many more people who are moving out of the areas where the lockdowns were stringent and long, which is a refusal to work under bad conditions. I also see a huge number of people who are adopting the Soviet work ethic of “we pretend to work and they pretend to pay us”. The people who ARE still working hard are getting the entire burden of running the show dumped on them, and there are fewer and fewer diligent workers getting more and more work dumped on them. The old American attitude of “can do!” is being replaced with “so what?” and “I can’t keep this up anymore”.

        Something’s gotta give, and I sense that it’s coming soon. We already have planes stuck on the ground and chaos at airports because there aren’t enough qualified truck drivers working to transport jet fuel from the refineries to the airports. Airports can’t easily hire a truck driver with the right licenses and training to replace a driver who decides to quit or downshift to part-time work. There are a LOT of jobs like that, where the working stiffs are tired of getting stiffed and are looking for greener pastures and better options.

        • NoPrep says:

          This is a solid comment – very perceptive describing current conditions and what is happening. The world remains on shaky, unsteady ground. Wolf’s WTF graphs on top of that, all based on solid facts, should make anyone feel, at best, a little uneasy about any ideas that incremental increased stability and return to normalcy are where we are going over the next couple of years.

          And all of this, Covid vaccines or no-vaccines. If the pandemic had faded without vaccines, most of these these troubles would still be in play. But the psychic war of pro-vax vs anti-vax, and division in thinking about control measures and showing proof of jabs, seems to make it harder to deal with it all. Many folks getting more and more angry at the other guy, or afraid of the other guy, who sees it different. And you may have to work with him or her on the line too, making the job more unpleasant (for both – they don’t even want to chitchat about nothing anymore, during a break, they only want to vent to someone).

        • Ensign_Nemo, NoPrep

          A very significant percentage of the population is constantly trying to drum up business. People are constantly knocking on doors. Do you want solar? Pest control? Home security? Landscaping? They were saying we had more realtors than homes for sale at one point. For the most part we are constantly getting sold things we don’t really need (we’re heading towards a trillion dollars being spent on advertising annually around the world), so it may take some time for the salesperson to become a tank truck driver, but the reality is that automation is probably progressing faster than people are losing their will to work. Most of the plumbers, electricians, HVAC technicians, and auto mechanics I’ve run into are all actively creating problems so they have more things to fix in the future. We have such an overabundance of workers, you’re never going to see a true worker shortage. That’s why so many are getting so excited over crypto. It’s a whole new field with so many jobs and opportunities to go with it.

        • Old School says:

          Yep. I am with you. Growth is not going to be there without massive government deficits as far as the eye can see. Too many throwing in the towel this covid recession.

          A lot of people did that that worked in residential construction during housing bust. A lot of small business owners and 60 year olds will do it this time.

        • Petunia says:

          I’m watching a lot of videos on retirement. One of the biggest and surprising trends is the number of people in their 50’s just leaving the workforce for good. The general advice they get is downsize, live on your savings first, then start drawing down retirement savings when you age into it.

          The benefits of downsizing is obvious, cash out and pay cash for a cheaper local. If you live on savings you don’t have income and pay no taxes and can qualify for cheap healthcare. Eventually, you can start drawing retirement income and medicare and even get a low wage job if needed.

          Many people are following this trend and are pleased with the results. That’s a lot of experience just bailing out.

        • Roger Pedactor says:

          Great comment.
          I am generally fiscally conservative, but the issue is that just in time led to cheapest labor possible led to vapor economy here in the States. Half of the financial instruments used for investing and passive income should be outlawed because they are literally funded almost entirely by stimulus. Add in the lack of corporate regulation and intelligent tariff application to level the playing field for manufacturing costs. Then there is garbage regulation applied to the environmental impact on manufacturing overseas and material sourcing not only compounded by the cheaper labor costs but the out-of-sight-out-of-mind approach to something like, say, solar panels.

          Human ingenuity and especially American ingenuity has always been able to come up with responses to challenges. The issue is that the lack of reasonable regulation is effectively corrupting capitalism. The U.S. is a GIGANTIC land mass that is still largely unpopulated. To say there is no way to feasibly source and manufacture nearly everything it needs or even consumes is insane to me.

          The problem is the fed, gerrymandering, political hypocrisy, lack of any term limits, lack of campaign contribution caps, and this insane notion that it can’t be done.

          I hate both parties equally, btw.

      • The Real Tony says:

        The rich go broke and the only ones who benefit are the ones who have no money, zilch in the first place. It only benefits people with nothing because they have nothing to lose.

      • georgist says:

        Consuming less == more savings
        => higher rent / land prices

        Yet again the secret sauce is crushing rentier activity, because that’s the root cause of America,’s problems.

        But Americans don’t seem able to think in this way.

        • Old School says:

          There is some truth in that because profit margins stayed unusually high for many big businesses. Profit margins should mean revert unless big business colludes with government. But there is nothing wrong with a landlord making a profit in a free market.

        • georgist says:

          Again no nuance, everything is binary on here.

          I said we should eliminate rentier profit. You can still have landlords who capture profit based on the additional value they add above the unimproved value of the land.

          Just saying landlords good/bad is binary and fails to articulate rentier profit.

    • Augustus Frost says:

      “Does anyone not see how this can, and will go on, into perpetuity?”

      The flaw in your theory is that you are ignoring human psychology, even excluding physical limits which prevent perpetual “growth” by enabling the global and US economy to consume more through endless borrowing.

      If your claim was true, why hasn’t anyway done exactly what is being done now before and gotten away with it? Do you really think those running central banks and government treasuries today are so smart while all their predecessors were economic illiterates?

      There is no “new normal” just as their is no perpetual motion machine, as that’s essentially your claim. A belief in something for nothing, forever. Your claim doesn’t just contradict all economic theory, but physics.

      This has gone on a lot longer that I ever thought possible but when the psychology behind this mania finally reverses, no amount of government financial gymnastics is going to prevent a decline and ultimately, a crash landing in American living standards.

      The typical American is destined to become poorer or a lot poorer. Debt and money “printing” do not equal real production and no economy can perpetually increase debt to endlessly increase productive capacity either.

      • Djreef says:

        Precisely. I’m sick of hearing all of this omnipotent Fed horsecrap.

        • Old School says:

          I think it comes down to the Fed is omnipotent because the financial system is built on confidence and they are the ones that can get in front of a camera and say we will do (print) whatever it takes to stop the loss of confidence. Don’t like it, but seems reality.

      • Somebody has to eat the cost when the Fed prints money. The people who go to work and save some of their earnings (or those who have done so in the past) are the suckers who eat the cost. So it’s not a perpetual motion machine. It’s a system of debt slavery where the serfs keep working and saving, thinking that their savings can be redeemed when the time comes. Even if the market crashes, the serfs will simply work twice as hard to make up for the lost savings. The game keeps going until there is a radical change in the American work ethic.

        Regarding your idea that the average person in this world is destined to become poorer, I don’t think anyone here disagrees with you on that point.

        • drifterprof says:

          “Even if the market crashes, the serfs will simply work twice as hard to make up for the lost savings.”

          I don’t understand. How does the market crashing reduce savings of serfs. Serfs usually do not have savings.

        • drifterprof,

          If you only consider the bottom 30% or 50% of society to be serfs, they have very little or no savings. They aren’t important in this context because they are are forced to work hard no matter what, living paycheck to paycheck.

          Many of the people who have some savings are serfs, too. Some of them just don’t know it, yet. You can have a million dollars, but until you spend it, it’s all theoretical. When someone has a million, they try to get to 2 million, and then 4 million and so forth, working hard the whole time.

        • drifterprof says:

          Orthodox Investor,

          You would have to explain further for someone to discern what you are talking about.

          The term serf is invalid in this context. It implies involuntary legally defined bondage or servitude to a particular wealthy owner.

          People who have a million dollars have quite a bit more latitude in what they choose to do.

        • NoPrep says:

          “When someone has a million, they try to get to 2 million, and then 4 million and so forth, working hard the whole time.”

          So true! I want another boat? Buy another boat. Etc etc. But as you say they may not be the super rich, they live in serf mentality. (Do the super rich work hard? I don’t believe Larry Ellison works hard at all, anymore. Nor has Bill Gates, lately, done much work). On the other end, poor people who win the lottery almost always lose it all – in a few years they are right back to just where they were. The dream of being rich never was able to truly take hold.

          Habitual ways and means of living, and of spending or not spending money, are just very hard to break, no matter what class or caste you exist in, someplace.

        • drifterprof,

          There are plenty of people in places like the Bay Area who have a net worth of a million, yet live in a dilapidated house built in the 1950’s while they still owe another million or two on the mortgage. Theoretically, they could cash out and move to the Midwest and own 5 similar properties free and clear. They have a choice between being a serf or a landlord. They are choosing to be serfs in overwhelming numbers. The big break is just around the corner, you know. Then you have the person with $1 million cash in the bank account, afraid to invest in a market bubble and losing a large percentage of the money each year to monetary inflation. He could theoretically retire, but chooses to be the serf, working for a living while inflation erodes his savings.

          The word serf in the financial media was popularized by various bloggers such as Charles Hugh Smith. We all understand that we are not really like serfs from a thousand years ago. Are Elon Musk and Jeff Bezos serfs? After all, despite their wealth, they still work and work and work to make more. In that sense, they are very much like serfs and the only reason we don’t consider them to be serfs is that their net worth is around 5 orders of magnitude higher than your typical millionaire. They are worth as much as 100,000 millionaires. They are the modern aristocracy. The millionaires are the serfs today.

      • Turtle says:

        I’m surprised they’ve been able to hold back Reality as long as they have. That feat is probably what makes people think things might actually be able to go on as they are forever.

      • Old School says:

        Seems to me big government always dances to close to the edge of the cliff and when they fall off they change value of money like FDR and gold, and Nixon and dollar. That’s what I expect within next 10 years but Powell might be able dance on the edge of the cliff a little longer.

    • Julias Caesar says:

      But what happens when debt holders through voting in dollars say NO.

      The game is over.

      Fiat doesn’t work because you back your currency on ex-nihlo.

      Boom!

      The US goes the way of every empire.

  3. 2banana says:

    Kinda circular logic.

    Need to tamp down on inflation so that massive deficit spending can remain intact?

    “White House is fishing for tighter monetary policy, including (somewhat) higher interest rates, to tamp down on inflation in order to allow the deficit spending priorities to not be ripped apart by concerns over inflation.”

    • Wolf Richter says:

      It’s Republicans that are hammering Democrats over inflation and they’re using inflation numbers as the hammer to shatter Democrats’ spending plans. That is what has been happening recently, which caused me to say in July that Biden will beg Powell to tamp down on inflation so that spending plans can be pushed through Congress. Inflation is a political bitch.

      • Djreef says:

        Just ask Jimmy Carter.

        • KGC says:

          I will actually dance when that man dies. Worst President of the last 100 years, although Joe’s going to give him some serious competition.

          Sadly there’s no Reagan waiting in the wings.

        • FDR says:

          Or Richard M. Nixon (stagflation and Watergate).

          Or the Gipper (Iran-Contra), circumventing the will of Congress and the power of the purse.

          Or Trump. I need a 300 page monograph to explain the ass- in- chief.

