What Needs to Happen to Get this Inflation under Control? And How Would Markets React?

Wolf Richter with Adam Taggart at Wealthion.

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  168 comments for “What Needs to Happen to Get this Inflation under Control? And How Would Markets React?

  1. Gooberville Smack says:

    It was a pleasant surprise tuning into Wealthion yesterday evening and finding none other than the ‘Wolf’ Richter being interviewed. At the end it sounded like you were capitulating into a gold bug Wolf, admit it..

    • Wolf Richter says:

      I don’t admit anything.

      • DawnsEarlyLight says:

        LOL!

      • BuySome says:

        IIRC, “I don’t like gold AT THESE PRICES”. And thus, the over-riding psychological impediment to buying one ounce of nearly anything compared to the price of a 24 ounce loaf of bread. Miners were targeting about $1200 per as their base in 2020. Anything above that is laughing gas. The ambient air may be filled with hyper fart gas, but can you live on nitrous oxide?

        • NBay says:

          No, but it was cheap fun to go to the back of the Safeway and inhale whipped cream spray cans upside down. And if you farted it you’d be one hell of a comedian….in small venues.

          I like gold plated connectors, otherwise, meh……

    • Steve says:

      Great interview! Wolf clearly says, at the end, that he is NOT a fan of gold “at the current prices”. It is also quite clear from his statements that in his opinion, if one believes the Fed will crack down on inflation, cash is the better (best?!) place to be in. Last but not least, great to hear Wolf is not a fan of crypto. I am looking forward myself to that entire scam coming down hard, which should happen when the “whales” who have been manipulating the crypto markets all the way up by engaging in fake transactions with themselves can no longer beat the naive greedy “little” speculators who will all be rushing to the exits.

      • Michael Stevens says:

        Crypto is the single best thing to own along with Gold and Silver. If that is not clear to everyone by now, I feel sorry for you .

      • Castor Troy says:

        You understand an entire country has made bitcoin legal currency, right?

      • Finster says:

        Yeah crypto a risky gamble. Infotech is infamous for obsolescence. I’m old enough to remember when Windows 95 was the wave of the future. How useful is it now?

      • Jeff Kassel says:

        The FED loves inflation…especially inflation in stocks and bonds. They’re a wholly-owned subsidiary of Wall Street. They talk a lot of about solving the inflation problem but they’re still shoveling hundreds of billions of newly printed money into Wall Street.

    • Depth Charge says:

      I just listened to it and heard him say he doesn’t like gold at these prices, and I agree. In fact, I now have less than 2% of my net worth in precious metals and don’t want any more. They’re essentially part of my shtf plan – not something I ever intend upon having to use. Speculating in precious metals, which is what most of these johnny-come-latelys are doing, is kind of silly.

      • 91B20 1stCav (AUS) says:

        DC-evidence of jit (and all of the longterm vulnerabilities it incurs) thinking being absorbed into the general thought process…

        may we all find a better day.

      • NBay says:

        DC- Take a lesson from the real shtf types and swap it for .22 bricks.

  2. fred flintstone says:

    Why just the other day J Powell paid $500.00 to get his Big Mac and fries………
    Total panic at the FOMC…….maybe we should think about raising rates a quarter point………sometime in 2023.
    Today……first proof……consumers that have inflated dollars cannot buy what they used to buy. Retail sales up .3 in face of .7 percent inflation. Actually down .4.
    Fed stimulating us into poverty. Congress wants to pass another fiscal stimulus.
    How many times can you call someone stupid…….but its not……its crooked.
    Worse than anything the mob ever did…….and they all attend church.

    • crazytown says:

      If you asked J-POW how much a dozen eggs cost, he wouldn’t be able to give you an answer that was even close to reality. These guys are so out of touch it’s insane.

    • historicus says:

      Has Jay Powell ever been to a lumber yard?

      Has Jay Powell or anyone else in his family ever SAVED MONEY and not be punished by Fed Policy?

      So why has he pulled the ladder up on most of the country by denying the ability to save ones way to financial soundness?
      I wish some Congressman would ask him that……

      • Harvey Mushman says:

        Those are great questions! I’m waiting for people to start asking them in the media. Eventually it will happen.

        • dishonest says:

          How many of the pampered performers in the media know what a lumber yard is? How many pump their own gas? How many go themselves into a supermarket?

          Why would they ask questions that would imperil the good life?

        • Chris P says:

          It will never happen. they are all in it together.

        • Ron says:

          Not allowed in public forum,we are China

      • Jeff Kassel says:

        When Congress talks to these FED guys, they get down on their knees and shine their shoes. The FED is a criminal organization that’s a proxy for Wall Street.

    • Confused says:

      Powell probably would raise rates a quarter pounder.

  3. Jay says:

    We’ll see what Powell has to say today, but it certainly looks like the FED’s timeline is about to accelerate. To say the they’re behind the curve is a massive understatement. I don’t see how Powell threads the needle on this one.

    • RH says:

      He is in dire straights, since raises in US interest rates would be problematic to the US federal budget. However, I suspect that what is going on in China will also create substantial inflation, because there will be fewer subsidies/benefits possible to CCP supporters as that government has fewer and fewer funds, like US companies who have been getting direct or indirect subsidies.

      For example, the continuing collapse of real estate developers, e.g., read about the reports as to Shimao, means that the CCP will need to bail out its local governments soon, as well as not a few real estate developers. Otherwise, many, many projects in China will not be completed. Their shortage of funds is obvious from many indicators: e.g., they pulled out of a project to build railways in Bangladesh, reportedly, due to shortage of funds.

      They will not be able to subsidize low prices for all their products in the USA for much longer, and Americans have grown used to subsidized, Chinese goods. I agree with a reported prediction from Ms. Wood that they face a lost decade, like Japan had.

      • RH says:

        I worry that the CCP’s financial dire straights might prompt it to invade a certain independent nation off their coast or two. “Wag the dog.”

        • Auld Kodjer says:

          Indeed. Straight from the Dictator’s Rulebook:
          When there’s trouble domestically, create some internationally.

