What Fed Chair Powell spouts Friday in Jackson Hole WY will be meaningless in the long-term. The longer the Fed allows price inflation to persist, the longer the economy will remain in this stagflationary environment of high prices and low economic growth (if any real growth at all). It’s simple math. For every incremental dollar Americans spend on essentials such as food, that incremental dollar won’t be spent on discretionary items such as video games or productive means such as a home DIY project.

• Monetary Policy: The Fed’s objective should be two part:
  • Take the air out of this Everything Bubble via higher rates and more importantly by shrinking the money supply by shrinking its balance sheet (QT).
    • Create a disincentive for pure speculation such as meme stocks and crypto currencies. The former is completely detached from fundamentals, the latter is detached from intrinsic value.
  • Get the markets back to an environment where we have real interest rates, not the negative rate environment that has become the “norm” since 2009-2010.

• Fiscal Policy: If either political party truly wants to see the U.S. economy enjoy sustainable growth in real terms, government bureaucracy needs to massively shrink.
  • Stop trying to buy votes with artificial stimulus and numerous welfare programs.
  • Strip away punitive regulation.
  • Replace “take it off the top” income taxes with “pay as you go” sales taxes for individuals and corporations. The objective is to grow the economy, not government.

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