Powell’s Pivot to Nowhere, by MN Gordon

The Fed isn’t going to reign in price inflation anytime in the next few years and we’re probably looking at a recession, if not a depression. From MN Gordon at economicprism.com:

Slow growth.  High prices.  The U.S. economy – and the global economy – was already facing these disagreeable prospects before Putin invaded Ukraine.

But now, with Russian tanks rolling through the “borderland,” negative supply shocks to the global economy will take things to a whole new level.  The dial on nastiness has been cranked up to maximum.  How all the madness is reconciled will be equally nasty.

The major stock market indexes, for example, had already been slipping and sliding since early January.  But now they’re beset with panic and fear…and sudden moments of greed.  These emotions play out in erratic wave patterns that can be characterized as massive freefalls punctuated by episodic relief rallies.

The initial delight that the potential world war would slow forthcoming Fed rate hikes quickly faded to a sucker’s rally.  The reality of it all is much greater than the variance between a 25 or 50 basis point rate hike.  The fact is, even with the stock market’s decline over the last two months, there’s still much, much further to fall.

The obvious immediate effects to the U.S. economy will be from higher oil prices.  This week, a barrel of West Texas Intermediate Crude – the light sweet stuff – topped $112 per barrel.  And here in the LA Basin, a gallon of regular grade gasoline is over $5.39.

Consumer prices were already at a 40 year high before this latest bout of war madness was triggered.  Now, with oil and gas prices going through the roof, consumers will soon be tapped out.

High prices, in this respect, would appear to be the solution to high prices.  But not so fast…

There’s not only oil supply shocks to contend with.  There’s also food supply shocks…and broken supply chains.

The price of wheat has spiked up to a 14 year high.  This has the makings of a mass food price inflation.  Moreover, the global shipping industry, which was already constrained from two years of coronavirus madness, is being further disrupted.

Bottomline, supply shocks, and greater scarcity, will further propel consumer prices higher.  Inflation has much higher to run.

Here’s why…

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