      • Franz Beckenbauer says:

        If you think the collapse of the chinese economy is inflationary, you’re welcome.

      • K says:

        Inflation is likely from China’s economic collapse because their PPI is zooming up and sooner for later those costs will be passed on; fewer goods are produced due to power outages, pandemic shutdowns, internicine CCP warfare that destroys companies, other, less rational regulations, etc. Fewer goods mean higher prices, all other things being equal.

      • Castor Troy says:

        Bangladesh railway projects cancelled because of allegations of fraud/embezzlement, price gouging, etc. Bengalis felt they were being ripped off. When chinese noticed Bengalis were not going to let the Chinese rip them off, they backed out of the project as punishment. That’s how the Chinese do business. “most benefit is for us, a little benefit for you… Or nothing at all”, meaning they won’t finance the project because the Bengalis called the Chinese out on the unfair terms of the deals. Has nothing to do with lack of funds. And if you think the Chinese are low on funds, wait until the announcement that the Chinese will be building a canal through Nicaragua. Guarantee announcement is coming in the next 12-18 months

    • Depth Charge says:

      Powell announced they are going to back up some more tankers of fuel to the forest fire, it’s just that instead of 12, it’s only going to be 9 tankers.

  4. Glenn Hautly says:

    Keep up the good work.

    Have a Joyful Christmas.

    Glenn Hautly

  5. Peanut Gallery says:

    Markets this morning seem to be telegraphing negative news coming out of the FOMC earlier this week…

  6. Old school says:

    Running negative real rates is paying for financial mistakes of the past. When you have too much debt, you have to determine who is going to take the losses. Powell is socializing them and gamblers get to keep their gains for now.

  7. Masked Ghost says:

    How to get inflation under control ?

    They could raise the interest back up to 20%.

    Or break up some of the bigger monopolies in agri-business, health care, software (that is you, Microsucks).

  8. silverdog says:

    I feel a bad moon rising……

    The options are becoming smaller and smaller for the FED.
    They need a black swan event pretty bad to pin the blame on what comes next.

    Expect a big haircut to any financial product you have(401K, Stocks, Bonds), don’t say you weren’t warned.

    • Harvey Mushman says:

      “They need a black swan event pretty bad to pin the blame on what comes next.”

      Yikes! as if Covid wasn’t bad enough?

    • dishonest says:

      Cash has already been haircut down to the bald pate.

    • georgist says:

      Alternate option: big inflation, everyone still working gets a raise after 1-2 years and carries on, boomers under the bus.

      • cb says:

        @ georgist –

        most boomers under the bus. Rentier boomers just raise your rent.

        • georgist says:

          Not how this works. Higher rates increase repayments above rents and selling will be at a loss due to falling prices.

          Rents are not set by cost to landlord + x%.

      • Ron says:

        This country has thrown old people under the bus for a long time

    • Anon1970 says:

      If you did a decent job saving for retirement expect to be hit hard by Medicare premium surcharges once you have to make Required Minimum Distributions from your tax deferred retirement account. You will also be required to pay income tax on the withdrawals and on most of your Social Security.

  9. Winston says:

    I assume that the skyrocketing new vehicle costs are also at least partly behind the increase in my comprehensive auto insurance policy cost?

    • El Katz says:

      Not entirely. The aluminum and specialty steel panels are more difficult to repair, requiring special tools and training in order to be certified to work on them – which takes out the small mom ‘n’ pops. Many cars now have aluminum sub-frames as well. Parts are more complex and not “user serviceable”. Take, for example, an LED headlight. Price one of those puppies (about $1,000 each). Federally mandate gizmos also add to the cost of repair (deployed or stolen airbags, crushed backup cameras, stolen catalytic converters, etc.) Add more exotic materials (carbon fiber for example) and the cost of automotive paint (price a gallon of color recently?) Lots of panel bond (cars glued together, not bolted). Complexity of wiring (CANBUS).

      Just to name a few.

      • Auldyin says:

        @EK
        I get why manufacturers and retailers love all that stuff but I’ve never got what was ever in it for customers and users other than cost and hassle.

        • Harvey Mushman says:

          What’s in it for the customers is convenience and comfort. Heated seats, automatic windows, automatic door locks, backup cameras, yada yada yada. It’s great when it’s working but when the car gets to around 100K+ miles things start breaking and then it gets expensive! I got my wife a new car a few years back. We have always held on to our cars for a long time, but now I’m not sure that is such a good idea.

        • El Katz says:

          Some of that “stuff” is government mandate. Others (aluminum) is in pursuit of fuel economy per government mandate. Backup cameras are government mandate. Airbags. Crush zones. You’d be amazed at the legislation that impacts auto manufacturers in pursuit of “safety”.

          As I have said before, I never bought an extended warranty (factory backed) in my life. However, with the current steed in the garage it is an absolute necessity. One failed digital gizmo and the cost of the warranty pales in comparison to the cost to just diagnose the problem (@ $170 per hour at the local stealership). Had the injectors fail (common issue on direct injection engines along with carbon buildup). The cost of the repair we avoided paid for the warranty – which is still good for a few more years.

        • COWG says:

          El Katz,

          Shell premium nitro 3…

          Your engine, valves, fuel system, etc, will thank you…

        • NBay says:

          NTSB is as bought off as the FDA. Those Toyotas DID kill people, but everyone wanted to use TBWire, so NTSB quietly fined them $500M or so and babbled a bit about floor mats and such.

          CANBUS wasn’t forced on them, but the wiring harness cost and assembly time savings were HUGE!!!!!

          Just wait till you get a real nasty intermittent on it….very comical symptoms…..if still under warranty maybe it goes back to the dealer and you get another car, if not……TS….know what a “hand job” in mechanic slang is?

