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March 8, 2022 | David Haggith: The Fed Did It! Inflationary Collapse was Already Here

John Rubino is a former Wall Street financial analyst and author or co-author of five books, including The Money Bubble: What to Do Before It Pops and Clean Money: Picking Winners in the Green-Tech Boom. He founded the popular financial website in 2004, sold it in 2022, and now publishes John Rubino’s Substack newsletter.

Excerpted from the Great Recession Blog:

For almost two years (starting in 2020 before you could see any consumer inflation at all), I have faithfully and consistently traced our trajectory toward scorching inflation that would cause a market disaster. Prior to that, inflationary burn-out was not an argument I ever made on this site (unlike some who perennially hyperventilate about hyperinflation).

Starting in 2020, however, I said inflation would be the news of our time.

I also recently laid out in a series of Patron Posts the massive economic collapse that we will see unfold now that inflation is forcing the Fed to tighten and cutting off the escape route the Fed has deployed whenever its tightening causes markets to crumble. That route, of course, would be a rapid return to quantitative easing, which rising inflation will no longer allow.

Well, that is, until now when the Fed may try to use wartime sanctions as an excuse to return to easing in a wartime stance, in spite of inflation. If they do, hyperinflation is a certain result, since we were already going to have continued high inflation. IF the Fed goes back to the easy answer of easing in our present high-inflation, high-shortage, low-production environment, we’ll move from the seventies-style inflation (complete with energy crisis) I predicted and traced out for the past two years to full Weimar-Republic inflation. I’m not saying the Fed WILL do that, but I could see it using the present sanctions as cover for such a move.

I have consistently predicted we’d enter a stagflationary recession at the start of this year, which would be prior to Putin’s War against Ukraine, and we are entering it, as the article below will show. I’m going to lay out the proof this inflation would have continued hot even without sanctions, using pre-war statistics, because we are about to see an even sharper rise in inflation due to the global sanctions imposed on Russia, and many will likely claim all the inflation in the months ahead is due to those sanctions, giving the Fed cover for its years of financial profligacy. In other words, “There is nothing the Fed could do about this; it is all because of the sanctions we had to impose to stop Imperial Putin.”

(I’m not arguing against the sanctions. I’m just saying they will make inflation worse, but they will also, therefore, easily become the convenient scapegoat for the collapse that was already assured by the failure of the Fed’s repeated debt-based, money-printing recovery programs.)

Inflation was specially baked in by the Fed and the government over the past few years due to the COVID-lockdown shortages and the helicopter money and the momentous bailouts, and you can trust me on that because I laid out how all of it would proceed month by month, several steps ahead of the inflationary events over the past two years, and all of it, right to the end of the bull market in the Russell 2000 this year, has gone exactly as I anticipated before there was any thought around the world about Putin invading Ukraine.

The Atlanta Fed was already forecasting the economy this quarter would fall as close to recession as you can get without being in recession. Now, since the start of the war, it is forecasted this quarter will be recessionary. My only argument would be that it was generally right but over-optimistic:

Federal Reserve Bank of Atlanta
As I pointed out more than a month ago, using an earlier version of this graph, we were practically in recession back in January, and the war now has just tipped the balance as to which side of zero the Atlanta Fed believes we’ll end up on this quarter.

If the Fed is allowed to use the convenient excuse that this stagflationary recession is due to sanctions that it cannot do anything about, once again, we will learn absolutely nothing as a nation about how destructive the Fed truly is to our economy with all of its central-planning manipulations. That’s my concern — that here we go with yet another “rinse and repeat” Fed “restoration” cycle.

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March 8th, 2022

Posted In: John Rubino Substack

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