Fed Can't Cut

3.4% CPI is HOT

The mainstream press puts out headlines like “US Inflation Eases to”. I have to laugh at the Orwellian headlines. For what it’s worth, the inflation rate when Trump was in office was under 2%.

If you are like me, you remember the stagflation of the 1970s. We don’t have that. Yet.

If you earned an MBA from a reputable school that taught classical and not Keynesian economic theory, you learned that the long-term goal of the Fed was to have inflation between 1%-2%, and GDP growth at 3% or better. That’s called stability and Biden’s policies are anything but.

Biden’s full of Keynesians so they blame tax cuts of any kind as the root cause of inflation. Spending is ignored. Subsidies are ignored. The growth of the regulatory state is ignored. More of the same will reignite inflation.

3.4% growth in CPI isn’t taming inflation. Follow Brian Wesbury on Twitter if you want to learn. The first quarter GDP was 1.6%. That’s backasswards.

The other good housekeeping rule everyone ought to follow is to toss out 2020-2021 in any dataset. Covid was a once in a lifetime (hopefully) shock. Economic action was extraordinary and unprecedented and leads to blind alleys of analysis.

University of Chicago, now Hoover Institute economist John Cochrane recently posted two blogs taking account of our fiscal situation.

Here is Part 1.

Here is Part 2.

The very liberal and left-wing wealth advisor and Washington Post writer Barry Ritholz is advocating for cuts in the Federal Reserve interest rates. He wants easing now.

We will see a test for the Fed. If they are partisan Keynesians, there will be rate cuts. There won’t be any cuts if they are classical economists, and there might be a couple of rate raises.

I would be shorting interest rate futures today on the rally, not going long. Probably getting killed.

In a sign of just how weak Biden is, he agreed to debate Trump where before he wasn’t interested. However, he put up several pre-conditions around debates which would give him an insurmountable home-field advantage. Trump should agree to debate, but not on Biden’s terms.

100,000 people in New Jersey show up to see Trump on an off day from his political witch hunt trial. Biden couldn’t make his way through a gas station.