        • Wolfbay says:

          He was unamerican. He was honest and asked people to adjust their lifestyles and conserve energy. Any kind of austerity, no way.

        • Ensign_Nemo says:

          Carter was and still is a nice man when compared to other politicians – that is the faintest of faint praises, but it is true.

          He was simply not the right man for the job. Sometimes you need to be at least a little bit of a tough bastard to get the job done, and he tried to be nice to people who deserved a Louisville slugger to their kneecaps. Fidel Castro and the Marielito boatlift, where Castro emptied Cuban jails and sent his criminal class to the USA along with many genuine political dissidents, was a prime example of Carter being too nice to the wrong person.

        • Raging Texan says:

          Carter = Reagan

        • NoPrep says:

          The Carter Doctrine was tough. And he had Zbigniew Brzezinski at his side too – no Mr. Nice Guy there. When he ran a second time, he said he would whip Teddy Kennedy’s ass if he ran Kennedy was drafted and did get in there. He did just that (though Kennedy’s disastrous Roger Mudd interview did not make that job too difficult). Alas ole Jimmy came up short for the final that time – Reagan had the “great communicator” and “morning in America” propaganda going strong for him.

        • 91B20 1stCav (AUS) says:

          Carter’s election only highlighted that, though ‘muricans say they want ‘outsiders’ in DC, they actually don’t when they encounter the realities of their choices…as mentioned earlier, the rise of, and now prevalence, of a binary-thinking population that rejects any hint of complexity in existence has placed more stones in the always-dark footpath of the future…

          may we find a better day.

        • Swamp Creature says:

          Jimmy Carter was a saint compared to what we have now in the oval office. 3 1/2 years of this crap and we won’t have a country left.

      • Enlightened says:

        Inflation will not be problem.

        Demographics, debt and the FED’s insane policies of rewarding the banksters instead of private investment mechanisms will be the bane of regulatory capitalism.

        • georgist says:

          Not nuanced enough: rentiers is the word.

          Banks can, and do, invest in productive industry. The problem is the issuance of credit that provides less wealth creation than the fiat created on the loan.

      • Thomas Roberts says:

        We need to replace Powell with AI in order to make a completely automated system. The algorithms will need to be tested first of course, to make sure they don’t throw each other off. But after that, between an automated FED and the increasingly automated trading in the stock market and more; we might just pump that bubble, a little bigger.

        #ReplacePowellWithAI

        • historicus says:

          How about this…
          Fed Funds must always equal or exceed inflation.
          Sound remarkable?

          That’s how it was for 75 years up to 2009. Now, its seems a distant thought…impossible. But that was NORMAL for along time.
          Now, borrowing for 30yrs for a house, at a rate 2% under inflation, is the new norm….but should not exist, can not last.
          Pulling wealth forward from future generations to fluff the present is nefarious. It should be identified as such.
          The THIRD MANDATE, the one intentionally omitted from the “dual mandate” game must be emphasized. For it is this mandate that would keep the yield curve normal and prevent irresponsible long term debt creation. Read it.

        • Thomas Roberts says:

          Noted.

          That will be very easy to implement in the algorithm.

        • Billybob says:

          Yes to AI-driven Fed, followed by the Congress.

          But for algo-bias, we could make it a reality. Imagine policy based on learnings from data and outcomes instead of privilege and power.

          Probably cost us tax mules a lot less in the long run and put a LOT more money in our pockets

      • PS says:

        Wolf: Isn’t what is being discussed here a perfect example of “the fool in the shower” metaphor? We’ve got the hot water spigot of loose monetary and fiscal policy going right now. So Manchin is advocating a little cold water of higher interest rates so Congress can increase the hot water tap of fiscal policy.

        Does less hot monetary policy and hotter fiscal policy change the overall economy? Perhaps it somewhat changes who the main beneficiaries are.

        • Auldyin says:

          PS
          QE gives newly printed money straight to the rich who may decide to buy a boat to create jobs. It’s an evil racket.
          Deficit spending is normal and goes straight to the people to be spent on jobs. Financing it pushes rates up, which QE has been stopping since 2008.
          We should never lose sight that QE is the big villain here, and always has been since 2008.
          Anything that gets rid of it once and for all can only be a good thing. IMHO

      • This may prove to be the most important economic topic of our time, Wolf.

        Good catch!

      • Nick Kelly says:

        ‘Biden will beg Powell to tamp down on inflation so that spending plans can be pushed through Congress.’

        So the spending plans aren’t inflationary? I’m just a bit puzzled by this.

        • Wolf Richter says:

          Yes, precisely, because the spending plans ARE inflationary, Biden will try to get the Fed to tamp down on inflation via monetary policy (somewhat higher rates, QE unwind), so that his fiscal policies can proceed. That’s my theory.

      • Wes says:

        Be careful what you ask for, you just may get it…
        Imagine that, Manchin, a Democrat worried about inflation?

        • RedRaider says:

          Remember Manchin is a West Virginian.

          During the civil war when Virginia seceded the western part of the state refused to leave the Union. That’s why we have a West Virginia.

          Manchin just might be doing something he considers in the country’s interest.

          Then again, that was a long time ago so maybe he is a fifth column.

  4. Scott says:

    How does the U.S. government afford to pay higher interest on bonds if rates go up? It looks to me like the U.S. government is in a catch 22, more spending requires more debt and money printing, thus inflationary, but raising interest rates to combat inflation increases the interest cost of debt and thus requires more money printing which leads to more inflation.

    • Old School says:

      A lot of zombie companies going to blow up before the debt is a problem for country. I am hearing more people say they might can taper, but they will not ever be able get off the zero bound.

      • Augustus Frost says:

        At some point, it will happen anyway. I see a lot of comments here and elsewhere believing that somehow, the US is different.

        It has the reserve currency but that doesn’t last forever. The USD is the cleanest dirty shirt but that doesn’t change anything ultimately either.

        Current monetary and fiscal policy is the equivalent of a put option on the FX value of the USD. As long as it doesn’t lose too much value versus other currencies or all currencies don’t lose too much value simultaneously, it can presumably mostly continue.

        Having the reserve currency is the primary difference other governments can’t get away with the same reckless economic policy the US does. They can’t dictate interest rates because if they try, the currency will crash. That’s what’s going to happen to the US “eventually” too.

        At some unknown point which no one can forecast in advance through a “trigger” event, loss of confidence in the currency will force the USG to make a choice. Either “inflate to infinity” or save the reserve currency.

        My prediction is that they will throw the US public and even most elites “under the bus” to save the Imperial State. The geopolitical position of the US has been slowly eroding where this country produces less and less that the rest of the world actually needs. The share of global GDP of the goods and services that actually matter is also shrinking, more than the aggregate GDP numbers.

        What this means is that accepting devaluing USD for real production is becoming less important for their growth and employment. If they have been holding price increases in check to this point to avoid losing market share, they aren’t going to do it forever.

        Americans are ultimately going to learn what its been in like in so many other countries that could not afford the same living standards because their economic production didn’t support it and no one would provide credit at a reasonable cost to live beyond their means either.

        • RightNYer says:

          Yeah, the “cleanest dirty shirt” argument is a smokescreen. While it may be true that IF you have to hold currency, the U.S. is the best, that doesn’t mean that people have to hold currency at all.

          There’s a reason that the Chinese are taking their U.S. dollars back to the U.S. to buy real assets. Because they don’t trust (rightfully) those dollars as a store of value.

          The fact that people don’t trust the Pound, Yen, or Euro either doesn’t suddenly mean that they do trust the USD.

        • YuShan says:

          Historically, the real reserve “currency” has always been gold, for obvious reasons. And unlike just a few years ago it can now be just as easily be used to settle transactions in the digital world.

          Imo, it is just a matter of time until it will be used to settle trade and replace the US$ in parts of world trade. Rising economies and powers are economic (and in some cases military) rivals of the USA. They are very eager to go off the dollar system once there is a viable alternative (which imo has already arrived). They could even consider their current dollar dependence a national security issue. Gold is apolitical, so acceptable for everybody, even between enemies.

    • Nathan Dumbrowski says:

      Treasury bills have short durations ranging from a few days to 52 weeks. Notes are sold in two-, three-, five-, seven-, and 10-year durations. Bonds are for 15 and 30 years.

      We as a country have an average debt obligation maturity average (~nine years I believe). That makes us very dependent on the ultra accommodative rates. The adjustment of rates is the magic that keeps the collapse from happening.

      • Nathan Dumbrowski says:

        The OMB calculates the Interest Rate on 10-Year Treasury to be 2.2% in 2021. Climbing to 3.1% in 2025. So even they believe the rate will only increase by <1% over the next four years.

        Source the 2021 budget office figures at .gov

        • Old School says:

          One thing you can take to the bank is if they predict it will be 3.1%, it will not be anywhere close to that number. Oh yes. They always assume no recessions within the next 10 years as well.

    • Auldyin says:

      S
      “more spending requires more debt and money printing”
      More spending requires more debt or more taxes. It does not ‘require’ money printing (QE).
      Money printing is an immoral activity which would be illegal for you or me and we would end up in jail.
      If interest payments rise, the Govt can borrow to cover it, so long as they stay within manageable bounds. Everybody in the World would lend to the US at a decent rate.
      They (the establishment) are stealing your money to protect the value of all sorts of dud assets held by others which cannot achieve a decent return in an honest market and should be marked down.
      The people have allowed this to happen by not scrutinising what the cabal have been up to for years. Inflation is the price to be paid for that neglect.

  5. Petunia says:

    The Kabuki theater season is open and in full swing.

    • Anthony A. says:

      I don’t get your comment??

      • Petunia says:

        They are all posturing to get through the midterms next year. Manchin is pretending to be the voice of reason in the democrat party, but he could have written this letter years ago, and didn’t. Nobody believes anything these people say and that goes double for the media.

        Get ready to witness several more acts in this drama.

        • Anthony A. says:

          Thanks! Understand what’s going on now (dumb engineer here trying to figure out what’s in store for us).

        • RedRaider says:

          Remember Manchin is a West Virginian.

          During the civil war when Virginia seceded the western part of the state refused to leave the Union. That’s why we have a West Virginia.

          Manchin just might be doing something he considers in the country’s interest.

          Then again, that was a long time ago so maybe he is a fifth column.

          I think you’re right though.

    • Brent says:

      We are not Japanese who need to go thru 1000 motions & 500 elaborate movements to drink a cup of tea.
      “Slapstick comedy” appears to be the general order of the day.
      50% of headlines are “A slams B for …”

  6. Dan says:

    FED scam in force; boost the prices of assets for their billionaire owners at the expense of the tax payers. What do Jeff Bezos, Musk, Gates and the others need? They want to be trillionaires now?

  7. Steve M says:

    Mr. Richter is offering theories! My eyes popped open. However I like it. Your theory that reality constantly intrudes on the biggest, boldest plans seems farfetched. It’s insane.

    Yet I think your theory isn’t an original one. Einstein spelled out something similar a century.

    When Democrats say something and Republicans say the opposite, it’s just for show. Behind clised doors, they’re actually related!

    As always, a toast to your work is one if the better reasons to keep drinking!

  8. Nathan Dumbrowski says:

    Wolf “Strike Leader” Richter theory …to tamp down on inflation in order to allow the deficit spending priorities to not be ripped apart by concerns over inflation….

