Facing political pressure, I predict the Fed will move inflation goalposts

Note to reader: Just passing along an opinion that conforms with my assessments; political regimes that rely on multicultural Socialism and Marxism always crash and burn as social largesse-induced inflation destroys confidence in the system. Why will this time be any different? Perhaps this was the intention all along.

Facing recession and political pressure, the Fed will move inflation goalposts


Here’s a prediction: Six months from now, we will be in a recession and unemployment will be rising. By the third quarter of 2023, Federal Reserve Chairman Jerome Powell will announce that 2 percent is no longer a viable inflation target, and that 3 percent or 4 percent is a more reasonable goal.

Why will he abandon his oft-repeated 2 percent guidepost? Because President Biden will be running for a second term and will be franticly pitching the success of his economic agenda — a “success” that has left Americans pessimistic and poorer.

The pressure on Powell to tee up Biden’s reelection in 2024 will be immense. He has already shown himself vulnerable to political influence; the only possible explanation for not raising rates faster as inflation took root in 2021 is that he wanted to be reappointed to the prestigious Fed post and knew Biden wanted a dove in charge.

In 2023, as consumers finally respond to rising rates and shrinking real incomes, the economy will nosedive. Americans are plowing through the holiday season, determined to celebrate the waning of COVID-19. But they are running out of gas.

That showed up in the November report on retail sales, which dropped 0.6 percent from the prior month, the largest slide this year. We shouldn’t be surprised.

While spending in 2021 and earlier this year was fueled by a pile-up of excess savings and an unprecedented gusher of pandemic benefits, Americans are increasingly resorting to credit cards to buy their Christmas gifts. Credit card debt is up about 15 percent from this time last year, the biggest jump in over two decades.

At the same time, the savings piled up during the pandemic, when many Americans held onto their jobs or received checks from the government and had few opportunities to spend, has been plummeting. The estimated $2.3 trillion nest egg began to shrink late last year; at the end of the second quarter, it had dropped to $1.7 trillion. JP Morgan CEO Jamie Dimon predicts it will be gone altogether by the middle of next year.

Consumer stress is also evident in a sharply dropping personal savings rate, which tumbled to 2.3 percent in October, compared to a more normal 7 percent level. In the past 60 years, only once – in 2005 – did the rate drop that low.

Consumer spending has been propped up by a tight jobs market. That will likely change. Layoffs are widespread in the tech industry today, and Wall Street, too, is shedding employees; the numbers in other industries are gradually rising. Companies’ job postings have fallen sharply, and the number of available jobs, while still high, is declining.

At the same time, the Conference Board reports that consumer confidence is swooning, with near-term expectations especially gloomy. “The combination of inflation and interest rate hikes,” says senior economist Lynn Franco in a press release, “will continue to pose challenges to confidence and economic growth into early 2023.”

Other recent reports confirm a slowing economy. The Fed’s latest read on manufacturing shows output dropping 0.6 percent in November compared to October, and increasing only 1.2 percent compared to last year.

None of this data impresses Biden’s economic team. Treasury Secretary Janet Yellen is unfazed, telling CBS’s audience recently that inflation will be substantially lower by the end of next year, and suggesting that the risk of recession is muted by a “healthy business and household sector.”

Yellen also told “60 Minutes” viewers that “I am very hopeful that the labor market will – remain quite healthy – so that people can feel good about their finances and their personal economic situation.”

Apparently, no one has told the secretary that a majority of the country has for months believed we are already in a recession, and Lending Club reports that in November, 63 percent of Americans were living paycheck to paycheck.

Moreover, U.S. households have lost almost $7 trillion in net worth this year, as stock prices retreated.

Biden continues to boast that his economic plan is working. If the plan entailed splashing trillions of unnecessary dollars onto an already-hot economy, thereby driving consumption through the roof and simultaneously keeping millions of workers from returning to their jobs, driving wages and prices even higher — yes, it is working brilliantly.

Powell has the unpleasant task of mopping up the excess trillions spent by Democrats. Yellen may think a contraction is not “something that is necessary to bring inflation down,” but Powell appears to disagree. He has already encountered criticism from Democrats for his hawkishness, and that chorus will only become louder as the 2024 election looms.

