If you thought the economy is in terrible shape right now, baby, let me tell you a little something using the immortal words of Bachman-Turner Overdrive: You ain’t seen n-n-n-nothing yet.
Sorry to be the bearer of bad news, but it’s true. It seems that as awful as inflation is at the moment, we’re headed for a “bloodbath” and that’s not just hyperbole or exaggeration. Things are going to go from bad to worse to holy crap I didn’t know it could be this bad to potential societal collapse.
According to the folks at Zero Hedge, Jerome Powell made a speech last Wednesday where he announced that the Federal Reserve has decided to hold the federal funds rate between 5.25 percent and 5.5 percent.
On Powell’s announcement, several commodities surged in price, with silver, gold, and copper performing especially well. Peter sees this as a repudiation of Powell’s messaging:
“I think we’re on the verge of the biggest bull market in commodities since the 1970s. Of course, this flies in the face of Powell claiming that inflation is going to go back down to two percent. There’s no chance that inflation is going to go back down to two percent! All the data shows that inflation is on the way up. Plus, if you understand what inflation is, it has nowhere to go but up.”
A hotter-than-expected Producer Price Index (PPI) report last weekalso contradicts Powell, with the PPI increasing from last month by more than twice the most conservative estimates. The PPI, in addition to a recently announced 13% federal deficit increase, does not bode well for the economy:
“This is why we have inflation. It’s driving prices higher. All this money is being spent. How can it not bid up prices? This is why the Fed is not only going to taper the QT [quantitative tightening] program but go back to quantitative easing because government spending is going ballistic.And all of it is stoking the fires for inflation. … There’s no downward pressure from five and a quarter, five and a half percent interest rates. Those rates are still too low.”
Peter Schiff stated that he is expecting rate cuts to come down the pike sometime in the future.
“The Fed is cutting rates come hell or high water. It doesn’t matter what the data is. The Fed is going to cut rates because the country is broke. They’re not cutting rates because they won the war against inflation: they lost that war. They’re cutting rates because they have to avoid a financial crisis— a banking crisis. They want to try to reelect Joe Biden. They want to try to save the government from having to default and cut social security and cut Medicare, and so everything’s going to be cut through inflation.”
The comments made by Powell are a prime example of the fact that once the Fed starts messing around with the dollar, they can’t stop, nor can they return things to the way they were. Printing money and flooding the supply has led to a massive decrease in the purchasing power of the dollar bill. What has more value? A baseball card that everyone has in their collection with thousands upon thousands of that same card being printed every day, or a card that is a one-of-a-kind? It’s a flawed analogy, but I think it gets the picture across.
“Bernanke— in 2009, when the Fed just started to increase the balance sheet— said that, ‘After the emergency, we’re going to bring it right back down to where we started. We’re not going to keep any of the bonds that we bought, because we’re not a banana republic. We don’t monetize government debt.’ Well, now you have Jerome Powell saying, ‘We are a banana republic. We do monetize debt because we want to maintain an ample balance sheet.’”
Powell did manage to get at least one thing correct and that’s that wages going up is a symptom of high inflation, but it is not the cause:
“If wages are going up, that’s a sign that there’s still an inflation problem. … It’s like when you take your temperature with a thermometer and you know you’re sick. The thermometer is not making you sick. You’re sick because there’s something wrong with you. The thermometer is simply allowing you to confirm that you’re sick.”
However, the Federal Reserve’s lack of handling the inflation crisis has now seemingly sentenced our economy to a rather awful fate:
“We haven’t experienced anything like that since the 1970s. The difference is we’re in much worse shape economically than we were in the 1970s, and we don’t have the ability to put out this fire. We’re not going to get another Ronald Reagan. We’re not going to get another Paul Volker, and even if they were there, they couldn’t do what they did back then because of the financial position, the weak position that America now occupies that it didn’t occupy back in 1980. So it’s a whole different ball game, and it’s going to have a very different ending.”
Things are most certainly going to get worse. It’s critical folks get prepared. Stock up on necessities while you can still afford them. Create emergency stashes of food and water. We’re in for a bumpy ride.
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