May 1, 2024 | Jerome Powell on Stagflation

“I don’t see the ‘stag’ or the ‘-flation’,” Fed Chairman Jerome Powell said during his Wednesday address.

Powell believed inflation would be “transitory.” He believed that the economy would come down for a “soft landing.” He believed we would enter the year and see numerous cuts due to waning inflation coming closer to the fictional 2% target. Yet again, Chairman Jerome Powell has missed the mark on stagflation.

If you really look at it, objectively, interest rates always rise during boom periods, and they decline during recessions and depressions. We will see increased inflation, probably into 2028 caused by shortages and war. But you’re looking at a declining economic growth, so that ends up being more like the economy of the 1970s, and you’re looking at what we call “Stagflation” where the inflation rate will be higher than economic growth.

Chair Jerome Powell said officials are prepared to hike again if price pressures return. He indicated that they were now considering when to cut rates as inflation subsides to their fictional and arbitrary 2% goal. Rate cuts are only sustainable once you see the economy decline. The events that unfold around May 7, primarily regarding war, will highlight what we need to know.

Inflation rising above economic growth is STAGFLATION, which is precisely what the economy experiences during war. Inflation will rise faster than GDP, causing the purchasing power of the USD to decline.

One major factor that is never included in the inflation numbers is TAXATION. Their theory is that taxes are the citizens’ obligation and not part of our cost of living. Yet, those at the top are seeing half or more of their wealth siphoned by Washington. We already know that the jobs reports are grossly distorted. To calculate GDP, they include total personal income and government spending. In March, we saw the public sector multiply, which only causes more of a burden on the taxpayer. The ADP that was released today indicated a spike in hospitality among the private sector, but we tend to see that before the summer months in the US. The public sector contributes absolutely nothing to GDP.

WAR WILL LEAD TO STAGFLATION. Of course, the Fed cannot come out and say that they see a looming escalation of war on the horizon, and Washington certainly would not come out and say to prepare for war. Socrates is impartial to bias and was correct about this inflationary trend into 2024. We are poised for a directional change in Q3 of 2025, implying an escalation in the war cycle post-2024.

Martin Armstrong May 1st, 2024

Posted In: Armstrong Economics

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