  10. robert says:

    Have the stooges (i.e. ‘leaders’) blame the greedy speculators, hoarders, wreckers, retailers, and manufacturers, capitalists in general, and people who buy too much with free money.
    Implement wage and price controls to protect everyone.
    Redesign the CPI to include things that people don’t want and wouldn’t eat or use.
    Implement draconian penalties for black market activities when the shelves are bare.
    Impose limitations on withdrawals of cash or the use of debit or credit cards.
    If that’s not working, implement rationing so everyone gets their fair share. All they have to do is stand in a long line for hours.
    Leaders and bureaucrats will be able to shop at special stores with subsidized reasonable prices and selection of fine foods and goods.

    All these measures have worked well in places like Zimbabwe and Venezuela and countless other nations in history.

    • robert says:

      Oh, and Turkey, yesterday, new legislation. From ZH reporting:
      As Lira Implodes, Turkey Proposes Huge Fines For “Hoarding”
      Erdoğan has openly targeted stockpilers, blaming them for the surge in prices and threatening to impose more severe punishments. (…)
      “Greedy” businesses that stockpile more goods than needed, are in part to blame for some sharp price spikes …
      etc etc, the playlist, but it could be anywhere, anytime.
      Remember Nixon’s price controls? And Ford’s ‘WIN’ – Whip inflation now? Maybe not …

    • Auldyin says:

      @r
      “price controls to protect everyone.”
      Congrats! I said here to start looking for that phrase last week.
      You’re the first I’ve seen here.
      Don’t worry there will be thousands behind you over the coming months.

      • robert says:

        I should have put an irony and sarcasm alert on the comment, which was in response to ‘what would need to happen’ in the headline of the article.
        But you’re right: the calls will come, from congress critters and Others Who Never Learn.

    • The Real Tony says:

      Pierre Trudeau implemented wage and price controls in Canada in the 1970’s. It didn’t work.

      • Roger says:

        Mr. Real – be more specific; What did it hurt, whom did it hurt, how did it get implemented and how did it get unwound?

        Or – got a source you’re familiar with that answers those questions?

  11. Winston says:

    Considering the MASSIVE coiled spring of “our” long-term artificial manipulation and money creation compared to the 1970s, I don’t EVEN see the success of Volker’s method being achieved without VASTLY worse economic consequences this time. Throw in COVID’s endless economic effects and China no longer being the “savior” as it was after GFC 1.0.

  12. Seneca’s Cliff says:

    We built the lifestyle Americans have come to expect when we were the greatest industrial and imperial power on earths. Now that is all fading away. Resources are more scarce and other countries are losing the ability to send us cheap stuff. We have run out of tricks, so now it is just a long slow slide until we are like Greece or Argentina. Nothing Powell can do will change this.

    • Harvey Mushman says:

      “Now that is all fading away.”

      I don’t think so. Yes, we need to get our finances straightened out, but the USA has a LOT going for it still.

      • Jake W says:

        what does it have going for it? a cohesive, homogenous culture? nope. a great manufacturing ability? nope. low crime? nope. a strong military? somewhat, but becoming less so and more woke every day.

        • Harvey Mushman says:

          “what does it have going for it?”

          1) The best farmland in the world
          2) Lots of natural resources (Natural Gas, Oil, Timber)
          3) We control all of the worlds oceans
          4) We are friends with our northern neighbor (Canada)
          5) We are friends with our southern neighbor (Mexico)
          6) We have the Pacific ocean as a buffer in the west
          7) We have the Atlantic ocean as a buffer in the east
          8) Six of the ten biggest companies in the world are American
          9) We have been offshoring manufacturing because it has been cheaper to do so, but we do have the technical know how to bring it back in a heartbeat.
          10) We have the world’s reserve currency
          11) People want to come to the USA more than any other country.

          So now look at Europe, Central Asia, East Asia, the middle east, Africa. Who has it better?

        • Augustus Frost says:

          The US is in clear decline. It’s not fully evident yet to most people because of artificially inflated living standards due to unprecedented borrowing and the loosest aggregate credit standards ever. When borrowing is no longer cheap, the USD takes a major dive in the FX markets, or both happen, it’s over. Living standards will decline noticeably.

        • Augustus Frost says:

          “We have been offshoring manufacturing because it has been cheaper to do so, but we do have the technical know how to bring it back in a heartbeat.”

          So do other countries but not where Americans can maintain current living standards.

          “People want to come to the USA more than any other country.”

          Yes they do, for now. It’s still one of the best options or the best for most who want to come here, because they are disproportionately poor.

          For those who have economic mobility now with some level of affluence, there are plenty of places which are “good enough” to live and work, depending upon language. Personal criteria will vary.

          For the very wealthy, they are better off not seeking residency or citizenship due to the tax system. The US wealthy would be economically better off abandoning their US citizenship and getting one elsewhere but the US government makes it pointless due to this country’s predatory tax system.

        • Ron says:

          Why do all illegal immigrants,flock to USA you people can move to beige or Nicaraguagood luck

        • 91B20 1stCav (AUS) says:

          Ron-because, for many decades now, someone keeps hiring ’em-and it ain’t the gubmint…

          may we all find a better day.

        • cb says:

          @ 91B20 1stCav (AUS)-

          because the Govt not only looks the other way, but actually foments the hiring …………..

          may we all have at least a decent day …………

        • Janna says:

          Harvey Mushman,

          I’m not disputing what you say. I do want to point out what I see. I live in a city with approx. 200k. There is a man living in a tent next to McDonald’s. There is a shuttered restaurant that has been turned into a small unofficial camp for the homeless. We have people every day at almost every major intersection asking for handouts. In the downtown, we have several homeless people who wander, many with major mental health issues. Despite this, our city is displacing the Salvation Army for a water park. Priorities, I guess. The point is, things are unbalanced. I imagine my city is not the only one like this.

        • Harvey Mushman says:

          Janna,

          I also see what you are pointing out. Almost exactly the same. This country certainly does have it’s share of problems.

        • 91B20 1stCav (AUS) says:

          cb-can’t have business burdened with anything resembling clear and enforceable card-check regulation, can we? Lobbyists have always insisted that business will step up and provide sufficient “voluntary” enforcement, no?

          may we all find a better day.

