The Inflation Surge, Effects of this Sudden Divergence between the Fed and other Central Banks, the Corporate & Government Debt Bubbles, Housing, and the New & Used Car Markets Now

Wolf Richter on “This Week in Money,” at HoweStreet.com, recorded on March 27:

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  57 comments for “The Inflation Surge, Effects of this Sudden Divergence between the Fed and other Central Banks, the Corporate & Government Debt Bubbles, Housing, and the New & Used Car Markets Now

  1. Debt-Free-Bubba says:

    Howdy Lone Wolf. Love these narrated articles by you. Thanks for saying most of US here are fairly well behaved. HEE HEE

    • Wolf Richter says:

      You listened to it all the way to the bitter end ❤️

      The actual phrase is “vibrant and fairly well behaved”

      • Debt-Free-Bubba says:

        HEE HEE. Yes Teach, I listened to the whole thing.

      • Thebigcheez says:

        Wolf. How do you think the changes with realtor agent commission will effect the housing market? Is the change a good thing for consumers? I don’t know what to think about this change and would like to hear your opinion. All the realtors I know don’t like the change or uncertainty.

        • Debt-Free-Bubba says:

          Howdy Thebigcheez, I am not the lone wolf but during the inspection period of purchasing a used home is where the fireworks or $$$$$ is made or lost. Unrepresented buyers are gonna lose bigly…..

        • Jon says:

          Not WR but I can tell you in maot casea agents don’t bring in the value because of technology and open information..

          People with vested interest would tell you otherwise .

          I have bought and sold many homes with discount agents by the way .

          It’s a good step for home purchasing.

          We don’t need too much $$ for middle man.
          My neighborhood homes are in millions and a home transaction may pay 100k easily to just realtors .

          Realtors need to go away .

          I also don’t need to deal with cat sales person by the way.

        • Wolf Richter says:

          I know it’s bad for Realtors. And Realtors are saying it’s bad for homebuyers.

          The old system was just a monopolistic ripoff. So it needed to go. No way in hell should the commissions for selling a home be 6%. That’s just totally nuts.

  2. Enlightened Libertarian says:

    Sorry Wolf. I read all your stuff and donate some money but I never listen or watch media.
    I only read, but I read a lot. Hours a day.

    • Gibbs says:

      EXCELLENT EXCELLENT EXCELLENT

    • Debt-Free-Bubba says:

      Howdy Enlightened L. Great Idea, I am going to try that on my wife.
      Thanks

    • andy says:

      I have ChatGPT do all my reading now, and listening. Then AI summarizes what I learned today. Saves tons of time.

      • Wolf Richter says:

        You should use another AI system, maybe Leo, to read the summaries that ChatGPT produces, and then you don’t have to read anything, would save a huge amount of time 🤣

        • andy says:

          Ah, the old double-AI passthrough. Done that. All I get is “Nothing goes to heck in a straight line. And, RTGDA!”

      • Anthony says:

        Remember, Ai as we call it, is just advanced software(in a computer) and software, is controlled and told what it can do, by the brain that put it there.

    • Home toad says:

      It’s no different than listening to the radio, Enlightened one,
      Just pretend you’re listening to Alice Cooper and eating a bat 🦇
      Instead of wolfman jack, it’s Wolf Richter.

  3. C. K. Cunningham says:

    Thank you for this helpful overview, Wolf.

  4. Danica Cordell-Reeh says:

    Sorry Wolf. I read all your stuff and donate some money but I never listen or watch media
    I only read, but I read a lot. Hours a day

    Appreciate your insights

    • MF says:

      Follow-up: would be great to have a written version of the (novel) content of this interview in the post.

      • Wolf Richter says:

        LOL, not happening. It’s their podcast. Either you listen to it, or your miss it. Those are your two choices. Up to you.

        • MF says:

          fair enough :)

        • viscacha says:

          If they click on CC they can read what’s said. I remember last time there was a guy that couldn’t hear. I don’t do anything special – the CC is just there.
          I hope you went to visit the sea lions – the most is 15 years.

  5. Doctor Whooves says:

    Can I donate so you can get a better microphone for these interviews?

    • Wolf Richter says:

      My microphone is a professional Rode. But the equipment of the interviewer is on a phone line, it’s his equipment, and phone lines give you terrible sound quality, but it’s his interview, and there is nothing I can do to change it.

