Inflation Is Accelerating And The Fed Has No Control
To investors, The inflation report this morning shows that the economic measurement is headed in the wrong direction. Year-over-year CPI came in at 3.5% and the month-over-month growth in inflation was 0.4%. This means that inflation is going up, not down, which is a major problem for the Federal Reserve. The central bank has been talking about cutting interest rates. The market has been expecting those interest rate cuts. But this economic report is going to make it nearly impossible for the Fed to follow through on it’s promise. The inflation report is actually signaling that the Fed should be RAISING interest rates, rather than cutting them. That is a big narrative violation. But maybe we shouldn’t be surprised by the hot inflation reading. In the letter I wrote on February 27th to this group, which was titled “Bitcoin Is Sounding The Alarm On Inflation,” I highlighted that bitcoin could be acting as an alarm system for incoming hot inflation:
Later in the letter I stated:
It turns out that this phenomenon of bitcoin as an alarm system was correct once again. The risk now is what I called out in our March 13th letter titled “Will We Repeat The Great Inflation?”
A true resurgence in inflation would be catastrophic to the US economy. The Federal Reserve has done so much work, including raising interest rates at the fastest pace in history, that it is unclear whether they have the commitment to continue raising interest rates from here. I don’t envy their position. It feels like there is a lose-lose scenario in front of them. If they keep raising rates to fight inflation, they will most likely push the US economy into a painful recession. If they don’t raise interest rates, then inflation is going to come back with a vengeance. Regardless of what happens in the coming months, American citizens are the ones who lose. We are living in an economy with 3.5% inflation, an accelerated pace of currency debasement, a national debt that is growing to the sky, over $1 trillion of credit card debt, a housing situation that makes it cheaper to rent than buy in the 50 major metros, and tens of millions of Americans who feel like there is no path forward for them financially. Insane. But the hot inflation reading is now reality. Bitcoin sounded the alarm bell. Hopefully more people will pay attention to this economic signal in the future. Have a great day. I’ll talk to everyone tomorrow. -Anthony Pompliano Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here. Darius Dale is the Founder & CEO of 42Macro. In this conversation, we talk about the probability of different economic outcomes, why "no landing" might happen, what that means, inflation, optimism index, small business survey, and outlook on asset prices. Listen on iTunes: Click here Listen on Spotify: Click here Darius Dale Breaks Down What He Expects On InflationPodcast Sponsors
You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research. You're currently a free subscriber to The Pomp Letter. For the full experience, upgrade your subscription. |
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