    • Auldyin says:

      @SC
      “we were the greatest industrial and imperial power”
      I get what you mean, but I would argue that Victorian UK was actually a superior empire.
      I’ve said here once or twice that USA could see their future by studying our journey in UK.
      I admire Italy in how they handled their transition from empire. They kept all the buildings, art and culture. They also kept pride in their heritage. In UK many denigrate and apologise for our heritage and hundreds of magnificent old buildings, etc were destroyed from the 70’s onwards. Survival is the name of the game for all these old empires and you can always go on holiday to the latest whizz-bang nation of the minute if you want to.

      • Nick Kelly says:

        ‘I admire Italy in how they handled their transition from empire’

        I thought huh? They lost their empire in WWII.
        Then I got it. You are talking about the ancient ROMAN Empire.
        It’s hard to think of two civilizations more different than those Romans and today’s Italy.

  13. Minutes says:

    Each day when Powell says he walks by the new tent village near the Fed building, I stick my head out and give him the one finger salute. I know he cares. He said so in one of his pressers.

    • Swamp Creature says:

      Minutes

      He cares so much he brought it up in his latest Oval Office meeting. Look for them to move the homeless camps away from his route to the Fed Reserve Building at 14th and Constitution. Problem solved. I noticed the camps keep moving from one place to another. There’s a big camp at Union Station and another one one block from the Supreme Court. The one near the Supreme Court is surrounded by Congressional members residences and staffers. I see that camp the next to be moved, as the citizen’s groups launch a major protest. The members of Congress don’t want this in their neighborhood.

    • historicus says:

      He slaughters the WORKING people of this country with promoted inflation and lets it run hot….the earners/savers/workers of this country that turn the lights on and fill the shelves each day….
      BUT, he keeps rates 9% below PPI inflation and 7% below CPI inflation to help the mentally ill who live in tents and walk past the WE ARE HIRING signs?
      Some personal guilt trip by Powell …. which is why a Taylor Rule is needed or something more concrete than how the Fed Chairman feels about the world at any particular point in time.

      • historicus says:

        The Fed should rewrite their mission statement and stop pretending..

        New Federal Reserve Mission Statement to be released soon…..

        “It is the Federal Reserve’s actions, as a central bank, to achieve these goals specified by Congress: promote unemployment by providing cheap money to the federal government to dole out and encourage idleness, promote inflation, punish savers and holders of dollars, and promote record low long term interest rates so as to facilitate the pulling of wealth forward from the future generations of the United States””

      • Ron says:

        Pulls back stimulus and markets go higher WOW

  14. CreditGB says:

    Increase products and services and reduce “free money” now awash in the economy.

    In politics, money and spending gets more and more power and control, so the likelihood of anything real happening is getting more and more remote. The needed rate hikes won’t be much if anything. Especially with the potential for crushing Federal debt service if rates are increased to curb inflation.

    They’ve painted themselves, and us, into a real tough corner this time.

    • Michael Gorback says:

      Totally agree. With all due respect to Wolf and Adam it’s been obvious for years that there is no painless exit and the main dilemma is political.

      • Augustus Frost says:

        That’s because there is never something for nothing.

        Whenever anyone asks what the solution is, it’s generally obvious. Stop doing what’s being done now to dig a deeper hole. But this isn’t the question they are actually asking. Their actual question is “how can we not only eat our cake but have more cake now that we have eaten it”.

        Actually “fixing” the problem equals a massive economic depression with big declines in living standards for most of the population. Most everyone will also attempt to use the political system to shift the losses onto someone else, meaning of course that those with the most influence win this unequal horse race, again.

  15. sam says:

    Correctamondo. What ‘was’ a minor (collision) repair cost now totals a late model vehicle when all airbags are triggered.
    Unless one has “gap/replacement” insurance coverage, the owner will face a net negative on their auto loan (given 84 months is “common”) balance.
    Happy Trails.

  16. DawnsEarlyLight says:

    10 yr. (1.44%) is down -0.144% from a month ago (1.584%). Tiny steps, in the WRONG direction.

    • Jay says:

      Which is crazy. Why would any investor buy treasuries today? We have to be within 3 months of treasury yields starting their slow climb up? Why not wait a little longer, let the bond market weaken which will cause the yield to rise and price fall sooner. Unless, of course, the FED somehow plans to continue its market manipulation beyond what’s being laid out as I type.

      • georgist says:

        Every time the yield goes down the price goes up.

        They don’t buy to hold.

  17. SocalJim says:

    FED can raise all they want … that will just cause an inflationary recession because the problem is productivity.

    As I said before, people have given up and gone galt and that is driving productive down. The big drop in productivity is inflationary. The FED can not fix that.

    This country is sliding hard.

  18. David Hall says:

    Need to increase worker productivity. Automate when feasible.

    Tax house flipping as there are empty houses held for speculative purposes, while others can not afford the rent increases.

    Reduce the Federal budget deficit.

  19. Michael Engel says:

    1) The worse inflation since the 70’s.
    2) IWM one year Backbone : Jan 25 2021 high @217.91/ Jan 29 low @204.84.
    3) IWM dropped to it’s middle.
    4) A dovish JP will start a Xmas rally.
    5) A bearish JP will send IWM to Dec 28 high/ Jan 4 2021 low trading range,
    or to the open space between them.

  20. Mendocino Coast says:

    kudos on the wealthion interview :
    I enjoyed the way you stuck to your guns really with very few ways out of the current situation . Inferring to stop Buying Goods and Services at inflated levels , the complete ruse about Gas Prices with Oil about $70 per barrel all about huge Profits being made from Gas sales, not any shortage or the like ,
    Bottom Line No way out except to stop the Inflation , Stop flooding a stimulus induced fire burning the economy into a deeper and deeper hole .
    However Nothing has happened yet it just keeps going and going .
    Do you really think the responsible Party’s cares ?
    Perhaps to lose their Job with the Fed and have to Leave with all the Millions $
    nothing left but enjoy all those Millions what a terrible fate how sad .
    Of course it’s obvious what to do to stop the Inflation but how do you undo all the damage ? Pay out all the losses to each individual rather than a tiny amount paid via stimulus.
    out. Most people with savings have lost income amounting to about 25% of their savings Total with inflation now gone. What do you tell all these people who Bought homes at High Prices if they just drop back to pre stimulus levels .
    Who’s Left Holding the Bag Now ? Humm I sure would not be wanting to be holding those loans

  21. Seen it all before, Bob says:

    Wolf, thank you for this excellent interview! You covered so many of my concerns.