    Can there be any benefit to an overheated inflationary period?

    Serious quagmire

    • Old School says:

      90% plus of the people I read don’t understand what Powell is doing regarding being soft on inflation. I think in reality Powell and Yellen want to run PCE inflation between 3 and 4% for a few years to help get Fed funds rate up to maybe as high as 2%.

  9. John Root says:

    I suspect we will hear a great deal about how we must fight inflation, with no meaningful action taken for the reasons of 1. This is a fight we will lose. 2. The kleptocratic establishment is positioned to maximally benefit from inflation. The Fed has enough different mandates now besides just management of inflation expectations to have political cover for inaction on rates IMO.

    • Implicit says:

      True. The FED will do an insincere Act of Contrition and appeasement by slowing QE, and lowering the purchase amount of mortgage-backed securities to pacify the nay sayers. However, they know that raising interest rates would be economic suicide, and the stock market would crash, so the crash will be prolonged but inevitable.

      • historicus says:

        I posted this months ago and do so again..
        the three steps..

        1. First inflation will be denied
        2. Then, the undeniable inflation will be explained away (calling it transitory became the tactic) (We are here now.)
        3. The Fed will “limp in” with meaningless and ineffective 1/4 pt raises.

        They will let the inflation effectively run…..because the arsonist should not be expected to reach for the fire hose.

        THEFT…arranged THEFT. Intentionally promoting inflation, while intentionally pegging rates at unrealistic lows (0%). Cui Bono?

        • Eastern Bunny says:

          You forgot the part where media comes in with stories like inflation is good for the working man.

        • Anthony A. says:

          EB, don’t forget that they will say that inflation creates jobs too!

      • Petunia says:

        Remember, in their religion you only have to atone for your misdeeds once a year, and then you are good to go until next year.

  10. Mountaineer says:

    Hip–Hip–Hooray for Joe Manchin. Someone had to take the first step and I am proud that it was a member our Congressional delegation to do so.
    Country roads take us back to where we belong. The end results will be painful, but the country need to get its monetary head on straight again.

    • Old School says:

      In a way Manchin is talking to the wrong person. It doesn’t matter so much about the Fed. Once Congress spends the money the American people are going to be taxed honestly through taxes or dishonestly through inflation. Now I do agree that it would be better to do it honestly, but he should be telling Congress to not be spending.

      I read that total debt of UD including unfunded liabilities of US is $225 T which means that our little $20 T is no longer able to keep the lie going with real interest rates. Financial repression forever. Future return on stocks, bonds cash in real terms going to be zero as far as I can see. Maybe long term with gold real return of zero is a good thing.

    • RightNYer says:

      While he deserves some credit, he’s still the one that agreed to the wasteful March 2021 $1.9 trillion bill that is the source of a lot of these problems.

  11. zr says:

    Big guy lives in a houseboat and is about to downgrade to an RV. All going as planned for Powell. Nothing to see here. Move along now.

    • zr says:

      It’s not actually a “downgrade” if you Hedonic quality adjust. In other words the houseboat was just “transitory”.

  12. MonkeyBusiness says:

    Nah. As long as Nancy P is still long the market, the Kabuki season is still in full bloom.

    • Old School says:

      My thought is Nancy has ego problem where she wants her final legacy to be $3.5 T spending bill that changes trajectory of USA to even more European style country.

      • Petunia says:

        It’s not ego, it’s necessity. She has to keep a lid on all the corruption in her regime. She will stay in congress until she dies or gets booted out.

        • Tim says:

          Petunia, at least she’s responding to her Master’s voice and protecting her financial stocks:

          ‘The drive to persuade President Biden to cancel student debt took a major hit when Pelosi stunned Congress with a surprise statement in opposition. It aligns her with Democratic megadonors Steven and Mary Swig, the billionaire scions of the Bay Area’s oldest real estate dynasty who have deep ties to the California representative.’

          Are Pelosi’s stock picks public knowledge? Why can’t we get rich by just mimicking her buys?

        • Petunia says:

          Tim,

          Besides the people you mention, there are 3 Blackrock former bigwigs in the administration in key economic positions. Do you think people will be able to keep their homes after being thrown out of their jobs? I don’t.

          Seen them in action before during the GFC and now they have had years to prepare. The only thing that may make a difference is that people are prepared as well, and the backlash may surprise everybody.

  13. Eugene Hoffman says:

    Congress is deficit spending, then the federal reserve house to deal with the consequences of stupid politicians. The senators should rethink his message

  14. Jack says:

    Well well!!

    The US government have reached it’s debt ceiling again!

    and we’d like to be entertained by the Democrats and Republicans to a new show of fiscal responsibility and monetary acumen !!

    The farcical Mr Joe and his boss are truly Hollywood material indeed.

    While talk is cheap, the pain that an average citizen is faced with is real, and the reality of the matter is that the US cannot afford to have “ leaders” like these to continue screwing you.

    If Not one senator will speak of the unbelievable budget of the DOD, and make sure it is halved or even quartered in this current debt-ceiling debate , YOU as an American citizen have the obligation to write to your rep, REP. Or Dem. to get it done right now.

    You have won NO wars, caused untold misery to generations of young Americans, let alone damaging any good well that the world held for this country.

    Gone are the days that you could hide these fallacies, time is now to build this broken nation. But,

    You need a new Congress, a whole new crop of leaders. Not a single one of your representatives should hold their seats.

    Don’t agree? It’s your peril.

    • gametv says:

      Jack – The real problem is that we allowed our CEOs to ship all the American technology and production to China and now we pay billions each year for China to pollute the environment and strip all our jobs.

      This is a retarded economic policy. We didnt just send the low wage, low value jobs, we send over tons of high tech manufacturing. And the Chinese have stolen all the tech.

      At the same time, we kept inflation artificially low by suppressing wages through the shipment of jobs overseas. This was a wonderful bargain for the billionaires.

      But now, the only way to prop up this disgraceful mess is to run perpetual budget deficits and strip our citizens and economy of the stored riches every year. The top 1% that owns technology assets continue to make enough money that this doesnt hurt them.

      All of the service economy jobs and the relatively high wages (compared to other countries) that are paid to service workers are only possible because the US is still a tech leader and the white collar workers are able to afford to pay the service economy at relatively high wages (compared to China). But this is a temporary situation if we dont bring back jobs.

      Trump was smart enough to see this as a huge issue, but not smart enough to solve it. Instead he foisted tarriffs that only pushed production out of China and into places like Vietnam. The trade deficit remains at a high. China continues to steal technologies from the world.

      The next chapter is going to get even worse. China sees that America elected Biden as president and Xi is going to press his advantage right after the mid-term elections, before the next Presidential elections. Taiwan becomes a major flashpoint.

      If any politician ever really told the true story of where we stand, the media would simply refuse to cover them. Not a word. Only politicos that “play ball” with the billionaires ever get covered. Politicians like Bernie Sanders and AOC get covered because their socialist ideas simply help to scare people away from real solutions that empower the middle class and reduce the power of billionaires.

      America succeeded due to capitalism. The form of government and economy we have now is not capitalism, it is a virulent form of fascism, where the government and big business work together to suppress freedom and competition. Because true competition is the biggest threat to the billionaire class.

      The people that are most dangerous to the billionaires are people that believe in real capitalism. The government should not be responsible for sending checks to citizens, or transferring wealth from one person to the next, but it should guard against monopolistic power and unfair trade practices. It should also create policies that promote the interests of domestic production, jobs and wealth creation for US citizens (not illegals or foreigners). Right now we have virtual monopolies and a lack of true competition in many industries, due to a lack of government properly enforcing antitrust rules.

      The simple analogy is a game of basketball. We let the players play and win or lose. The referees are there to make sure that rules that promote fair and aggressive competition are followed. The referees do not try to change the outcome, but they do stop a player that is not following the rules. And every once in a while, if the game becomes overly dominated by one player, they would change the rules to promote greater competition.

      The problems with our economy now go so far beyond the mere money printing and the debt bubble and the wealth inequalities. Those are mere outcomes of a system that has failed to promote real competition and has allowed massive segments of our economy to be shipped offshore for the benefit of certain extremely rich people.

      • Mojer says:

        Excellent summary and analysis of the current situation and the cause of all the current economic disaster, the extreme capitalism without limits of the state has eaten itself and to avoid the collapse inevitably becomes a dictatorship and any dictatorship always the final collapse.

        Joe Manchin, Democratic Senator it only tries to postpone the ball of responsibility for the predicted disaster.

      • historicus says:

        gametv

        ” The referees do not try to change the outcome, but they do stop a player that is not following the rules.”

        And what happens when the referees dont follow the rules?

        Mandate #1 The Fed is supposed to promote maximum employment yet what they do with rates has had the OPPOSITE EFFECT. The free money to promote inflation is borrowed by the federal government and paid out in a fashion that discourages employment. Fail.

        Mandate #2 The Fed is supposed to promote stable prices, yet they promote just the opposite, INFLATION. Fail

        Mandate #3 The Fed is supposed to promote moderate (not extreme) long term rates, but we have near record lows, 30yrs almost 2% below inflation. Those rates are IMMODERATE and EXTREMELY low. Fail.

        • cb says:

          @ historicus –

          Thanks for continuously reminding us of the FED’s mandates, and their corruption in not following their mandates.

          The FED are not not referees. They are planted inside players working to benefit the favored team ,,,,,,,,,,, and as George Carlin might say ,,,,,,,,,,, you ain’t on the favored team.

        • cb says:

          @ historicus –

          I always enjoy your posts and reasoning. You have a good command of the “facts” as they are written.

          The fly in the ointment is you reason through these via an honest lens. These bastards are corrupt and our system has a lot of corrupt influences.

          The agenda is much bigger than America. It is eventual world rule. The American common public good is dispensable.

      • cb says:

        @ game tv –

        Good insight. Well put.

      • Old School says:

        We are pretty much peons in the public policy game. Looked pretty smart to ship factory work over to China thinking they would become a democracy. Didn’t work out like they thought. It all went to China and all we got was cheap stuff via Walmart and amazon and a $10 T dollar virus problem. Maybe high tech will flip them to democracy, but I doubt it.

        • MCH says:

          It was stupid to have shipped jobs over at all. It doesn’t matter the form of government. It was insanity started under Bubba from Arkansas, accelerated under Jr, and supercharged under Audacity of Hope.

      • georgist says:

        Presently the problem is that rentiers own the court. They don’t care what the result of the game is, and there is only one court.

        Why am I not seeing words like “enclosure”, “land prices” and “rentier” on these pages?

      • Nick Kelly says:

        Go to Walmart and you’ll see 90% of Chinese imports and no high tech.

    • Anon1970 says:

      I agree with you but I don’t plan on wasting my time complaining to my Congressman and Senators about their big spending habits. It would not do any good.

      The big donors to both political parties don’t seem to be worried about the deteriorating financial picture of the US and “The Never Again” crowd doesn’t seem to understand that long before the first deportation trains to Poland left from the Berlin-Grunewald train station in 1941, Germany had experienced a decade of fiscal and monetary chaos, as well as economic depression, during the Weimar years.

