Jerome Powell might be done as a useful Federal Reserve Chairman. Not that Fed Chairs provide a use that’s of any real value. They mainly excel at destroying the wealth of wage earners and savers for the benefit of member banks.
But as Powell loses a grip on price inflation the business of supplying credit at a fixed rate of return becomes less fruitful. Consumer price inflation, as measured by the consumer price index (CPI), is rising at an annual rate of 4.2 percent. That’s well above interest rate of a 30 year fixed mortgage, which is currently 3.1 percent.
It doesn’t take much imagination to foresee a CPI over 6 percent. At that rate of price inflation, what good to the bank is a home loan that’s only paying 3 percent? This, among other reasons, is why Jay Powell is toast.
Powell, no doubt, has been going along to get along since long before he took over the reins of the Federal Reserve. He’s always done what everyone asked. He’s rapidly expanded the Fed’s balance sheet to fund massive government deficits and backstop the mortgage market.
Of course, he’s not alone. The central planners in the U.S. and abroad manufactured this price inflation through decades of mass money printing, credit market intervention, and currency devaluations. Anyone with half a brain knew the day would come when the glut of money and credit would jack up consumer prices. Quite frankly, what took so long?
This is a complex question to answer. One that’s much to intricate for us to comprehend. Still, today we attempt to unfold one wrinkle of the complexity:
How the delicate trade relationship between the U.S. and China suppressed consumer prices in the U.S. over the last three decades…and how that delicate relationship has reversed to exasperate rising consumer prices going forward.
The latest out of China, as reported by the Wall Street Journal, is that rising raw materials and a shortage of factory workers have put the pinch on small manufacturers. Some manufacturers have passed higher costs to overseas buyers, including U.S. consumers. Others, however, are refusing to accept new orders.– READ MORE
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