    What does everyone think of short term or ultra short term bond funds? 3 months to 3 year duration? Grade A or better.
    I agree with Wolf that long term bonds will likely be massacred.

    Are short term bonds a good compromise? They shouldn’t get hit as hard and will recover quicker with an increasing interest payment. They took a hit in Sept 2008 (down 6%) but recovered by Dec 2008 (Fund:BSV).

    I’m already maxing out on I Bonds. 10K per calendar year at 7.1%. These are safe short term bonds (6 months).

    Gold doubled from 2008 to 2012. Gold would have been a wise choice back then. Why is it different now?

    Just looking for a relatively safe place to put cash (while keeping enough cash to cover my mortgage and bills for 1-2 years. I don’t want to lose the house).

  22. DR DOOM says:

    Powell wants a legacy. Face the Nation (CBS) interview with Mohamed El-Erian in which the ex-Pimco bond king trashed Powell for being negligent for behind inflation with his transitory nonsense should be a warning to Powell. Powell watched that interview. The Administration is politically wounded,weak and this is a liability for Powell. Congress ain’t gonna take the blame for inflation. Both Congress and the Administration have been trying to blame the people for inflation.The CBS interview showed Powell that dog won’t hunt. Mrs Magoo of Treasury said that massive printing adds only “dab” of inflation. She’s set it up to also cut and run. The comfort of a soft landing is fading by the minute. Powell is getting in the cross-hairs of the Swamp. He is getting lined up to be thrown under the bus by them all with the MSM leading the charge. If Powell wants to have a legacy his only way out is a Paul Volker Massacre and then place the blame of the carnage where it belongs,Congress and the Administration. Decades of spending without money either stealthily stolen by de-basement or the massacre of savers and handed to Wall Street may be facing a reckoning. The Chairman of the Federal Reserve has the power to do this. It is a fact not an opinion. It was given to him by Congress in 1913 for this very purpose. Does he have the Kahunas to be a Paul Volker or will he be pitiful Shakesperian Fodder in the form of the Scottish King Macbeth ? Vanity,arrogance and power, It is always and everywhere an old true story.

    • Pea Sea says:

      “If Powell wants to have a legacy his only way out is a Paul Volker Massacre and then place the blame of the carnage where it belongs,Congress and the Administration”

      Which administration? The one that threatened to take his lunch money and give him a swirly in 2018, “forcing” him to cut rates? Or the one that is pushing him, albeit way too late, to raise them now?

    • Depth Charge says:

      El-Erian has as much credibility as Jerome Powell – ZERO. This guy was rating junk securities AAA and offloading them onto unsuspecting pension funds and countries in one of the greatest frauds in history. He should be spending the rest of his days in a cold, damp concrete prison cell. If you’re reading around here, El-Erian, SUCK IT!

  23. AdamSmith says:

    This is the best overall explanation of the jist of what is happening to evaluate the meaning of the current state of affairs.

    Wolf shines here and should consider going national but that means you are going to have to hire a make up artist and get fake tans like Trump to project the “Cool California Dude” personna.

    Go Man Go Macro Analyst….
    Do you remember Wolfman Jack? WOLF is GOING BIG TIME!!!!
    Go for it Wolf….You deserve the success coming….
    On youtube.com “4 hours of wolfman jack, Baby! R&B, Soul, Doo-Wop

  24. AdamSmith says:

    owwwwwwwwwwwwwwwoooooooooooooooooo!

  25. AdamSmith says:

    Definition of the word “wolf”

    noun
    1. a wild carnivorous mammal of the dog family, living, living and hunting in packs.
    2. usef feguratively to refer to rapacious, ferocious, or voracious person or thing.
    verb
    devour (food) greedily

    My definition of “wolf richer”
    “Devour charts/info rapaciously, ferociously, or voraciously and translate for all to SEE with the mind’s eye.

  26. raxadian says:

    Wolf, are you gonna tall about Miami apartments and condos sales bubble? Or it gad already exploded?

  27. georgist says:

    I hadn’t seen Wolf before and it’s always funny when you have a picture of someone in your head from audio/written work, then you see them in the flesh and it doesn’t match.

    The Welthion guy is a good interviewer because he remains measured. I think he’s a little on the alarmist side, however Richter did provide balance.

    Interesting to see Wolf basically stating that BTC investors need to do some real work. Wolf: the economic term is rentier. It’s used to differentiate unearned wealth versus earned wealth through value creation. It’s integral to the inflation side of the story. If you create credit and no worthwhile economic activity occurs you get inflation. If you get value created it’s not inflationary.

    Why are you not using these common economic categories to shape your argument? It would really add clarity as I can see from your comments page that your users really lack articulation in this area. They imagine that rates going up is going to magically fix problems, when in reality if the rentier activity persists it won’t fix anything. And rentier activity can persist at higher rates.

  28. fred flintstone says:

    Jay, the Japanese have bombed Pearl Harbor…….
    OK………they probably just made a mistake…….lets see how it plays out. If necessary…….two years from now……we might decide to build a few more ships and only if indicated by the conditions at that time, raise an army…….but only by one division every six months.
    Some folks always panic at the first stage of a few clouds….its us mature types that understand its no time to panic until Denver is conquered. When Chicago goes we will begin the long process to start construction of our navy……but only destroyers……if NY goes we might think about an aircraft carrier…..but only one.