      As King Louis XV of France once said “After me will come the deluge”. Or maybe it was his mistress that made the prediction.

      • Old School says:

        Trying to buy precious metals when they are cheap is better than trying to get leopard to change its spots.

      • 91B20 1stCav (AUS) says:

        Anon-and not complaining to your representatives will only guarantee it. Our clankety ‘representative democracy republic”s success in governing itself requires much unpaid PITA thinking and work from its citizens. Your choice, but no less your responsibility.

        may we all find a better day.

    • drifterprof says:

      Guns-R-US

    • Implicit says:

      I agree with your sentiments. Unfortunately the interconnection of the financial system within all the legalized monopolies especially those related to the defense department will use fear to justify their greed. You always hear the words National Security to justify War when in fact it is a Mercantile interest to control energy and other commodities for wealth/greed immorality of the wealthy.

    • Old School says:

      Debt ceiling is a legacy joke from how it started. So sad. Used to be like a board approving each bond issuance.

    • Person X says:

      I agree fully! We need most of the things the far left are asking for but the answer is not to not do them (most of them), it’s to not waste the money elsewhere … if we hadn’t spent the last 20 years needlessly in Iraq and Afghanistan we could have had the best healthcare system in the world along with education, water, and clean energy and infrastructure! We could be looking like the damn Jetsons if we had put that money to those uses. Add in taking corporations down to where common sense would say they should pay and our potential would be amazing but special interests mostly coming from Republicans are in the way at every turn.

      The cost is just the stock market about 70% lower than it is but 5% interest rates and steady 5% stock market returns you can plan on would be better for everyone anyway. Just disgusting how it’s squandered.

  15. Sweet Kenny says:

    They can’t raise rates – too much debt in too many places. That’s why there will be future lockdowns – it’s cheaper to give people free money than trying to deal with so much bankruptcy. It will continue this way until it can’t – the new currency system will be insisted – the US will be bailed out by SDR or equivalent world currency – central banks will be nodes in a world wide cryptocurrency. The Chinese will adopt it to avoid becoming a reserve currency – everyone wins except for us peasants.

    • Wolf Richter says:

      They can raise rates just fine. They did last time too until Trump cracked on Powell. Think about the difference this time!

      • Tom Pfotzer says:

        What’s different, Wolf?

        All the fundamental facts seem to be the same:

        a. Household real income falling
        b. Buying power of dollar falling
        c. Balance of trade degrading
        d. Industries that create new, well-paid jobs not being created
        e. Automation concentrating the benefits of productivity into the hands of a few
        f. Transfer payments funded by addnl debt, much of which is monetized, further exacerbating (b) buying power diminishing

        How does rising interest rates materially affect this picture?

        The transfer payments absolutely will, and must, continue until some fundamental and durable means of increasing household real income is implemented. BTW, I’m including all fiscal stim-paks, incl “Infrastructure Investment” in the transfer payments bucket. These are generally “make-work programs”. They have some value, but don’t result in a fundamentally different economic situation. After the money gets spent, items a-e above will still pertain.

        If those transfer payments stop, the economy stops. The USG and Fed and Wall Street all know this. What’s going to change?

        • Wolf Richter says:

          Tom Pfotzer,

          What is different now, compared to the Trump era, is that the Fed is getting the government’s backing for tightening policy. Under Trump, it got hammered for its tightening policy. That’s what my reply was about.

        • MonkeyBusiness says:

          Isn’t the Fed supposed to be independent? Nothing has changed it seems.

      • cb says:

        @ Wolf –

        I see no difference. Different actors, but same results. Interest rate suppression for the foreseeable future, temporary feigned action and a blip here and there aside.

      • georgist says:

        If you look at the rate corridor since 1980 it’s on course to go negative soon.

        If they do raise it would break a 40 year trend. So a super cycle, not a cyclic change.

        That really would be great, but I’ll believe it when I see it.

    • historicus says:

      “They can’t raise rates – too much debt in too many places.”

      Which is why you dont do what they have done…
      and you STOP what they are doing.

      If they can print for ridiculous ventures, they can print for the debt service.
      Interesting that the MMTers are okay with new government debt….as long as the government gets to control how its spent. BUT, with debt to pay interest, the government loses control on how that money is spent by the holder of the debt.
      Lost is the economic engine that a fair return on savings proviedes, and how a balance between lender and borrower is healthy for the economy.

    • 3D Modeler says:

      Just look to the ’81-’82 recession (induced by Fed chair Paul Volcker’s rate increases) as an example of how effective higher interest rates can be in stopping inflation in its tracks. Smart companies don’t raise prices when consumers are losing their jobs. The big difference between then and now is there were no stimmies raining down from the sky back then to blunt the inflation-fighting impact of the higher rates. We’re in uncharted waters now.

  16. Axe says:

    Since the Fed is running out of tools, during the next recession it won’t be surprising if the Fed implements negative interest rates and starts buying equities (via the Treasury and SPV in order to bypass congressional approval).

    • Old School says:

      No need to for negative rates.. Powell can get what he wants with QE which is real negative rates as long as he bankrolls Congress spending. Might buy stock ETFs like Japan before all is over. If Powell doesn’t get tough, the next Fed chair surely want.

      Hearing that best like long term place to make money is emerging market value stocks and bonds. Not sure about that but US growth stocks are priced for perfection.

  17. ttt says:

    You do not have to produce anything, you just print money and buy the whole world

  18. Raging Texan says:

    Prediction 1: Rates will go up when the people in control of the Fed want to buy cheap assets.

    Prediction 2: Many gullible people, including lots of commenters on this forum, will continue to believe that the Fed has an important mission and is actually run by benevolent, wise, strong willed scholars who desire to judiciously issue currency, buy assets off the market, and sell them back at the right times and the correct prices to help the economy stay in balance.

    • drifterprof says:

      I agree with you on those points. The “Fed” is an association of privately owned banks, who have quasi-independent control to manipulate the status of national money policies for the benefit of private interests.

      However, how many Americans actually understand how the “Fed” evolved (good history is book “Gods of Money”) and what it does? So most people are totally ignorant and/or weak cognitively rather than being gullible.

      From reading this forum for a while, its seems to be hyperbolic exaggeration to say that *many commenters think* that the Fed is run by benevolent, wise, strong willed scholars etc. etc.

    • historicus says:

      ” the Fed has an important mission and is actually run by benevolent, wise, strong willed scholars..”

      I think those who believe that are rare….especially on websites like this.

      • Raging Texan says:

        My solution is END THE FED AND THE ZERO RESERVE (FORMERLY FRACTIONAL) BANKING SYSTEM IN ONE DAY, but every day on this forum I see many commenters; Fed apologists, fans, wannabe bureachrats, offering suggestions how the Fed can do it’s supposed “mission” better, or bemoaning the Fed isn’t doing well enough accomplishing it’s “mission”.

        From today, here’s just two:

        1) “We need to replace Powell with AI in order to make a completely automated system.”

        2) “How about this…
        Fed Funds must always equal or exceed inflation.”

        The authors of quote #1 and #2 don’t want to end the Fed, they want to improve the Fed! Search a little, you will find thousands of such comments- my assertion is fact, not hyperbole!

        • Old School says:

          It’s all too complicated now as each crises has added more belt and suspenders. Banking system totally intertwined with government through FDIC and Fannie and Freddie.

        • Tom Pfotzer says:

          Suppose you actually did “end the Fed”. Which, if any, of the functions the Fed currently performs would continue to be performed, and by whom?

          Here’s a few things, currently done by the Fed, that come to mind:

          a. Print money to buy USG paper when no one else can or will buy (happening a lot now)

          b. Intervene in the credit markets to force rates low and keep existing debt service cheap

          c. Supervise the banks. They really need supervising. Not sure how much is happening right now, but it needs doing

          d. Lender of last resort when bank-runs happen

          e. Coordinate with other CBs worldwide to keep things “coordinated”, so whatever policy we have is done coherently across the world

          While it may seem tongue-in-cheek for me to ask all the Fed-bashers what they’d no longer do, it’s really not.

          It’s one thing to object, quite another to field a viable replacement.

          Please remember to address the knock-on effects when you advocate for your position(s).

        • Raging Texan says:

          Tom glad you asked

          The viable replacements are freedom, market forces and interest rate discovery, which most of the current Fed functions you listed impair for the benefit of insiders.

          a) private and corporate investors are fully capable of deciding at what rates they want to buy, sell, hold or avoid USG paper
          b) there is no need for the govt to intervene in credit markets, just replace the owners of capital according to law when firms go bankrupt
          c) Banks don’t need any special protections. They can go bankrupt just like any other business. Without a Fed- they will stand/fall on their own. If anything banking oligopolies and monopolies should be discouraged.
          d) there is no need for a lender of last resort- bankruptcy (or national default) is the solution to bad luck and irresponsible use of capital
          e) there is no need to coordinate with the various central banks of the world. Actually the first nation to stop coordinating will have a tremendous economic advantage.

          And you didn’t ask, but there is really no need for the FED or the fedgov to tell the people what to use as currency or money, either. People are creative and will rapidly find a replacement for fraudulent Federal Reserve Notes and fraudulent Federal Reserve USD electronic cash. The Constitution only restricts the states, not the people, as to what they use as currency or money.

        • Tom Pfotzer says:

          Raging Texan:

          Great response: we let market forces do their thing. I’m happy with that solution, since I don’t have much dog in the hunt, as I’m retired and good at providing for myself.

          Once interest rates normalize, a whole lot of assets deflate (real estate for ex) , a bunch of banks and sorta-banks go bust (collateral worth cents on the dollar), cascade defaults bring down a good bit of the FIRE sector (and I’m cryin’ no tears).

          Now the USG has to go into rescue overdrive. Has to raise trillions to prop up all those families etc. that got no income anymore. House building went flat-line.

          Remember, there’s a lot of interest rate repression. Also, we’re going to have all the same stuff happening in Europe, too. Trade slows way down, industrial output falls, too. Developing world gets absolutely trashed.

          And, automation keeps a-chuggin’ along. Every new factory or retail point that gets built will have a lot less workers.

          I’m pretty sure a great deal of what I just described will happen if we “let market forces” do their job.

          Let me remind you, if I may, that I am all for “market forces”. Nice clean model.

          The Fed, the USG, and every politician in the Western World has been moving heaven and earth to _avoid_ having market forces do their thing.

          Because the market now consists of a few well-off oligopolies that control the bulk of the wealth _creating_ capacity, and then there’s the rest of the 99 percent that… really isn’t all that necessary any more if you look at it from a production standpoint.

          We’re not ready to stop the game, stupid and screwed up as it is, because we don’t have a viable economic system anymore.

          The 50s thru 80s worked; household incomes for the middle class were enough to keep the economy running.

          Those conditions are gone, Ragin, and it doesn’t look like they’re coming back.

        • Raging Texan says:

          Tom the reason I advocate pushing the reset button is because , even with the temporary horrible problems you mentioned- the consequences will just keep getting worse and worse until they blow up anyway.

        • Tom Pfotzer says:

          Just to help people appreciate the impact of raising rates on the housing market, here’s the monthly payment – principal and interest – on the same $300K purchase price house, 30 year fixed rate mortgage:

          a. at 3.25% interest rate, the monthly payment is $1,305.

          b. at 8.25% interest rate, the monthly payment is $2,253.

