The Terrifying Fate Of Biden's Economy
Sept 9, 2022 23:04:16 GMT -5
Post by Berean on Sept 9, 2022 23:04:16 GMT -5
The "Scariest Paper Of 2022" Reveals The Terrifying Fate Of Biden's Economy: Millions Are About To Lose Their Job
BY TYLER DURDEN
FRIDAY, SEP 09, 2022 - 03:20 PM
For much of the past year (and certainly at the time, more than a year ago, when the so-called experts, central bankers and macrotourists were still yapping about "transitory inflation" and other things they were wrong about and do not understand), we were warning that at some point the Fed will realize that it is simply impossible to contain supply-driven inflation through stubborn rate hikes which instead would lead to a dire alternative - millions in mass layoffs and newly unemployed workers ...
... and will revise its 2% inflation target higher, a move which will send every risk asset - from high-beta trash and meme stonks, to blue-chip icons, to bitcoin and cryptos limit up.
To remind readers of this coming phase shift, we most recently warned in June that "at some point Fed will concede it has no control over supply. That's when we will start getting leaks of raising the inflation target"...
Well, it turns out that we were right, and not just about the coming mass layoffs, but also about the inflation target leaks. But first, lets back up a bit.
A little over one year after nobody expected the Fed would be hiking rates like a drunken sailor until some time in late 2023 or 2024, it has now become fashionable to not only predict that the Fed will keep hiking rates at every FOMC meeting and at the fastest pace since the near-hyperinflation of the 1980s, but that the central bank will somehow manage to avoid a hard landing (i.e., the hiking cycle won't end in a recession or depression), even though every single Fed tightening cycle since 1913 has ended in disaster.
An example of this was the statement by former Fed vice chair (and PIMCO's "twice-revolving door") Rich Clarida, who told CNBC that "failure is not an option for Jay Powell," adding that "I think they're going to 4% hell or high water. Until inflation comes down a lot, the Fed is really a single mandate central bank."
Of course, if one could hike rates in a vacuum that could work - after all, Clarida himself, who admits he got this year's soaring inflation dead wrong when he was still a daytrading god and part oft he Fed in 2021, said that the Fed may as well have just one mandate, namely to tame inflation. But what so few seem to recall is that the Fed is "hiking to spark a recession", or as CNBC's Steve Liesman put it, there is no such thing as "immaculate rate hikes" meaning that rate hikes have dire tradeoffs in other sectors of the economy. In other words, if the Fed's intention is to spark a recession, it will spark a recession... leading to millions of Americans losing their jobs, something which even Elizabeth Warren appears to have grasped.
Continued at link
BY TYLER DURDEN
FRIDAY, SEP 09, 2022 - 03:20 PM
For much of the past year (and certainly at the time, more than a year ago, when the so-called experts, central bankers and macrotourists were still yapping about "transitory inflation" and other things they were wrong about and do not understand), we were warning that at some point the Fed will realize that it is simply impossible to contain supply-driven inflation through stubborn rate hikes which instead would lead to a dire alternative - millions in mass layoffs and newly unemployed workers ...
... and will revise its 2% inflation target higher, a move which will send every risk asset - from high-beta trash and meme stonks, to blue-chip icons, to bitcoin and cryptos limit up.
To remind readers of this coming phase shift, we most recently warned in June that "at some point Fed will concede it has no control over supply. That's when we will start getting leaks of raising the inflation target"...
Well, it turns out that we were right, and not just about the coming mass layoffs, but also about the inflation target leaks. But first, lets back up a bit.
A little over one year after nobody expected the Fed would be hiking rates like a drunken sailor until some time in late 2023 or 2024, it has now become fashionable to not only predict that the Fed will keep hiking rates at every FOMC meeting and at the fastest pace since the near-hyperinflation of the 1980s, but that the central bank will somehow manage to avoid a hard landing (i.e., the hiking cycle won't end in a recession or depression), even though every single Fed tightening cycle since 1913 has ended in disaster.
An example of this was the statement by former Fed vice chair (and PIMCO's "twice-revolving door") Rich Clarida, who told CNBC that "failure is not an option for Jay Powell," adding that "I think they're going to 4% hell or high water. Until inflation comes down a lot, the Fed is really a single mandate central bank."
Of course, if one could hike rates in a vacuum that could work - after all, Clarida himself, who admits he got this year's soaring inflation dead wrong when he was still a daytrading god and part oft he Fed in 2021, said that the Fed may as well have just one mandate, namely to tame inflation. But what so few seem to recall is that the Fed is "hiking to spark a recession", or as CNBC's Steve Liesman put it, there is no such thing as "immaculate rate hikes" meaning that rate hikes have dire tradeoffs in other sectors of the economy. In other words, if the Fed's intention is to spark a recession, it will spark a recession... leading to millions of Americans losing their jobs, something which even Elizabeth Warren appears to have grasped.
Continued at link