    • BuySome says:

      Get real! Boeing just sent some beautiful new bombers to the islands care of Uncle Sam’s dimes. That’s sure to boost the economy. And with all that luxury cargo space available you can order dog sweaters via Ma Bell and have them sent out everywhere. Tojo’s bound to see the light, and start switching factories over to producing those new technologies called television, radar, and jet propulsion. He’ll stop being an evil guy and make everybody happy with luxury goods at low, low prices! Might even be willing to let you in on the ground floor of a great investment in a jungle railroad that only needs to have one bridge repaired. It will be lined with Burma Shave signs which will be another win-win for all one he takes over production of soap, brushes, and razors. Forget all that talk of Imperialist intents…he’s your daddy now! Get cozy!!

  29. Depth Charge says:

    Now we’ve got another billionaire – Ray Dalio – telling us why the FED can’t do anything about inflation, and to get used to it (inflation). Sounds like this narcissist is trying to telegraph what he wants the FED to do, which is nothing. These pigs can never have enough. Ray doesn’t want to watch his portfolio vaporize.

    • fred flintstone says:

      Amen!

    • Wolf Richter says:

      You nailed it, concerning Dalio.

    • AdamSmith says:

      Read the Amazon review on Ray’s book on the one star rating reviews.
      This guy pulled his pants down and I stopped reading the free audible book version once I saw what Ray is about in relation to his China Investment portfolio. No credibility whatsoever just bagging on USA….

    • Swamp Creature says:

      Dalio is telling all his investors to double up on Chinese stocks. After they take over Tiawan, they will own the whole world semiconductor industry. Since these are all necessary for all the new cars being built they will own the whole world’s car industry as well. It’s a Win, Win investment. Go for it!

      • Wolf Richter says:

        Dalio wants his Chinese (and other) stocks to go up and so he’s hyping them. They’re all doing this. They don’t care about anything except talking their book.

  30. Depth Charge says:

    The FED is 100% beholden to the stock market and all of the asset price bubbles they have created. They are not going to do anything about inflation in the short term. I expect them to come out and, instead of the “transitory” nonsense, float their next great lie, which is “this is a one-time sharp increase in prices which will level off next year.” And then they’ll continue to QE for 3 more months, then they will float a chintzy, embarrassing 25 basis point rate hike as inflation rages near 20%. FIRE THESE CLOWNS – ALL OF THEM.

    • Swamp Creature says:

      DC

      Do more than fire them. Send them all to Gitmo. They are terrorists and should be treated as such

  31. Depth Charge says:

    Yep, just as I suspected:

    “The Federal Reserve on Wednesday voted to speed up a reduction in bond purchases to $30 billion a month so that the program could end in March instead of the original plan of June. The Fed also penciled in three increases in short-term interest rates in 2022, up from the one move projected in September. In new forecasts, the central bank raised its estimate for inflation next year to 2.6% from 2.2%, using its preferred PCE price gauge. U.S. economic growth was also projected to slow to 4% in 2022 from an estimated 5.5% this year. In its policy statement, the Fed dropped the word “transitory” to describe inflation and it left a key short-term interest rate unchanged near zero. The fed funds rate is expected to end around 0.9% in 2022.”

    They are going to continue to stoke inflation for 3 months. And a fed funds rate of .9% to end 2022. This folks, is a FED who has just told the people to f**k off and die.

  32. Depth Charge says:

    And here comes the stock market tear, folks! Going parabolic. Weimar Boy gave them more crack. He’ll never stop.

    • Jake W says:

      doesn’t make sense though. he’s doing exactly what he said he would last month. who is surprised?

  33. Depth Charge says:

    Powell had a chance to do something and he shit the bed – diarrhea everywhere. The markets were prepared for something bold, everybody knew it needed to happen, and this guy came out with a total dud. What a LOSER! And then everybody looked around, gave a bit of a nervous laugh, then hit ***BUY*** on all assets. Weimar Boy Powell needs to go. FIRE JAY POWELL!

    • jon says:

      Powell is doing what he is supposed to do. Make sure his rich friends are getting richer.

      I didn’t expect anything other than this from Powell.
      People who think that FED is going to do something drastic to tame inflation are sorely mistaken.

      • Depth Charge says:

        Sure, but I’m going to continue to expose him as the LIAR AND FRAUD he is.

  34. Depth Charge says:

    If anyone hears friends or family members complaining about inflation, kindly remind them it is 100% intentional. This is an intentional act by politicians and the FED to enrich all of their buddies. Be very clear to them. Tell everybody you can. They are destroying your life so their buddies can amass fantastic wealth.

    • Swamp Creature says:

      Most of my family members and people I know around here are complaining about inflation. But they all voted for these clowns that are now in office. Our Congressional representative is a communist. Need I say more.

  35. economicminor says:

    Thanks Wolf, That was a very clear concise analysis of where I also think we are. The FED has no options. None that are good anyway.

    Most likely, they will slow taper until the market breaks. Slow taper isn’t QT. The FED not actually tapering continues to feed the beast. Then the beast runs out of food and starves.

    It appears to me that with the amount of debt being carried by so much of society, doesn’t matter that the wealthy have huge savings, what matters is that at least 80% don’t. Wages never go up as quickly as prices. So these price hikes are depleting what little reserve 80% of the people have/had. The extra children stimmy and SNAP increases only affect a smaller percentage of that 80%.

    So I’m thinking that the ability to fund this inflation will be transitory. It will sort of run out of steam over a quarter or two, leaving all of what was the working poor and middle class with no reserves. This will peasantize much of society. Peasants aren’t great consumers. Food, Shelter, clothes..

    You are thinking that most companies have refied and are not in bad financial shape but when sales slow way down, they still have to make the payments and pay their exorbitantly expensive upper management. By then their stock prices will be in the tank and many will be having loans called.

    Depression looming is what I see. Add in some political incoherence and cultism.. Doesn’t look real great to me.

    • Depth Charge says:

      “The FED has no options.”