          If the market set rates, and best-credit (USG) rate was set at the current inflation rate, that would be about 5%.

          The mortgage rate is around 3 pts greater than the fed funds rate, so that would set the mortgage rate at about 8%.

          So, if we let “the market” set rates, then at today’s inflation rate house prices would have to fall almost 50% for people to be able to afford to live in the house they currently live in.

          Remember what happened in 2008 when house prices crashed that much? And all those mortgages and CDOs were suddenly junk? Remember jingle mail? Remember Wall Street saying “if you don’t save us, we take the economy down with us”?

          :)

          I remember those days well.

        • Tom Pfotzer says:

          Ragin’:

          I agree. No good end to this story.

          What I would like to do is tell the people the truth about where we are, and how rough it’s going to be to get on good footing, and get our people to agree to do what we gotta do.

          We need to protect the kids. They are our future, and right now they’re going to get hit the hardest.

          Face it, make a plan, and deal with it.

          Right now, we got denial, no plan, and a lot of us … ah, let’s just say we’re fortitude-challenged.

          Texas less so than some others, but still, as a nation, it doesn’t seem like we’re “in shape for this run”.

          Good working with you, Ragin’. Enjoyed it.

        • Raging Texan says:

          Yes 2008 was crushing devastating experience for me.

          Texas just as f’d as the other 49 states

    • NoPrep says:

      “Many gullible people, including lots of commenters on this forum, will continue to believe that the Fed has an important mission and is actually run by benevolent, wise, strong willed scholars who desire to judiciously issue currency, buy assets off the market, and sell them back at the right times and the correct prices to help the economy stay in balance.”

      I feel bad for these high class Fed operatives (almost), especially the ones who have to speak to the media about policy. Because they have to say/act just like this. But they are not actually stupid, they know clearly disasters and “black swans” are on the way. They just can’t talk like that publicly. The problem is called cognitive dissonance – saying one thing, yet thinking or knowing something very different. Cognitive dissonance is a condition that beats up the human soul, and makes people personally unhappy who practice and live it in a major way.

      I suspect when Wolf shares facts here, rather than lies, crazy ideologies or magical delusional thinking, he finds it good medicine for his own soul, and that it motivates him to keep working hard at it.

    • cb says:

      @ Raging Texan –

      Regarding prediction 1: Bingo. The obvious answer is often the correct answer. The FED has been manipulative, corrupt and self serving to the masters for years.

      Regarding Prediction #2: Correct, overall. A lot of people know the corruption of the FED and our politicians. Just not nearly enough to overcome the propaganda of concentrated wealth and power. And for many that do know, they are beneficiaries and are unwilling to give up their positions on the gravy train.

  19. Phoenix_Ikki says:

    While as much as I despise Weimar Powell, my hatred towards Manchin is probably right up there. Let’s be clear, Manchin is no friend of the working class and this is your typical political theatre at best.

    Ask Manchin about how much he cares about the workers of Viatris pharmaceuticals, if only he spend the energy of writing this letter to actually serving his own constituents.

    • hidflect says:

      Manchin’s daughter got a $20M payout from the company.

    • RightNYer says:

      Yes. The “moderate” theater back in March cemented that for me. He reduced the threshold for the unnecessary and wasteful “stimulus” from couples making $160k a year to $150k a year. Big whoop.

  20. Yamo says:

    Manchin for President.

    • KGC says:

      Seriously?

      Look up “corruption” in the dictionary and one of the definitions is West Virginia Democrat. I’m pretty sure the accompanying photo is Robert Byrd.

  21. DR DOOM says:

    Joey is getting hammered in the almost heaven state. His daughter is bagging $31 Million while her company pulls the plug on operations in WVA. Joey needs a “I feel your pain” moment with the good folk of WVA. Joey did not feel their pain from the opiod slaughter. No nasty-gram was dispatched to Purdue from Joey . Big Pharma owns Congress and Joey . Gotta give Joey a thumbs up on the move. People will buy bullshit if it’s packaged correctly.Powell will blow the letter off. If interest rates are raised the market will crash. Powell needs the market to crash on the sword of its fundamentals, not his interest rate hike. He ain’t taking that up the wazoo. QE ain’t going stop along with inflation. We are gonna bop till we drop.

    • makruger says:

      Dr. Doom, I think you’re right. Besides, there is a whole lot of debt he still needs to help inflate away. Therefore, the financial repression will continue until moral improves.

    • Old School says:

      Manchin’s wife gets a billion to hand out as part of some rural development committee. Can’t make this up, but if you protests too much you are going to get locked up or locked down.

  22. Djreef says:

    Wonder why the financial sites aren’t covering this?

  23. Clarke Acton says:

    Wolf I like your posts but think you’re missing something here. The fed CAN’T raise rates. When Volker raised rates he did so in conjunction with Reagan lowering taxes and decreasing the rate of govt spending. That worked. But raising rates in an environment of exponential government spending and increased taxes is a whole different ballgame. If you take a hypothetical look at higher rates higher taxes and higher govt spending you get the end of the private economy, insolvent government and continued negative real interest rates. Powell has only one choice for the Fed to remain viable while Biden increases taxes and government spending. LOW RATES. Raising rates now would have an entirely different effect than raising rates in the ’80s. It would kill everything – the Fed the US government and the private sector. Not going to happen. Stagflation, continued bailouts and more wealth disparity. This does not end with an economic fix it only ends with a cultural revolution and devastation of the economy. And I’m an optimist! I just know history

    • Wolf Richter says:

      “The fed CAN’T raise rates.”

      They can raise rates just fine. They did last time too until Trump cracked on Powell. Think about the difference this time, now that the Fed is getting encouragement and political cover!

      Sure, the Fed isn’t going to raise to 18%. It might raise a few percentage points WHILE unloading the balance sheet as they did last time. Volcker didn’t have a balance sheet to unload. He had to do all with rates.

      • historicus says:

        Wolf…
        agree entirely. This “cant raise rates” is false.
        They can and they MUST.
        They have been making water run uphill and holding the beachball underwater for far too long.
        Fed Funds = to inflation rates…is the historical history of this country until 2009. We must return to that….IMO.

        • Tom Pfotzer says:

          What do you see as the effects of your interest-rates-at-inflation-rate policy, Historicus?

          Here’s my back-of-envelope qualitative assessment:

          a. Savers get paid. Check, that’s good.

          b. Cost of capital goes up across the board. Housing, mfg’g, all cap investment costs go up. Not good. Housing, just for ex., is a big part of GDP, lot of jobs. That’s going to be a mid-term negative.

          c. Marginal companies surviving on cheap debt roll-overs go bust. Probably a good thing. Short term negative, but good mid- and long-term

          d. Existing debt service cost for healthy companies goes up. Not good, but probably tolerable. Will contribute to inflation; those costs are significant, must be passed along if poss

          e. Existing debt service for gov’t goes up. Taxes or borrowing (both, probably) go up, less resource avail for transfer payments

          f. Stock market goes down. Leveraged positions harder to make work, got to vacate some positions. Automatic demand for stocks dries up. If the stock-demand dries up around the same time companies profits get curtailed, zombies go bust, might get a bit of a correction. Maybe a lot.

          I’m saying low interest rates are sustaining aggregate demand (people willing to buy). This economy is not in position to take a real shot to demand, and demand is being sustained in large part via transfer payments which are funded by massive new USG debt (only possible with xtra low rates), by the stock market / asset price “wealth effect”, and by housing construction.

          Take them away and you get a disorderly collapse.

          Please rebut those point. Not being snarky. You seem like a smart guy, and maybe you know something I don’t.

        • RightNYer says:

          Tom, so instead, we maintain the status quoa, and have a catastrophic collapse at some point? Why is that better?

        • Tom Pfotzer says:

          RightNYer:

          Of course, you’re right. Waiting around for the anvil to drop on your head is really dumb.

          My point is to solve the problem where it is. Don’t waste time solving a symptom. After you fix the symptom, you’re still sick.

          Our economy is _really_ sick. The engine of strong economy is:

          A. strong household income (earned income, not gifts, and maybe not so much “rents”, either)

          B. well-allocated investment at the household, industrial, and public levels

          C. well-advised (wise) long-term policy (econ, energy, industrial, environmental, social). Not just having the policy, but effectively executing it.

          We are currently getting C- or worse on those three things, and that’s why we have to throw money at people to keep them from sinking.

          If we were doing items A-C above really well, I’m pretty sure we wouldn’t be talking about “financial repression” and “raising interest rates” and “abolishing the Fed”.

        • RightNYer says:

          Tom, okay I see your point. I think we agree on the goals. You are basically saying that ending monetary games would bring about a recession in many ways because the economy is unhealthy. I agree on that. But my argument is that the financialization/monetary games allows us to pretend the sickness isn’t there, and delay taking steps to fix it. Ending those games would force our collective hand.

          So we agree on the ends, just not the means.

  24. Trinacria says:

    Boy am I confused??? I thought QE was an asset swap – that is to say, FED takes treasuries from member banks, and said banks get a reserve account which pays minor interest at the FED, but they cannot spend this account. This drives interest rates down to help spur lending. The banks are to loan their own money against these reserves. On the fiscal front, when our illustrious government does all this stimulus aren’t they borrowing the money (basically from our great, great grandchildren). At some point diminishing returns has to set in big time, because all this has encouraged seems to be rampant speculation from my vantage point. But then, what do I know. So, is this money printing?

    • Wolf Richter says:

      “I thought QE was an asset swap”

      That’s a fantasy. There is no asset swap. The Fed CREATES the money (credits) and then swaps the created money for assets. Get it?

      • Trinacria says:

        Thanks for the reply and I understand that part. But my real question then, is it true that the banks cannot spend the created money they received for the asset as that money needs to stay in the reserve account at the Fed? Your clarification is appreciated as I am trying to understand this.

        • Old School says:

          Fed’s got a lot of programs going and banks are highly regulated, so what they can do with each program has rules. Fed is having to mother hen banks since rates are so low and they don’t want things breaking down. The rules on repo and reverse repo are interesting and trying to serve Fed objectives of keeping financial system from breaking.

        • cb says:

          @ Wolf –

          Please answer Trinacria’s follow up question. which was:

          “But my real question then, is it true that the banks cannot spend the created money they received for the asset as that money needs to stay in the reserve account at the Fed?”

          There is tremendous confusion about bank reserves.

        • Wolf Richter says:

          Trinacria,

          There are some things in your question seem a little mixed up, but I think I get the gist of your question, and I will rephrase your question and then answer the rephrased question:

          “is it true that the banks cannot spend the money that they have in the reserve account at the Fed?”

          Not true now. But some of it was true before the spring of 2020.

          The banks can spend any “cash” or “cash equivalent” that they have. Some of this cash (about $4 trillion) is invested in an interest-earning but instantly liquid instrument, namely cash on deposit at the Fed.

          The Fed calls these cash deposits “reserves” (money that it owes the banks, and that it pays the banks interest on, and they’re a liability on the Fed’s balance sheet).

          Banks, on their balance sheets, call that cash on deposit at the Fed, “cash.” It’s an asset for the banks. This cash on deposit at the Fed is instantly available to be spent or lent out or used in other transactions with other banks. The only reason the banks keep this cash at the Fed is because the Fed pays them 0.15% interest on it.