Inflation is cooling, but, at 7.1 percent last month, we are far from a 2 percent target. With wages accelerating and China likely to reopen, inflation could prove sticky. Indeed, Powell made that case in his last press conference, suggesting that wage growth, which is running at about 5 percent, needs to drop to 3.5 percent to achieve 2 percent inflation.

The Dallas Fed reported in October that most workers’ wage hikes have lagged inflation. “For these workers, the median decline in real wages is a little more than 8.5 percent. Taken together, these outcomes appear to be the most severe faced by employed workers over the past 25 years.”

Will Powell work to squash wage increases even as Biden pitches his economic agenda?

Much easier for the Fed chair to move the goalposts – making 3 percent or 4 percent the new inflation target – than continue to clobber the economy with even more rate hikes. My guess: that is exactly what he will do.

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13 thoughts on “Facing political pressure, I predict the Fed will move inflation goalposts

  1. From the beginning I have stated that the Ukraine conflict is a redevelopment project – with Russia acting as the demolition contractor. No one took me seriously and some even consider me a conspiracy nut. But slowly I have seen evidence that proves my conspiracy theory is slowly becoming conspiracy reality.

    I mean, c’mom. Article after article focused on rebuilding Ukraine (practically before the Russians launched the first attack). Shouldn’t the order of operations be first to stop Russia, secure Ukraine, gather information on damages THEN discuss a rebuild plan?? Not when the establishment must generate overwhelming public support for the redevelopment project. How many average Americans prior to the conflict could find Ukraine on the map? How many knew what the flag looked like? But in less than 2 months we had flags hanging on over passes, in front yards, facebook profile pictures, etc.. Maybe time to call it crowdfunding Ukraine project? Perhaps it all ties into the global financial organized chaos? Blackrock is the golden rule: He who has the gold makes the rules.


  2. These benefits were around pre-covid, so why all of a sudden are people dropping out of the work force now? In a hyperinflationary environment with wages rising between 5-6% yoy, the labor force should be climbing, since wages are offsetting price inflation. The covid stimulus is long in the rear view mirror.

    I submit the cascade of these articles that divide blue and red are just that. As the people are getting sicker and dying in their prime, Arlington and McLean Virginia need to divide and divert the multicultural livestock. Throw in the race card, too, and the cattle are none the wiser.

    Shhh…. People are dropping out as they get sicker.

    Six-Figure Blue-State Safety Nets Are Driving Americans Out of the Work Force, Study Finds


    1. Classic SoS headline:

      “Six-Figure Blue-State Safety Nets Are Driving Americans Out of the Work Force, Study Finds”

      No point in reading the article, since you already know what they want you to take away from it, just by reading the headlines. This is the SoS’s equivalent of sending an unsolicited nude picture on a dating app.

      It’s interesting to see Vice and National Review employ the same tactic, despite being apparent ideological and stylistic opposites.

  3. Inequality in annual earnings worsens in 2021

    Top 1% of earners get a larger share of the earnings pie while the bottom 90% lose ground


    Key findings
    •In 2021, annual wages rose fastest for the top 1% of earners (up 9.4%) and top 0.1% (up 18.5%), while those in the bottom 90% saw their real earnings fall 0.2% between 2020 and 2021.
    •Workers in the 90th–99th percentile of the earnings distribution also experienced real losses in 2021.
    •The top 1% earned 14.6% of all wages in 2021—twice as high as their 7.3% share in 1979.
    •The bottom 90% received just 58.6% of all wages in 2021, the lowest share on record, and far lower than their 69.8% share in 1979.

    From 1979 to 2021:
    •Wages for the top 1% and top 0.1% skyrocketed by 206.3% and 465.1%, respectively, while wages for the bottom 90% grew just 28.7%.
    •On an annualized basis, bottom 90% wages grew only 0.6% per year, compared with 2.7% and 4.2% annualized wage growth for the top 1% and top 0.1%, respectively.

  4. Still very high….


    U.S. current account deficit narrows more than expected in Q3

    Q3 Current Account: -$217.1B vs. -$222.0B consensus, -$238.7B previous (revised from -$251.1B).

    The U.S. current account deficit — or the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries —narrowed by $21.6B, or 9.1% during Q3 vs. Q2.

    The Q3 deficit was 3.4% of current-dollar gross domestic product, down from 3.8% in Q2.