      Of course they do. Making excuses for the FED and providing them cover is gross. What they need to do – everybody knows it – is to crush inflation and asset prices just like Volker did in the 1970s. A massive deflation in house prices is the best thing that could happen for Americans. Have you not seen the tent cities everywhere? WAKE UP. Bringing affordability back insofar as mortgages and rents are concerned – the biggest item in every household budget – stimulates the economy because people have more discretionary income. I’m tired of the BS.

      • cb says:

        Depth Charge said: “A massive deflation in house prices is the best thing that could happen for Americans.” … “Bringing affordability back insofar as mortgages and rents are concerned”
        ———————————————-
        Correct. Might be tough though. The FEDs constituency, the Rentier class, relies on rents – either for renting property or for lending money.

        • Ron says:

          Black rock will buy it all

        • cb says:

          Good point Ron. Corporations with their limited liability, perpetual lives and concentration of capital can be ruinous to individuals. Perhaps their charter should be revoked.

          Concentrated power and wealth can be ruinous to free markets, capitalism and democracy.

  36. cb says:

    Part of this is due to the effort of the bastards at the FED, through interest rate suppression, to force savers into risk assets — to support the stock market.

    A behavioral component of money creation and simultaneous interest rate suppression that explains part of the delay in CPI increases is:

    Wary savers, particularly those who have to rely on savings for retirement:

    1. become averse to richly priced assets like stocks and real estate
    2. become averse to low yielding, long duration debt instruments
    3. try to save more to offset the low risk yields they no longer receive
    4. cut back on spending to accomplish those new saving goals

    At some point some of these savers recognize their increased savings can not keep pace with the money creation and even the new CPI increases. Their principal is becoming worthless far faster than they can sacrifice and save. Why continue saving more? Why even try to preserve the principal you have as inflation eats it a faster rate? The savers capitulate. The floodgates open. It is reflected in CPI.

  37. Depth Charge says:

    “Powell expects inflation to fall by the end of next year.”

    You see, folks, this clown is STILL doing the “transitory” thing. He’s lost it. FIRE JAY POWELL!

    • jon says:

      He may be right . The home sin my neighborhood increased from 1 million to 1.2 million USD in last 12 months, so 20% increase. In next 1 year, it may go to 1.3 million, so the inflation has indeed gone down.

      But the bottom-line is: Are the prices going to go down ? For housing, un less the mortgage rates spike up, it won’t.

  38. Red says:

    Just loaded up on APPL.

  39. Red says:

    To the moon baby !

  40. cb says:

    Yes, CPI increases will be hard to contain going forward, for a while. How do you disappear all the created money in the system? It is here to stay.

    But the new money (inflation 1) was not unexpected and it is not new. It has been continuously growing for the many, many years. New money was being infused into the system. It was going into the asset markets. Stocks. Bonds. Treasuries. Real Estate. Bitcoin.???

    They flooded the system with money, making saved dollars worth less …. much less.

    Can it turn? Can prices drop? Possibly, if they stopped giving away free and cheap money.

    CPI is a horrible measurement to watch to determine debasement of money. The debasement was taking place as the money supply was continuously enlarged. CPI is just an effect, and a bastardized measurement that should be scoffed at, of new money creation.

  41. cb says:

    Next on the watch list — money velocity.

  42. Red says:

    I see you guys like Micheal Burry, correct but like 1 year or more at least in your analysis off of when the market should turn. Your smart but thats your problem. Look at bitcoin and game stop and amc and rivean or tsla valuation. Dumbshits are freakin bored stuck at home having a good time at the casino that wins. You may lose a good chunk of your cash due to inflation trying to wait these people out.

    • 91B20 1stCav (AUS) says:

      Red-revising an earlier comment of mine-

      “…the general population can stay irrational longer than an individual can remain solvent. Or sane.”

      may we all find a better day.

    • Depth Charge says:

      “your”

      *you’re

  43. Powell said ‘raising rates while tapering bond purchases didn’t make sense because one was tight(ing) monetary policy and the other was accomodative. Okay so that puts the Fed neutral on policy AND contains inflation. But lets pump the stock market instead. Then he opined they did not want to spoil the economic recovery… (and they always do the right thing) [the GDP deflator will clawback the recovery numbers, and end in recession. The man did this in 2019, and he keeps trying to misdirect us, “you are not getting your early 2020 economy back” and good thing for him. Then he blamed China or Trump. for the rate cuts. Now he only has to sit on his hands while real rates are negative 5%, less than 3% at the 5yr:). Tapering will do nothing for inflation, but then probably neither does raising rates. Erdogen keeps firing his Fed chiefs over this. He wants zero rates too. S&P gave the LIRA a B+ last Friday and then the currency fall apart over the weekend. China and US banks are probably lying about Evergrande’s missing payments, which is an issue on dollar denominated debt and who gets paid. So who is buying this market (today)? Powell told you that as well, they aren’t buying Bunds or JGBs, the dollar carry trade is hot. My gut says watch quad witching Friday to see if foreign buyers are rolling out their futures contracts at higher strikes. King dollar is the currency of a hot money banana republic. The investment won’t hurt us but the collapse in dollar denominated debt is going to bite. If they recycle enough of those purloined US dollars into US stocks, maybe it all works out. If you have an export business, I hear Del Taco is hiring.

    • cb says:

      Do scumbags have any reservations about being yellow-bellied cowards?

    • cb says:

      Ambrose Bierce said : “Powell said ‘raising rates while tapering bond purchases didn’t make sense because one was tight(ing) monetary policy and the other was accomodative.”
      —————————————-

      Both actions are better than what we have now. Rates should be free to rise and QE should end.

  44. Contrarion says:

    The number of bearish comments in this post is strangely high. How do you guys like the market’s reaction today? ;)

    • Wolf Richter says:

      How did YOU like the market’s reaction Monday and Tuesday? Why didn’t you come around yesterday? Today’s rally didn’t even quite recapture that drop.

      • There was a lot of self congratulatory opining today. I mean up one percent after they speed up taper, and announce three rate hikes. One analyst said the three hikes were probably June, Sept, and Dec. By the time rates are normalized we’ll be in a recession and they will never fill the dotplot and they are still buying bonds as long as they roll over the paper on their balance sheet.