          Banks don’t have to put their cash on deposit at the Fed. It’s voluntary, it’s a way to make a little extra interest income.

          Maybe what you’re referring to:

          The Fed lifted the “reserve requirements” in the spring of 2020, and now, banks no longer have to keep any cash at the Fed, and they can spend all their cash on deposit at the Fed.

          But before spring 2020, the Fed had a 10% reserve requirement in place, and banks had to keep 10% of the cash from their deposits (based on a regulatory formula) at the Fed. This requirement was designed to make sure the bank always had enough cash to meet a surge in withdrawals by its customers in case of a “run on the bank.” Those “required reserves,” when they still existed, could not be spent. Maybe that’s what you were referring to.

        • Trinacria says:

          Thank you (cb) and Wolf for the explanation below. Your rephrased question is what accurate. I think I sort of understand it. It is very confusing indeed and probably by design. I probably am confusing things a bit with this comment below by Dr. Lacy Hunt:
          “Dr Hunt concluded with a warning: deflation will win out unless the rules are changed. If the Fed’s mandate is altered, as some are now advocating for, to become the “spender of last resort” and able to monetize its liabilities as legal tender, then that would change the game and runaway inflation would ensue.”

          This gave me the impression that bank reserves at Fed could be used to loan or transact with other banks, but these reserves could not be loaned directly to private businesses looking for loans and, that the banks had to use their own funds not on reserve at fed to do this….the fed reserves in other words serve as a backing.

          Most of us are visual, so on this one most folks probably need a step by step visual diagram with the ability to ask questions, probably in a live setting. Take care and thanks again.

        • Petunia says:

          Trinacria,

          Maybe I can try to answer your question another way. QE was all about maintaining asset prices and not allowing them to fall. The fed always buys at full face value or pays a premium to accomplish this price stability.

          The original mandate of the fed was provider of liquidity of last resort. They were created to lend to member banks when no one else would. Under the original mandate they usually lent on assets at market value.

          The lender of last resort has now become the buyer or spender of last resort. Paying full price regardless of market value. What I think Dr. Lacy was referring to was the day when price discovery reenters the picture. Everybody knows the real value is a lot lower and this is the disinflation Dr. Lacy is referring to.

  25. Ed C says:

    “Republicans are doing so not because they’re opposed to inflation or money printing, far from it, but for political reasons.”

    That’s a loaded statement that reveals your democrat leanings. The Republican party has been the party of fiscal responsibility compared to democrats, although one might wonder about that given the failure to rein in spending by recent Republican administrations. There have been plenty of Republican congressmen and senators decrying the out of control spending. They’ve been fighting the ridiculous stimulus packages promoted by the democrats tooth and nail.

    Careful you don’t alienate half your audience with gratuitous swipes like that.

    • John Root says:

      The budget deficits rate of increase accelerates with Republican presidents and decelerates with the Democrats. The Republicans have no credibility on this.

      • historicus says:

        John…

        Trump was terrible in this regard, and when he jawboned Powell into the MMT camp, he did the country a terrible disservice. There was a tremendous arbitrage going on at the time, borrow in Europe, convert then buy US Treasuries. (late 2018). This probably would have brought rates down without Trump’s intrusion.
        It must be remembered that Trump is always a borrower in his business….highly leveraged, and more importantly HATES the Fed.
        It put him out of business in 1981.
        He also had one view of the Fed and the market bubble when he ran for office, then flipped.

    • Trinacria says:

      The parties that are not in power always seem to play the “we are fiscally responsible card”. “Choosing between these two political parties is like choosing between Lou Gehrig’s disease and stage 4 pancreatic cancer. I repeat, as Theoden King of Rohan said: how did it come to this?

    • drifterprof says:

      “Republican party has been the party of fiscal responsibility compared to democrats..”

      Compared in what way? Republicans have never been fiscally responsible when it comes to splurging on the bloated “defense” industry (i.e., war preparation).

      Politicians talk the talk, but few walk the walk.

      • wkevinw says:

        Since WWII, the two parties have spent almost the same as a % of GDP when occupying the white house. (FDR spent a lot during WWII).

        http://www.truthfulpolitics.com/http:/truthfulpolitics.com/comments/u-s-federal-government-size-as-measured-by-spending-by-president-political-party/

        There is a fraction of “rank and file” conservative (Republican?) Americans who do want to be responsible with government spending. As people say, the leadership, however, lie about it. The government/leaders spend just as much as anybody else when in office. I would like to at least talk about being responsible, than to not even try, as fruitless as that has been for many decades now.

        Private, competitive free enterprise activity has been shown to create the most benefit over long periods of time for many centuries (as opposed to government/centrally planned economies).

    • Wolf Richter says:

      Ed C,

      When it comes to “fiscal responsibility,” as you say, Republicans are the biggest hypocrites. When they’re in power, anything goes, as we have seen. At least the Democrats are upfront about their fiscal irresponsibility. They just don’t even care. But in the end, they’re both the same concerning “fiscal responsibility,” and that’s one of the big problems America has. That’s just reality.

      • Turtle says:

        Trump campaigning: “Interest rates are too low. They need to go up!” (paraphrasing). Trump as president: “0% is great!”

        They’re all the same in the end, even the ones who seem most independent at the start.

      • Earl says:

        Since 2008 billions (trillions) have gone straight to the big banks,you know, the guys who own the actually own the Fed. All the inflation created here is not counted as inflation..housing, education, medical, energy. It’s only increases in fiscal spending that qualifies as inflationary..as soon as that ends, inflation will end…what a joke

      • Artem says:

        So the minority party in Congress will be consinsenty hawkish and flip-flop when back in charge? Not a great argument for the FED to react to this.

      • cb says:

        A Wolf – A+

    • RightNYer says:

      Ed C,

      I’m as far right as they come (hence my name), and the Republicans are full of shit. They’re only responsible stewards of our budget when they’re in the minority. When they’re in power, they approve every wasteful spending bill possible.

    • Person X says:

      Yes, well the only evidence of Republicans being the party of fiscal responsibility is only because they like to say so. They have not been, they have spent more. They don’t like to spend money on things people get something for like healthcare, education or infrastructure….they just spend even more on war and tax cuts instead. The claims they make are delusional and their base just eats it up while they work against their best interests and only work to give corporate interests and the wealthy as much as possible.

      • Petunia says:

        I’m a republican and agree with you about the hypocrisy of the party as it relates to spending. They always have money for bombs and tax cuts, never for infrastructure and improvements. I have no illusions about them on that score. The place where they get my support is on their live and let live agenda. They are not trying to micro manage drinking straws, plastic bags, and other nonsense nobody cares about.

    • 91B20 1stCav (AUS) says:

      Uh, Ed-now i’m unclear on former VP Cheney’s affiliation. The words “…deficits don’t matter…” come to mind. (maybe he should have said ‘…the practical application of objective intellectual rigor no longer matters…”. In any case, the battle against absolute power corrupting absolutely will remain present, ongoing and endless…).

      may we all find a better day.

  26. Sweet Kenny says:

    Ed C are you for real?

    Where you paying attention while Trump was president?

    What about the quagmire Bush got us into in Iraq – how many trillion?

  27. simonyoosen says:

    Drug addicts never stop themselves unless force to do so. US will never ever stop from it FREE MONEY unless the world said no more CREATING SOMETHING FROM NOTHING. Past 12 years have proven the addiction getting worse and there is no way back. Either you crash the economy and send hundred of thousands of companies into bankruptcy or act nothing is happening now. Put yourself into the shoe of these technocrats and politicians, the path to choose is obvious.

    • Old School says:

      You will know it’s about over if 10 year gets to zero and some of the $500 T of financial assets start getting sold of to get into the $12 T gold market and gold spikes by 2X or 3X at local coun shop.

  28. Jay says:

    I guess the question is if they do decide to taper and raise interest rates, do they have the conviction to stick to it?

    It’s obviously the right thing to do, but when boomers retirement accounts shrink, pension fund liabilities grow and the economy grinds to a halt from decreased spending due to crack nest eggs, how quickly will the 180 be?

    • doug says:

      The market has rallied so much, that there is room to lower it. Plus a fair number of boomers (with ‘enough’ assets) are sitting on cash having left the market.
      I think no 180 this time.

  29. ru82 says:

    Covid pandemic has accelerated wall streets move into becoming the country’s landlord.

    There is no shortage of people looking to rent a house in a good neighborhood.

    ———————————

    Before the pandemic, boyhood friends Michael Murano and Richard Tyson owned 96 rental units in their hometown of Rochester, New York. They offered accommodation to low-income tenants, many in the service industry, from rooming houses to single-family starter homes.

    Today, they’re well on their way to liquidating the entire portfolio. Two-thirds of the units are already gone. The buyers? Large investors with all-cash offers.

    “It broke my heart to sell 15 single-family homes to just one, out-of-state big corporate investor,” said Tyson, a 38-year-old U.S. Navy veteran.

    “The last thing we need is to be exporting wealth out of this community, and limiting wealth creation here. But I knew we had to get the hell out of affordable housing – fast – because this was going to be a tidal wave coming at us.”

    Many of America’s landlords have gone a year and a half without being paid by tenants, who’ve been protected by several state and local eviction moratoria as well as an umbrella federal ban enacted 11 months ago.

    About 23% of small landlords, owning between one and three single-family homes, planned to sell at least one property due to difficulties caused by the eviction ban, according to a February survey of 1,000 such owners by the National Rental Home Council, a Washington D.C.-based trade advocacy group.

    This could reshape the market in the United States, where local landlords provide the bulk of rental properties and affordable homes. They range from small “mom-and-pop” owners with a few units to medium players with dozens.

    During the first half of 2021, $77 billion in institutional money has poured into the rental home market, according to residential brokerage Redfin.

    This month, for example, Tricon Residential announced it would be spending $5 billion to buy an additional 18,000 homes together with a Texas pension fund and other large investors.

    “There is an incredible demand and a shortage of supply for high-quality rental homes – in fact, we receive over 5,000 calls weekly to rent our homes, with only 250 homes available at any time,” said Kevin Baldridge, Tricon’s chief operating officer,

    • ru82 says:

      A friend of mine has 9 rental houses. A tenant moved out and he listed the house on Zillow and he was overwhelmed by the number of people responding. He has been doing this fo 20 years and never seen such demand.

      He lives in flyover land in a city of 80k.

      • Turtle says:

        Sounds like a great time for him to cash out and take it easy for the rest of his life. Nine houses…

        • georgist says:

          And how does a speculator take it easy for the rest of his life?

          Someone is paying more to support the lord’s of the land.

      • historicus says:

        EVERYONE wants to take the Fed induced mortgage rates that are 2% under inflation ….and buy something….almost anything.

        This inversion of rates is abnormal and unnatural. People see it, apparently the Fed doesnt.

      • georgist says:

        That right there is a rentier.

        This is what you have to stop. He has to get rental income derived from the value he’s added to the unimproved value of the land. The unimproved value of the land should be taxed away, as society created that value.

        These are the ticks, sucking blood.

        The distributed rent collectors for bankers that make unproductive lending.

