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The Fed’s economic projections coming out of last week’s FOMC meeting are far too optimistic.
- Fed’s Real GDP projections for 2022, 2023 and 2024: 1.7%, 1.7% and 1.9% respectively.
- 2022 is going to be a zero percent to down Real GDP year in our view.
- 2023 will be flat with 2022 in our view.
- 2024 gets interesting because both political parties have gone Socialist given the fiscal “stimulus” packages of Trump and Biden. Apparently it’s OK to print money and mail it to voters. We are awfully close to Universal Basic Income (“UBI”), and dramatically growing the welfare class and the moral hazard that goes with it. Thus, expect whomever is elected in 2024 (GOP most likely) to print money and mail it to voters in an effort to “stimulate” growth (i.e. buy future votes).
- Fed’s PCE Inflation projections for 2022, 2023 and 2024: 5.6%, 2.6% and 2.2% respectively.
- Wrong, wrong and wrong.
- We will finish 2022 north of 6% and we won’t see a 2-handle on the CPI figure for the remainder of the decade.
- We believe the Fed will adjust its target CPI above 2% within the next year.
- We grew M1 by more than 4x over approximately one year – all of it unnecessary and therefore excessive. It will take far longer than one year for this monetary excess (“inflation”) to wash through the system.
- Fed’s Unemployment Rate projections for 2022, 2023 and 2024: 3.7%, 3.9% and 4.1% respectively.
- We have never cooled off inflation without experiencing a recession.
- We have never experienced a recession without taking the unemployment rate above 4% HERE.
- The probability of the Fed taking the CPI to 2.6% in 2023 with unemployment of only 3.9% in the same year is zero percent.
- Our view is that we are in the midst of a recession.
- The Fed’s outlook is pure propaganda. If you wish to read the Fed’s full projections, click HERE.