      But yes, you can donate.

      • Biker says:

        Phone line should support a reasonable bandwidth. Likely the problem with the remote audio is the narrow band 8kHz codec such as g711 or g728 as my memory serves well.
        Having a wide or supper wide band codecs such as 722, silk, opus would produce HD audio.
        This is more about the application layer rather than connectivity issues. 128 kbps should give HD quality.
        Applications like WhatsApp, Skype etc do have built in good codecs.
        But I’m not sure about your specific context.

        • Wolf Richter says:

          Plain old telephone service (POTS) has a frequency range of 300 Hz to 3,400 Hz. That is a very narrow bandwidth, barely enough to make a human voice understandable, but that’s about it. It has been unchanged since time immemorial.

          So that’s on his end. On my end, I’m calling over the internet (Skype) to his telephone number. All he would have to do is switch from POTS to Skype or similar, and we’d have a great connection. But he is an old radio guy, and that’s how he has been doing it forever, and so that’s a no-go. I’ve suggested it before.

        • drg1234 says:

          Almost as though g.711 was created to support the 3400 Hertz telephony bandwidth…

          Oh wait! It was.

  6. phleep says:

    Wolf’s always sticking close to the data, as here, adds up to the best overview. The sloppiness and hyperbole of other financial sources is exposed.
    I most appreciate the info here on auto prices.
    I am expecting a clash of irresistible force and immovable object, when the US-China trade war over auto prices heats up. This one will be visible and easily felt by consumers and will, I think, have a big presence in a propaganda conflict. Alongside Boeing, I am wondering, is the supposed resurgent US manufacturing prowess DOA? Are we nearing a “Suez moment” (thinking of 1950s Britain’s strategic weakness being brutally exposed)? US tariffs, asset seizures, and other other economic nationalism seem to me hot trends to watch, and a sort of stress test of US economic vitality, alongside inflation. I just wonder how good our hand is to play this mind of game, competitively, long term.

    • 91B20 1stCav (AUS) says:

      phleep – well said (…the inherent follies/dangers in presuming that what brought one to the dance is inherent, and that great press releases are all that are required going forward from initial success…(Agassiz’ old Minolta commercial declaring: “…image is EVERYTHING…” comes to mind…).

      may we all find a better day.

  7. Richard says:

    Is the slowing of QT not a dovish move by The Fed indicating that they’re still possessed of a dovish mindset?

    Nothing has seemingly been broken by the rate hikes yet, however surely if the employment numbers (or some other metric such as GDP) start to weaken The Fed will be incentivised to cut?

    Thus the probability is still greater for a single cut more than a hike this year.

    • Wolf Richter says:

      It shows that they’re preparing to run down the balance sheet as low as possible, and far lower than Wall Street is fearing. And easy does it. They have done other things to that effect, including reviving the Standing Repo Facility, which they had before 2008, and which Bernanke shut down after he started QE. The SRF eliminates the need for QE during a crisis, which is how the Fed had always done it before 2008.

      They want to go slowly with the balance sheet reduction so that liquidity can go where it is needed without blowing something up, like QT-1 did in 2019 (blew up the repo market), which had caused the Fed to undo a big part of QT-1. That’s to be avoided this time. QT will go on for years, and easy does it. QE is like so over. The Fed is going back to its old ways.

      • Bobber says:

        Gotta say Wolf…that’s a bold prediction that defies mainstream opinion. If the Fed said QE will not be used to support stock markets, I think the S&P 500 would plunge 40% in a week. Unemployment would rise and the Fed would be forced back into QE, unless it accepts a decent recession.

        This all points back to the stupidity and dishonesty of pursuing QE in the first place. There never was and never will be a viable escape plan, unless you consider long-term elevated inflation a viable solution.

        In any case, they’ve boxed themselves in and must hide the truth of our predicament. Major governance reform is required.

        • Wolf Richter says:

          Who’s your mainstream? ZH? Hedge funds on X? Bloomberg & CNBC stock promoters?

          I’m telling you what the Fed has explained several times already, and I reported on it here, starting with the revival of the Standing Repo Facility in July 2021. That was a sea change. I reported on it right here at the time. “Mainstream” just doesn’t like it, and refuses to even mention it. Your “mainstream” is the same crowd as the QT deniers, the pivot mongers, and the Rate-Cut Mania instigators. They are spreading BS propaganda to be consumed by morons to drive up asset prices — that’s their agenda. And you people are polluting the social media and comment sections to make that work by hook or crook.