  30. casey turk says:

    Wells Fargo discontinued personal lines of credit and halted home equity loans. So does Wells Fargo have inside information on future events?

    • Old School says:

      Banks let you borrow their umbrella when sun is out, but asks for it back when it starts sprinkling.

    • Wolf Richter says:

      casey turk,

      No. Those forms of credit have gone out of use. People use credit cards instead of personal lines of credit, and Wells Fargo is very aggressive in credit cards. And people do cash-out refis instead of a HELOCs. Wells Fargo just shut down marginal small businesses that just weren’t worth it anymore. Wells Fargo operates under an asset cap (imposed by the Fed due to bad behavior) and so it concentrates on its most profitable lending businesses. Makes total sense.

      • Swamp Creature says:

        I have a small business account with Wells Fargo which was grandfathered in when they took over Wychovia in 2009. They’ve been trying to get me to get rid of it. Said it was a legacy account that was obsolete. I have a lot of other money in this bank and told them I would close all my accounts if they terminated this account. They finally gave up.

  31. Implicit says:

    I agree with your sentiments. Unfortunately the interconnection of the financial system within all the legalized monopolies especially those related to the defense department will use fear to justify their greed. You always hear the words National Security to justify War when in fact it is a Mercantile interest to control energy and other commodities for wealth/greed immorality of the wealthy.

    • Mojer says:

      From the time of the Roman Empire, the war has always been made to take over the wealth of the conquered territories and distribute it to the elite, now for several decades the world elite has reversed the tactics, the US war is made to creep on the part of the world wealth elite of the empire. This change of strategy like the useless wars of the last decades ago means that the resources of the US empire will be quickly run out, China is just waiting for its end to become the new empire, and the card game will resume with the world elites.

  32. Willy says:

    This may be a daft question so please excuse if so, but…

    On the one hand, all the QE will devalue the dollar and cause inflation.

    On the other hand, people talk about a crash in asset prices. But a crash against what? The dollar that itself is being devalued? In which case, that devalued dollar can suddenly buy more of the assets that have just crashed (stocks, property etc) depending on which has crashed more.

    Or should we be talking about different asset classes rising and falling against each other? I.e. the dollar, other fiat currencies, gold, silver, property, index linked gilts?

    That’s before you factor in any likelihood of a rise in interest rates which would usually strengthen the fiat currency in question and weaken most of the other asset classes.

    Again, those questions might be a bit naive, but like most people, I’m just looking to protect what I have and work out the best asset allocation given the situation we are in.

    Also, I’m from the UK so may have a different perspective to many here, though a lot of the issues will be common to both countries.

    • Alku says:

      Dollar is devalued compared to these asset prices. So, if an asset goes down in price, the devaluation will become less.

      Even for cryptos, all the gains are still reported in dollars :)

      Regarding other fiat – the dollar index hit at the all time low during the peak of the the stock market, and started growing after the market crashed

  33. Gilbert says:

    My suspicion is that in an effort to knock down the inflation they have caused, the FED and it’s minions are doing what they have done for years to PMs — naked shorting most commodities.

    • ivanislav says:

      That’s what the gold-bugs say, but if it were true, how come the market as a whole hasn’t been blown up with failure to deliver? It’s a conspiracy theory that admittedly *could* be true, but the onus is on you to prove your claim.

      I’m long-term bullish on the shiny stuff, but simply tired of these incessant unproven claims. They reek of a cultish desperation to convert others.

  34. Citizen AllenM says:

    No real interest rates beyond 5 percent for the rest of my life. Nobody here is talking about the fact that the rest of the world can’t take higher rates. Huge debts have created huge wealth, but the international economic system runs on debt expansion.

    Commodity prices are going to soar, and that will force a contraction beyond what the system can take. How much debt floats Japan, China, Korea, etc?

    • Turtle says:

      But will Powell or his replacement really let the US become like Argentina with regard to inflation?

      • historicus says:

        digital minting……the stolen power of the Fed.

        • Old School says:

          Like gold, crypto isn’t much of a threat yet. Let it threaten government monetary power and they will get taken out by one law of Congress or one executive order by treasury. Don’t mess with government’s pay check.

    • Old School says:

      That’s the Lacy Hunt theory unless system is redone. USA is going to bounce around zero just like Japan and Europe for as long as eye can see. Maybe that was one time Bernanke told the truth that interest rates wouldn’t go back up in his life time. What did they do?. Government spends more and more and productive economy flat lines to under 1% growth.

  35. Misc.Etc says:

    “thank-for-saving-the-universe-as-we-know-it”

    Thank you for that. I needed a laugh today.

  36. Brant Lee says:

    We’re all riding the dollar dominance, but the dollar is riding the stock market. If the stock market goes, the dollar goes. The wealth of the U.S. is centered on stocks, what else have we seen producing monetarily in the last twenty years? Where does the printed money go? Stocks.

    Real estate rising or holding value with the stock market falling? Nope. Our darling corporations and banks can’t continue business without a rising stock market, much less stagnant or falling. Would the dollar hold up then?

    • Old School says:

      Fed messed up with wealth affect. Everyone is addicted to rising asset prices now. They intentionally rolled the ball of confidence way up the hill and it’s got a long way to roll when they can’t hold it up anymore.

    • RightNYer says:

      Yes. The stock market used to be representative of the economy, now it’s a confidence game that has become the economy in and of itself.

      It won’t end well, but when it ends is anyone’s guess.

  37. Depth Charge says:

    The FED has been minting new homeless Americans for more than 7 years straight, and last year went to herculian, diabolical lengths to destroy the working class, fixed-income retirees and the poor. You’ve got house prices over 10x incomes in most major markets, yet the financial terrorists Jerome Weimar Boy Powell and Co. are still buying over $40 BILLION per month in MBS, leading to working people living in their cars. Where was Manchin the whole time? This political grandstander should be fired along with every single other Congresscritter.

  38. Island Teal says:

    Sunday 8/15/2021 is the 50th Anniversary of Nixon taking the US off of the Gold Standard.

    How did all of that work out ??

    • Old School says:

      Maybe while banks are closed this weekend they will revalue the dollar and get another 50 years out of it.

    • Anon1970 says:

      Remember when economists were concerned that there would not be enough US debt outstanding for the Fed to conduct monetary policy? That was around the year 2000 when the US was running a general fund surplus and the national debt was expected to be paid off by about 2010.
      Things did not turn out that way, what with tax cuts, the longest war in US history and the largest epidemic in a century.

      50 years after Nixon took the US off of the Gold Standard, I am enjoying my 17th year of early retirement with no debts to worry about. My guess is that most of the children and grandchildren of religious conservatives who voted for Bush 43 face a much grimmer future.

      Just think: If Bill Clinton had not stained Monica’s blue dress, Al Gore might have been elected president and the US would be a much different place these days.

    • Wisdom Seeker says:

      And not just the US… basically the whole world came off the gold standard when US did.

      Meanwhile, the dollar has lost 90-99% of its value since 8/15/1971… depending on what you want to buy with it.

  39. Marco says:

    Unfortunately it is probably too late now, the inflation psyche has now been initiated … you have to also ask who is going to buy US debt at 2% in a couple of years time with permanent high inflation? The Fed’s balance sheet is not going to stop growing .., it’s all a confidence game now, can they make it last

    • MonkeyBusiness says:

      Have you seen the rates on junk bonds? Thanks to the Fed, people are still gouging on those. We are talking about JUNK bonds here. I don’t think the Treasury will have a problem finding buyers.

  40. georgist says:

    Okay. What do you actually want?

    You want food inflation down.
    You want land inflation down (that’s why housing is expensive).
    You want absurd medicine costs to come down

    What don’t you want?

    You don’t want productive businesses to close.
    You don’t want productive new business starts to halt.
    You don’t want people turned out of their family homes.

    Raising rates to the sky will get you both lists.

    Taxing land more, and labour less, plus ending absurd IP monopolies, will get you the first list only.

    You need to comprehend monopolistic pricing.

    > Land is the mother of all monopolies

    Winston Churchill

    Why not enumerate what you actually want? Americas are so disorganized.

    • historicus says:

      “Raising rates to the sky will get you both lists.”

      Which is why irresponsible debt creation is a bad thing, agreed?
      It leaves you little options when the system is clogged with debt at RECORD LOW, 4000 year low rates manufactured by the central bankers.
      Why? Didnt they see this coming?
      So “more of same” is the only course? Where is the wisdom in that.
      Normalcy would be Fed funds = inflation. That’s where it should be…
      the sky isnt….the sky.

      • georgist says:

        > more of the same is the only course

        I’ve explicitly detailed a radical (as in root) change that you have totally ignored.

        Why is economic comprehension so low in the USA? You have zero chance of real change with all this simplistic binary thinking

        Low rates vs high rates
        Communism vs capitalism

        The real answers are going to require more hard work than this.

    • RightNYer says:

      Nonsense. True productive businesses don’t need low rates. Low rates at this point are being used to fund operations (not capital investment) and are thus keeping zombies alive. It’s the difference between borrowing money to go to trade school and borrowing money to pay for your groceries.

      If anything, low rates DESTROY productive new business starts, as they have to compete with the big boys who can lever up at low rates and crowd out any competition.

      • historicus says:

        RightNYer
        Agreed. Low interest rates are only stimulative in the short run. Protracted (12 years) begets excesses and irresponsibility. We see posters right here saying no to any higher rates with limp reasonings.
        33 year old stock brokers have never seen REAL INTEREST rates, exception 2018.
        Low interest rates, rates pegged below a Fed promoted inflation is absurd.
        These central bankers have interrupted free market events like cycles and corrections which flush excesses and make things healthier. Excesses become pent up, the flushing systemic threatening.

      • georgist says:

        low rates are a sign of low productivity, however simply hiking rates will still leave you with rentier activity, siphoning from true wealth creators.

        Adam Smith wrote about rentiers. Keynes did. Friedman did.

        Ignoring rentiers because it’s more complex than low vs high or commie vs free market is too simplistic.

        Even the Fed don’t set rates. They follow productivity, which is low because of rentier activity.

      • Old School says:

        I follow a REIT and will probably buy it again if price hits my target. They are selling stock anytime price gets high enough that dividend yield is less than a loan interest rate of 3.875%. They are financing new debt at 2.75%.

  41. 3D Modeler says:

    The government borrowing more money to fund higher debt interest payments in a rising interest rate environment is not a green light for companies to raise consumer prices. Conversely, borrowing money to stuff cold hard stimmie cash directly into the pockets of consumers is a HUGE green light to companies to raise prices in unison with impunity. Any CEO/CFO worth their salt will go after their fair share of that stimmie cash…or find themselves on the outside looking in. Big difference.

  42. Micheal Engel says:

    Unemployment rate false positive bias. Overtime zero, working hours flat.
    Help wanted bs. NDX take a break after reaching week #9.

  43. MonkeyBusiness says:

    I still don’t see how the elites can accept a lower stock market. They own most of it, so yeah rates will probably increase some, but not enough to matter.

    Supposedly July’s retail inflow to the stock market was the highest it’s been in years, but a couple of billion here and there might as well be a drop in the ocean compared to the overall holdings of our billionaires.

    • RightNYer says:

      What good is paper wealth in the form of the stock market if it’s all owned by rich people who can only afford to sell it to each other?

