Tag: public debt

The $250 Billion Spending Bill Portends More Money Printing & Low Rates

The $250 Billion Spending Bill Portends More Money Printing & Low Rates

The $250 billion Semiconductor Spending Bill (United States Innovation and Competition Act), means the Fed will be printing money, expanding its balance sheet and maintaining low interest rates in order to keep the gravy train running while the fiscal deficit expands and public debt outstanding grows. This is a recipe for more inflation, not less … Continue reading The $250 Billion Spending Bill Portends More Money Printing & Low Rates

CPI Will Persist Above The Fed’s Target

CPI Will Persist Above The Fed’s Target

Inflation as measured by the CPI will persist above the Fed's target rate of 2% over the long-term. Why? Because as Milton Friedman said: "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in … Continue reading CPI Will Persist Above The Fed’s Target

The U.S. Economy Is Long-Term Fragile

The U.S. Economy Is Long-Term Fragile

We do not believe that investors fully appreciate how fragile the U.S. economy is. Our view is that the U.S. economy is in a recession and that this period will be followed by long-term muted growth given: 1.) the enormous U.S. Government debt load ($30.4 trillion), 2.) persistent price inflation, 3.) a consumption-driven economy rather … Continue reading The U.S. Economy Is Long-Term Fragile

The Fed Will Reset Its 2% Inflation Target

The Fed Will Reset Its 2% Inflation Target

Our view is that the Fed will reset its 2% inflation target approximately one year from now if it wants to salvage the last vestiges of its credibility. While April's CPI number may come down some due to the retreat in the price of oil, we could continue to see core inflation march higher for … Continue reading The Fed Will Reset Its 2% Inflation Target

Fed Spin and U.S. Jobs

Fed Spin and U.S. Jobs

Federal Reserve officials tout the U.S. economy's strength as the reason why Fed tightening will not tip the economy into recession. The unemployment rate is the preferred metric of Fed officials who are spinning the tale of a strong economy. We provide an alternative. The Fed is expert at one thing - pulling the wool … Continue reading Fed Spin and U.S. Jobs

Rate Hikes Are Not Perfectly Priced In

Rate Hikes Are Not Perfectly Priced In

The Financial press has pushed a variety of narratives around interest rate hikes. One narrative is that four 25 basis point increases are priced into the market. Maybe, maybe not.A second narrative that was pushed yesterday was that a 50 basis point increase for the Fed's March meeting was priced in. Unlikely so in our … Continue reading Rate Hikes Are Not Perfectly Priced In

The Fed Will Likely Tighten Faster Than The Market Anticipates

The Fed Will Likely Tighten Faster Than The Market Anticipates

A 2004-2006 Fed Funds tightening period could be around the corner should the Fed truly want to curb inflation. The Fed is already late to the inflation game. QE should not exist. The Fed Funds Target Rate range ought to be above 0.00-0.25. Below we have plotted what the next two years could look like … Continue reading The Fed Will Likely Tighten Faster Than The Market Anticipates

Real GDP Growth Remains Muted

Real GDP Growth Remains Muted

The Atlanta Fed updated its model for Real GDP ("GDPNow"). The Atlanta Fed's 3.2% Real GDP estimate as of today is down from 3.7% as of September 21st. We have previously written that real GDP growth may very well be zero percent or even negative as we believe the Federal Reserve underestimates true price inflation … Continue reading Real GDP Growth Remains Muted

Our View On Fed Tightening and M&A

Our View On Fed Tightening and M&A

Our view is that the Fed will only truly pursue an extended tightening course (full wind down of QE followed by rate hikes), if price inflation continues to where the Biden Administration feels it will cost the Democrat Party in the 2022 mid-term elections and/or hurt Biden's chances for re-election in 2024. The Fed is … Continue reading Our View On Fed Tightening and M&A

The Fed Expanded Its Balance Sheet Amidst Tightening Chatter

The Fed Expanded Its Balance Sheet Amidst Tightening Chatter

Amidst the talk of the Fed potentially tightening monetary policy in 2023 or even next year, the Fed expanded its Balance Sheet at its fastest pace since March 17th of this year, growing assets 1.4% from the week prior. This narrative of the Fed potentially becoming more hawkish needs to be put into perspective. With … Continue reading The Fed Expanded Its Balance Sheet Amidst Tightening Chatter