          All you have to do is actually read what the Fed publishes to understand where they’re going. But you’re not going to do that because it would destroy your narrative.

        • Bobber says:

          That’s not my narrative. Don’t lump me in with the Wall Street pivot mongers and crybabies who just want stocks and RE to continue flying.

          Also, don’t lump me in with the folks who think 3-5% inflation for several more years is acceptable.

          I simply want the Fed to do what it says it will do – bring inflation to 2% in a reasonable time frame, even if that means slowdown or recession. I’m seeing delayed progress on inflation, and that has me questioning whether the Fed has enough conviction for this fight.

        • Bobber says:

          Also, I hate Wall Street’s capture of the economy and the artificial stock prices. I deplore having to buy some stocks and RE at these overpriced levels to maintain some degree of diversification in case the Fed doesn’t succeed in reducing inflation within a reasonable time frame.

          I had to spend last weekend researching the tax straddle rules in order to manage the extreme equity risks. In a hard money world with reliable predictable pricing, I could have been outdoors having fun with the kids.

    • JimL says:

      It should be noted that rates and QE/QT hut different areas in different time lines. In the long run it is all liquidity, but they impact the system in different ways.

  8. OldPaperBoy says:

    Rates will be higher for longer….

    • Debt-Free-Bubba says:

      Howdy OldPaperBoy. ZIRP should be dead and never to return. 3 to 5 % interest rates seem normal to me We will see what the so called smart people have in store for US.

  9. perpetual perp says:

    My view is that hiking the interest rates simply funnels more wealth up to the already super rich. They do buy the bonds. The remedy for inflation is competent government spending. Don’t try to buy that which is not for sale. Resources, or
    lack of same, are the real restraint on government spending and, thus, inflation. The real economy is relatively robust, for now. But the remedy is using fiscal tools–tax and spend. Our over dependence on monetary tools aka ‘Financialization’ of everything needs to be re-regulated.

    • Wolf Richter says:

      This is so naive, it’s laughable. Congress is in charge of fiscal policy. OUR Congress, the best Congress money can buy! Congress will never use spending cuts and tax hikes to combat inflation. NEVER. They will always use spending increases and tax cuts to buy votes.

      • 91B20 1stCav (AUS) says:

        “…we have met the enemy, and he is us…”

        -Walt Kelly’s ‘Pogo’, six-plus decades ago…

        may we all find a better day.

      • BillTheCat says:

        Decades ago I listened to a great mentor. His family’s wealth came from Texas banks and funeral homes. He taught me much, from economics to how to tune a car with just a vacuum gauge (pre electronic ignitions). Some wisdom in no particular order:

        – We have the best legal system money can buy.
        – We have the best government money can buy.
        – Dealerships don’t sell cars, they sell ‘deals’.

      • JeffD says:

        Pre-1992, they actually increased/decreased taxes as was warranted for a balanced economy. Then the concept/action of raising taxes mysteriously disappeared. I blame Grover Norquist as the catalyst.

      • JimL says:

        Wolf,

        Help me out with my 30 plus years ago education in economics that I haven’t kept up on except recreationally. Please let me know if I am wrong in my memories.

        So many posters here think congressional (government) spending is automatically inflationary. From my memory this isn’t necessarily true. Don’t get me wrong, it can be, but it also might not be. It depends upon what government borrowing is spent on.

        From what I remember, government borrowing “crowds out” private borrowing. Companies that are looking to borrow money to expand their production have to compete with the federal government for loans.

        This is naturally disinflationary. Businesses are less likely to borrow and expand (and hire more workers (inflation!!!)) if the government is crowding them out of the loan market.

        Don’t get me wrong, government spending can most definitely be inflationary. For example, borrowing money to give nearly every adult American a few hundred dollars (as was done during COVID) is inflation on steroids.

        But government borrowing in general is not necessarily inflationary. It can be the opposite.

        Am I wrong in my thinking?

        • JimL says:

          I fact, if I may go out on a very thin branch (meaning I know the things I say might not be true and are more speculation than anything).

          I think the federal government should be running huge deficits during times (such as now) where there is lots of excess liquidity in the system. Their deficits help soak up that excess liquidity. So their deficits are actually more disinflationary than inflationary.