    The narrower deficit mostly reflected a decreased deficit on goods that was partly offset by a decreased surplus on primary income and an increased deficit on secondary income.

  5. The full court press to demoralize Americans and to get them separated from homeownership is in full overdrive. I’m even reading how financial advisors and cfps are writing how owning a home is quickly becoming a sucker’s bet. Nothing could be further from the truth, except for those who cannot control their spending. Unfortunately, most people’s financial and spending decisions are determined by their exposure to advertising.

    Given the choice, I would devote whatever money I had to owning my own home versus putting it into a 401k. I see how the Biden regime is working to enhance 401K rules to encourage contributing. Meanwhile, the same forces are trying to make it nearly impossible for these same folk to purchase and maintain a property.

    If the typical person wants any hope of achieving any financial Independence, it is imperative to own your own domicile.

    The Homeownership Society Was a Mistake


    It is a truth universally acknowledged that an American in possession of a good fortune must be in want of a mortgage. I don’t know if you should buy a house. Nor am I inclined to give you personal financial advice. But I do think you should be wary of the mythos that accompanies the American institution of homeownership, and of a political environment that touts its advantages while ignoring its many drawbacks.

    Renting is for the young or financially irresponsible—or so they say. Homeownership is a guarantee against a lost job, against rising rents, against a medical emergency. It is a promise to your children that you can pay for college or a wedding or that you can help them one day join you in the vaunted halls of the ownership society. In America, homeownership is not just owning a dwelling and the land it resides on; it is a piggy bank, where the bottom 50 percent of the country (by wealth distribution) stores most of its wealth. And it is not a natural market phenomenon. It is propped up by numerous government interventions, including the 30-year fixed-rate mortgage. America has put a lot of weight on this one institution’s shoulders. Too much.

    The consensus that homeownership is preferable to renting obscures quite a few rotten truths: about when homeownership doesn’t work out, about whom it doesn’t work out for, and that its gains for some are predicated on losses for others. Speaking in averages masks the heterogeneity of the homeownership experience. For many people, homeownership is a largely beneficial enterprise, but for others, particularly young, middle-income and low-income families as well as Black people, it can be risky. This critique isn’t new (not even at this magazine); in fact way back in 1945, the sociologist John Dean summed up many of my concerns in this quote from his book Homeownership: Is It Sound?: “For some families some houses represent wise buys, but a culture and real estate industry that give blanket endorsement to ownership fail to indicate which families and which houses.” This is my central critique: At the margin, pushing more people into homeownership actually undermines our ability to improve housing outcomes for all, and crucially, it doesn’t even consistently deliver on ownership’s core promise of providing financial security.

    1. I would not be surprised if they take away the tax benefits of owning a primary residence such as mortgage interest tax deduction and property tax deduction . These are traditional tax deductions from the past to help encourage homeowners. With less homeowners and more renters as voters, I would not be surprised to see political pressure to remove these homeowner tax benefits and maybe even add a tax deduction for paying rent. Massachusetts actually allows a $3,000 above the line deduction for paying rent BUT NO tax deductions for primary residence owners.

      I see deductions still staying in place for rental properties given that Landlords have a powerful lobby in the federal and state legislatures.

      Lesson number 1. Be a single family residence landlord. There will be a lot of suckers renting with all the immigrants who will never afford homeownership and all the millennial and Gen Z kids who disdain homeownership and/or cannot afford a house.

    2. I suppose it depends on the financial savvy of the homeowner. I have friends that own a home in Toronto that probably could sell for 1.5 million. However, they are Gen X and they Gen Z children, university age. They proudly told me that they have all this real estate wealth to pass on to their children. They have average jobs, I think they lived off their line of credit when one of them was out of work (just guessing, because as interest rates rise, they’re not living as large). They’re struggling to pay the bills. So I asked when would the sale of this house happen? They probably will live another 20 years, if all goes well, so are they going to sell now and give a chunk to the kids? Then where are you going to live? Or stay in the house and let your kids try to own their home in impossible conditions, saddled with university debts for which you might dig into your line of credit to help them. I think homeowners who used their real estate as bank machines are going to be in trouble now. And I think there are a LOT of people who did that. Homeowners who live within their means and can stay ahead of stupid debt have a better chance of doing well.

      1. IKR – laughable….do you think they think we are that stupid? Or it’s just fake?

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