        • Wolf Richter says:

          There is still way too much stimulus money out there for the economy to dip into a recession in 2022. A lot of this money hasn’t gotten spent yet, but will be spent. And rates even after rate hikes will still be low and negative in real terms, even for junk bonds. This whole setup is hugely stimulative and will remain so until we have positive real short-term rates.

          Also, there is almost no chance of a recession if asset prices don’t crash 50%+ because they themselves continue to provide stimulus as grotesquely inflated as they are.

        • very cogent. never say the word recession without the global prefix. there’s a short list of players, alt reason why the dollar bubble is rising even while the Fed trashes their own fiat. what if supply chain constraints aren’t transitory?

  45. Contrarian says:

    Staying in cash (not to mention shorting the market even worse) is 100% insane in this inflation environment. Good luck with your purchasing power while u keep calling for a crash folks.

    • Wolf Richter says:

      Monday and Tuesday, the market dropped more than it rallied today, and cash did great and shorts did great. Why didn’t you come around Tuesday, and post this ingenious comment?

    • Swamp Creature says:

      Buying PUTS is looking better every day. You don’t risk your entire capital on a short that goes in the wrong direction but if you get the timing right you make out big time.

  46. Auld Kodjer says:

    Wolf

    I can’t help but look at your books in the background.

    “Faith and Power” could be about the FED if the title was extended to “Blind Faith and an Abuse of Power”.

    Discretion prevents me commenting on “Crude Dreams”.

    • Wolf Richter says:

      I should choose one of the fake backgrounds. Before anyone gets any ideas, “Crude Dreams” is about the oil boom in Alaska. Just next to my brain and working on it by osmosis is “Das Kapital.”

  47. cb says:

    @ Wolf –

    There has been continuous money creation (inflation 1) and rising prices (inflation 2) since shortly after Volker.

  48. cb says:

    @ Wolf –

    I think you said “crash the markets to put people back to work”

    provocative. There should be wide disdain for our financial markets. A corrupt core corrupts it all – and corrupts the outlook of many market beneficiaries. And nothing is more corrupting than a corrupt money creation system. The FED should be ended.

    • Wolf Richter says:

      Hey, Powell paid lip service to me today in the presser when he pointed at the asset bubbles as one of the reasons people aren’t going back to work :-]

  49. Swamp Creature says:

    Message to Powell:

    Biden didn’t want you. He wanted Brainard. But he did a head count and came up short with Brainard. So he took you as sloppy seconds. Now it’s your chance to do the right thing and get even at the same time. Volcker is no longer with us but his legacy lives on. Same with Ike’s Fed chief McChesney Martin. Do the right thing and end this madness once and for all. We’re waiting.

  50. breamrod says:

    Powell doesn’t run the fed, Satan does! He does what he’s told and the Devil promised him a seat by the window in hell!

  51. Green Acres says:

    I enjoyed your interview with Adam.

    As far as the Fed goes, their announcement today makes me say ‘Meh’.

    The Fed are still buying bonds, and three rate increases could be 0.25% each, bringing us to a whopping Fed Funds Rate of 0.83% by the end of 2022.

    Meanwhile inflation gallops away…

  52. Joe Blow says:

    Wolff is correct: businesses raise prices (i.e. cause inflation). Why? Because “they can get away with it”. Now, what if we introduce wage and price control legislation? Isn’t that better than increasing interest rates to cause a recession/depression?

    • Wolf Richter says:

      Price controls have been tried before many times because they seem such a simple and logical solution, but they have never worked because an economy is not simple or logical.

      • Swamp Creature says:

        Price controls never work. I agree. That’s why they will implement them. First on Gas at the pump. That’s low hanging fruit. There is some price gauging going on. Crude went down 25% and the price here has budged one inch. They’ve had plenty of time to adjust the price. Next, after price controls. look for Manditory allocations of the gasoline distribution. Blue states will get all they need and red states will get shortchanged resulting in gas lines. Enjoy

    • cb says:

      How about we just practice money creation controls ………….. like stopping the continuous creation of funny money.

      Then prices and wages can take of themselves with some sense of stability and stable expectations.

  53. Nick Kelly says:

    JP lays down the law and there’s a relief rally. Jesus wept.

    He should have said rates up .25 Jan 1 and .25 April 1. Or .5 on Jan 1 would be ideal but we don’t live in an ideal world.

    But wouldn’t that shock the market? Yes it would, that is the point.

  54. Yort says:

    Today the Fed just changed the saying “A day late and a dollar short” to “A year late and a dollar short(er)”.

    So pedal to the metal QE at 50% rate instead of 100% over the average of the next three months…”Where’s the Taper”???

    Once the Fed gets the SP500 up another 12% to 5300 by March 2022, then he can work on “PrIcE StAbIlItY” via higher market and liquidity risks???…sigh…

  55. Sierra7 says:

    The fed will continue to support the financial markets until it can’t.

  56. Franz Beckenbauer says:

    I don’t like survival at these prices.

    Cut me a few pennies, and i’m in.

    you americans are really funny.

  57. Swamp Creature says:

    This is a little off topic, but I have to say I’m surprized that there has been a complete blackout of any new information about the spread of the virus here in the local Washington Metro Area. I used to get weekly updates, but now have got nothing since the 1st of Dec. They blamed a server that went down. I have my suspicions. Maybe they don’t want to dampen Christmas and Holiday sales and have put pressure on the local poiliticians and the media to hold off until the new year anything that would adversely affect sales. Only “GOOD NEWS” is allowed to be published. Meanwhile our Washington Football team is thinking of cancelling the important weekend game in Phillidelphia because 21 members of the team are sidelined with Covid, and are in quaranteen. Many schools aound here are going virtual once again becasue of massive Covid outbreaks. Somebody is lying and withholding information. I went out and got my 3rd Moderna shot (1/2 dose), no side effects this time around.

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