          Where am I wrong?

        • Wolf Richter says:

          In super-simplified principle:

          The key principle here is “deficit spending” – not “spending,” and not “borrowing” by itself.

          What is inflationary is deficit spending. The government borrows money, so obtains cash from global (!) investors who do that to earn interest, and then plows this cash into the real economy in the US which creates demand in the real economy, which is inflationary. A glaring example was the issuance of stimulus checks, funded with a huge amount of borrowing. You could see consumer spending spike after they went out.

          On the other hand, if the government spends money it raised from taxes, and has a balanced budget, then it presumably lowers the spending power of the taxpayers/consumers, so lowers demand from them, while it is increasing its own spending, and thereby is increasing demand. So over the longer term, the spending is just redistributed, from taxpayers/consumers to the government, with a neutral effect on inflation.

          Obviously, these are super-general principles. In real life, there are a gazillion complications, including that some government spending creates more demand (stimulus checks, giving money to the poor, etc.), while other government spending doesn’t create any demand, such as spending overseas.

          Also taxing the super-wealthy more and redistributing this cash to the poor, for example, would instantly lead to more demand as the super-wealthy spend all they want to anyway, and won’t spend any less; but the poor will spend all the new money they get to put food on the table and pay rent and school supplies, etc.

          But the basic principle here is that “deficit spending” – not “spending ” – is inflationary.

        • Home toad says:

          A better question is, what does God think?

          I think if I over spend I’d better get to work.
          I’ll check my receipts.

        • Tater says:

          It depends how you define inflation. If the price of eggs rises because a disease killed a bunch of chickens or a major distribution plant was taken offline due to a fire or bacteria outbreak or something, I don’t call that inflation. I like the Austrian definition that inflation is an increase in the quantity of currency.

          If I loan the government money by buying T-bills, that is not inflationary, as it doesn’t increase the currency supply. However, when the fed monetizes the debt with QE like they did in 2020-2022, that is inflationary. If banks use 10:1 leverage on currency they create out of nothing to buy Treasuries, that is inflationary. There are talks of exempting certain government securities from regulatory leverage ratios on bank balance sheets, and if that happens, that will be highly inflationary.

          It’s not where the currency that changes the quantity of currency. It is where the currency comes from and whether or not the currency supply expands. However, where the government spends the currency could have varying impact on prices of various goods and services depending on where it goes. But the price increases are just a symptom of inflation that already happened.

      • Cervantes says:

        “Congress will never use spending cuts and tax hikes to combat inflation. NEVER. They will always use spending increases and tax cuts to buy votes.”

        So much this. There’s so much I find interesting from the MMT people, but their conclusion that fiscal policy should be used as an inflation policy tool so beggars belief that it’s hard to take anything else they say seriously.

    • Gen Z says:

      Lowering the interest rates during 2021 and early 2022 caused home prices to double in metro areas of America and Canada, even 10 times gains in remote parts of Ontario, Quebec, and the Maritime provinces.

      $7,000 per acre lands went for $100,000+ an acre in a few years. Low interest rates helped real estate go brr.

  10. Escierto says:

    The government will never raise taxes are the bulk of the citizens. Forty per cent of people already pay no federal tax. The goal is 100%!

    • JimL says:

      This is dumb.

      Do you know who makes up the bulk of that 40%?

      Children, students, etc. People with no income and do not do a bunch of importing or exporting.

      You say your goal is 100%. What are you going to do with the 18 month year old babies who refuse to give money to the federal government?

      • Cervantes says:

        I don’t really have a dog in the fight policy wise, but the 40% statistic is a measure of households, not individuals, which is easily ascertained by a simple Google search.

        While a small amount of those would be unemployed and students–and a small minority are probably wealthy people who can assiduously avoid income tax through (say) business deductions/credits like real estate–the majority are going to be low-income households.

        Many low-income households qualify for the earned income tax credit and child tax credits, which offset the tax liability they would otherwise have from work income. Other households have income that is offset by the generous standard deductions under the TCJA.

        In other words, yes, there are many households who work jobs but pay no income tax under current law.

  11. James Nicoll says:

    Thanks Wolf great insight. Thanks again for commenting on Canada as well.

  12. Good Boy says:

    Wolf – what has actually happened to used car prices since you last covered the subject? Are they flat or continuing to decline? Thanks!

Comments are closed.