      • MonkeyBusiness says:

        They can sell some slowly to the “middle class”.

      • Nathan Dumbrowski says:

        Fractional shares. It is the new way that anybody can play in the Casino known as WallStreet

  44. Micheal Engel says:

    WTF : ZG, Gold Futures breached the support line coming from June 2019 to 3/1/21 close. ZG might rise to test support.

  45. joe2 says:

    “Maybe that’s what Powell is waiting for, that Biden begs him to act.”

    Probably waiting for a guarantee his job is safe so he can rake in more stock bonanzas and he won’t be replaced by a South American border jumper.

    But Biden is not selling 100year 0% interest bonds. So he just expects to hide the interest increase in monster $20T budgets?

  46. John says:

    Wolf,
    Interesting. I look at Manchins letter as him tipping his hand on all the bills coming for a vote as he is in with Pelosi and Shumer.All the fiscal stimulus coming now which Bernanke and Yellin had called for previously. So if it wasn’t for covid we never would have had the fiscal stimulus to cause the inflation. So make Bernanke had it all right. I think other powers that be had other ideas with all this cheap money.

  47. Rcohn says:

    So how have the markets reacted
    S+P up to new all time highs
    Gold. down 2.5%
    Silver down 4.7%
    Bitcoin up 6.6%
    Interest rates -10 year Treasury @ 1.28% up from below 1.22% the day before but far below the 1.65% during the spring.Yesterday real rates were close to it at all time Highs.

    The stock market seems to be saying that it does not believe any taper will happen.
    Gold and silver seem to believe the opposite .
    Real Interest rates seem to indicating that many participants enjoy giving money to the government

  48. historicus says:

    Hats off to Manchin.
    Certainly this is a political move, but it doesnt make it a bad move.
    Manchin had the stones to bring up the issue…for certainly this inflation just gave all his constituents a 5% pay cut….when will the other politicians wake up, join the parade?
    But dont expect the arsonists (the Fed) to reach for the fire hose…until political pressure builds and the “cause celeb” gets traction.

  49. Micheal Engel says:

    1) GOOGL weekly : rising after 7/19 week #9, to a lower high.
    2) FB weekly : falling after week #9.
    3) AAPL weekly : an inside bar, so far, under the July 12 long legged doji,
    support line (1:45 PM). Go to 30 min.
    4) AMZN weekly : an inside bar, on the right of an ugly large supply bar, at It’s bottom (!!), back to earth, distributing wealth to the imitating peons.

  50. breamrod says:

    the boom bust cycles will continue with the fed’s blessing until the middle class owns nothing. Raise rates say 2%. So much leverage in the system and houses are so over priced and the economy then turns down and one spouse loses their job and opps there goes whatever equity they had in what they thought was their can’t lose investment known as their home. The banks get in bad shape with all of the foreclosed properties and in steps Blackrock and buys all of the houses sitting on the banks balance sheet for 40 cents on the dollar. You better own it 100% if you want to keep it. By 2030 ” you’ll own nothing and be happy”

  51. CtKahanamoku says:

    The only economics course I ever took was Econ 101 for dummies and I basically failed that. With that in mind, it all seems fictional to me in the same way that corporations have recently been made into people. It does seem to this economics ignorant multi-business owner, that democracy was created to benefit the general population and capitalism was created to control democracy. At least that’s the way it’s currently working. If you look at it through that prism, what you see is a system set up and managed to control well, basically everything we do particularly when it comes to spending money. Inflation, it seems to me, is something that the Fed wants in order to devalue money so the debt is easier to pay??? The more cash in the system the less the debt is worth??? Why is this important? Only because it’s been made to be important. If individuals regained their importance all these fictional entities would lose their significance and a balance could be restored between democracy and capitalism but we know that isn’t going to happen because most lobbyists are former members of congress or their staffers. It’s a sad state of affairs, one that can only end badly. More specifically, inflation controlling wage growth and wage growth being used to pay for basic living.

    • VintageVNvet says:

      Good Start with the following ctk:
      ”Only because it’s been made to be important. If individuals regained their importance all these fictional entities would lose their significance and a balance could be restored between democracy and capitalism but we know that isn’t going to happen because most lobbyists are former members of congress or their staffers. It’s a sad state of affairs, one that can only end badly…”
      Just one more example of the oligarchy, including those just joining that group by ”paying their dues” taking what actions they need to be able to continue to control the world as they have they past few thousand years..
      However, in spite of that continuing control, at least WE the PEONS do not have to put up with the ”individuals” of the oligarchy taking all advantages of the virgin brides, etc., etc., as formerly…
      Not to mention them allowing us to access the great and greater music(s) of the entire world as was clearly NOT the case even a couple centuries ago!!!

      • 91B20 1stCav (AUS) says:

        ct & VVNV-i have yet to receive a coherent answer as to why corporations and their assets (considered to have the same rights as individuals) are not required to register for, and be subject to the military draft…

        may we all find a better day.

  52. jon says:

    I know we all are getting excited by Manchin’s letter but we should realize this is all dog and pony show..
    FED won’t taper and or lower rates for two reasons:

    1. It cant as Govt needs to borrow money and hence needs the rates low.
    2. FED wants to help the asset holders hence won’t do anything.

    There has many instances in other countries where the real inflation is many time smore than the CB interest rates.
    This is the case in USA for a decade or so at least. Currently the inflation is ~14% but 10Y yield is 1.3ish…

    A home which costed 300K 1 year back is now costing 360K. Next year it may cost 390K instead of 430K and on this FED would say, see the inflation has come down which is true as inflation has come down form 20% YoY to 10% YoY.

    • jon says:

      News Flash: Student Load Payment has been postponed till Jan. Many more to come. Common public has no knowledge about the great wealth transfer happening, They are happy to receive their pittance while the asset holders are getting richer day by day.

      Most of the people have no idea what’s happening.

      • RightNYer says:

        Why not? At this point, it’s all funny money until it collapses. The sooner the better.

  53. It’s hard to have inflation when high fuel prices create a ripple effect in credit.

    It’s hard to have inflation when fuel prices today are significantly lower than they were in 2014 and even lower still than they were in 2008.

    $70/bbl WTI now vs $118/bbl WTI in 2014.

    If there was inflation, the price of 87 octane would be $5/gallon outside of California and Hawaii and the air would be rushing out of the various asset bubbles.

    An argument can be made air is rushing out of bubbles already, even as US/EU shares are at all time highs. Bitcoin. China shares. SPACs. Are there too many assets? Maybe, what is clear most assets are relatively worthless.

    This means real inflation problem isn’t consumer goods — that includes used cars which have been underpriced for years.

    If the price of a piece of plywood drops from $80 to $25, well … $25 was the price from a year ago. The loser might be Home Depot but they can make up their retail losses with volume.

    When price of shares drop 50% it means there is a solvency issue and a run out of credit. Ditto if house prices drop even 30% or the dollar strengthens by 10%.

    Inflation is a ‘run out of the labor factor’. Our labor factor was long ago shifted overseas or replaced with robots. It’s also a convenient distraction away from the ongoing insolvency of an industrial regime that burns up its capital (non-renewable resources) as fast as possible for negative returns.

    Burned up capital: inflation here and there would be useful. If a gallon of gas cost $1,000 nobody would waste it. That gallon of gas would represent an investment in the future.

    • cb says:

      @ steve from virginia –

      Money expansion (inflation1) and price increases (inflation2) has been continuous for decades.

  54. LM says:

    The price of Nestle semi-sweet morsels vaulted to $3.49 here in a Jersey ShopRite, up from $2.69 two weeks ago—a 30% spike. I work from home and get through the afternoon with a cup of tea and freshly baked chocolate chip cookies. I relish my homemade cookies while I go on buyer’s strike from a move I had been trying to make to another state.

  55. Hyperinflation as an Artform says:

    “With the recession over and our strong economic recovery well underway”
    – Good one Manchin!

    Are these Dems seriously that clueless or does he just want a nice big dip to buy? Powell tapers, stocks tank and it’s all on him.

    The conspiracy voice in me suspects if calls to taper grow louder, the Fed’s gonna have to ‘invent’ something to tank markets so they can maintain cover to keep printing.

  56. Max says:

    What a educational and interesting publication this is along with the well informed and illuminating commentary.
    Thanks Wolf and commentators.

  57. billytrip says:

    There are a couple of high-level predictions of what is going to happen.

    1) there are those who say the Fed “can’t” raise rates and proffer many reasons largely relating to the market reaction and the effects on debt repayment

    2) there are those who think the Fed will eventually HAVE to raise rates for a host of reasons and that the resulting pain will be borne by all

    I believe in 3). The Fed will raise rates as soon as they believe that every possible “retail investor” is all in. (It’s taking longer than the usual 7 years this time). When they decide it is time, the appropriate justifications and prognostications will be telegraphed in the media. When the real time is nigh, markets will start to weaken and put options will soar because the real owners of the country will know well in advance when the changes are coming and to the basis point how much. Market reaction is a blessing if you are one of the few on the right side of a trade.

    “If the American people ever allow private banks to control the issue of their currency first by inflation then by deflation the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered”

    • RightNYer says:

      I think 2 or 3 are equally likely. The fact is, while people have said that the Fed will sacrifice the dollar to save markets, that is only true to a point. If we lose our status as reserve currency (even if it is the cleanest dirty shirt, that doesn’t mean that people can’t use a mix of currencies), then the Fed loses all of its power.

      They’re willing to sacrifice the dollar, but not too much.

  58. Spencer Bradley Hall says:

    Money products now have a negative economic multiplier. Whereas savings products have a positive economic multiplier. The economy is being run in reverse.

  59. Nacho Censored Libre says:

    I hope your prediction of Joe begging the Fed fares better than your predictions of great stock market crash of 2020 and great housing crash of 2021.

  60. Swamp Creature says:

    Noticed a lot of signs “PRICE REDUCED” on properties in the heart of the DC SWAMP. No more bidding wars. If this is happening with interest rates this low, I hate to think what the price action would be if the interest rates normalized. Also, the ratio of the listings to sales has started to blow off. I think the Case Shilling data is outdated. What is happening now has not been picked up in that data. The local MLS data shows otherwise. This is sort of like what happened in the summer of 1990. The real estate market died without any major event or warning.

  61. SpencerG says:

    I am not sure that I agree with Wolf on this. It seems to me that both the Fed and the Democrats want to keep on with their program (QE and Fiscal Stimulus) but now that inflation is rearing its ugly head they want the other side to take the blame.

    I will believe that Manchin is serious about inflation when I see him voting to restrict the size of the Reconciliation bill. I will believe that Powell is serious about inflation when I see him jack up interest rates.

    Until then this is all Washington gibberish.

  62. Lynn says:

    I hope you’re right Wolf, but I don’t see Manchin as someone who follows the Dem line or as someone in the “in crowd” politically. He’s basically a polite but obstinate left leaning Independent IMO. Albeit with some common sense and some bi-partison pull.

    Either way I hope he inspires or scares others on both sides into writing the FED and dampening inflation.

    At least finally someone is bringing the subject up for public discussion. I’m not up on politics so much but maybe he is the adult in the room on some issues. He has an interesting and probably very demanding constituency.

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