by Matthew Piepenburg, Gold Switzerland:
With the USD losing influence, it would be the understatement of the year to say that we live in interesting times, for we certainly do.
But despite the inevitable attacks of appearing sensational, un-American or just plain cynical, I feel a more appropriate phrase boils down to this:
“We live in dishonest times.”
Below, I bluntly address the “Fed pivot debate,” the “inflation debate” and the USD’s slow global decline in the setting of a now multi-FX new normal in which gold’s historical bull market has yet to even begin.
TRUTH LIVES on at https://sgtreport.tv/
These views are not based on biased politics, but honest economics, which for some odd reason, ought to still matter.
Let’s dig in.
The New Normal: Open Dishonesty
I recently authored a report showcasing a string cite of empirically open lies which now pass for reality on everything from the CPI inflation scale to the Cleveland Fed’s +1 real interest rate myth, or from official unemployment data to the now comical (revised) definition of a recession.
But a more recent lie from on high comes directly from the highest of all, U.S. President Joe Biden.
Earlier this month, Biden waddled to his podium and prompt-read to the world that the US just saw 0% inflation for the month of July.
It’s sad when our national leadership lacks basic economic, math or even ethical skills, but then again, and in all fairness to a President in open (and in fact sad) cognitive decline, Biden is by no means the first President, red or blue, to just plain fib for a living.
A History of Fibbing
We all remember Clinton’s promise that allowing China into the WTO would be good for working class Americans, despite millions of them seeing their jobs off-shored to Asia seconds thereafter.
And let us not forget that little war in Iraq and those invisible weapons of mass destruction.
Nor should we ignore both Bush and Obama’s (as well as Geithner’s, Bernanke’s and Paulson’s) assurance that a multi-billion-dollar bailout (quasi-nationalization) of the TBTF banks and years of printing inflationary money (Wall St. socialism) out of thin air was, “a sacrifice of free market principles” needed to “save the free market economy.”
In reality, however, we haven’t seen a single minute of free market price discovery since QE1.
Thus, Biden’s announcement that there was NO inflation for July is just another clear and optically (i.e., politically) clever lie among a long history of lies.
That is, he failed to clarify that although there may have been LESS inflation in July, this hardly means “no” inflation, as any American who has a bill to pay already knows.
Setting the Stage (Narrative) for a Fed Pivot
What the July CPI decline does achieve, however, is yet another headline myth to justify an inevitable Fed pivot to more easy money by year-end (i.e., mid-term elections) or early 2023.
As we see below, the fiction writers, data-gatherers and fork-tongued policy makers in DC have already been gathering more official “data” to justify a Fed pivot toward more dovish money printing and hence more currency debasement ahead.
In addition to a decelerating CPI report for July, DC has also been checking the following, pre-pivot boxes to allow the Fed to get back to doing what it was truly designed to do, which is print debased money out of thin air to save the US Treasury market rather than working class citizens.
Specifically, DC is pushing hard on the following “data points” and narrative:
- Decelerating inflation expectations
- Declining online pricing
- Declining PPI (Producer prices)
- Declining oil prices (from their highs)
So, has inflation peaked? Are the above declines proof that inflation creates deflation by crushing consumer strength and hence price demand? Is the Fed’s work nearly done in defeating inflation?
My short answer is no, and my longer answer is that when it comes to market, currency and economic conditions, there’s…
…More Pain Ahead
One clear sign that there’s more pain ahead, and hence more reasons for the Fed to pivot from temporary hawk to permanent dove, is the credit tightening now taking place in the US.
As I’ve said too many times to recall, the credit—and bond—market is the most important market and economic indicator of all.
Earlier this month, the Fed’s quarterly Loan Officer Survey came out with some scary and telling news, namely that the credit markets are tightening.
It’s important to know that in the last 30 years, a tightening of credit has always preceded a recession, even if DC wants to pretend that we are not in a recession.
The hawks may argue, of course, that during the inflationary 1970’s, tightening bank credit did NOT stop Volcker’s Fed from a hawkish rate hike policy.
But let me remind again that 2022 USA (with a 125% debt to GDP ratio) isn’t the Volcker era, which had a 30% ratio.
So, I’ll say it once more: The US can’t afford a sustained (Volcker-like) hawkish (rate-rising) policy–unless you believe the Fed is under direct orders from Davos to destroy America, which, I suppose is a fair belief, but one I’m not ready to embrace (yet)…
Despite Powell’s fear of becoming another Arthur F. Burns who let inflation run too hot, and despite his failed attempts throughout 2018, and again now, to be the tough-guy at the Fed, I still feel the Fed, for all the narrative points/reasons set forth above (including falling US tax receipts in July), is waiting for more weak economic data to justify a dovish pivot toward more QE rather than less inflation.