The Federal Reserve Is the Monetary Equivalent of the Kabul Airport
Speaking to the virtual Jackson Hole conference of the Federal Reserve System, Fed Chair Jerome Powell says that inflation will go away soon. He sees “…upward inflation pressure dissipating and, in some cases, reversing …. As supply problems have begun to resolve, inflation in durable goods other than autos has now slowed and may be starting to fall. It seems unlikely that durables inflation will continue to contribute importantly over time to overall inflation.”
Can’t blame the guy — he’s interviewing for a job with Joe Biden. Powell has to feel for his prospective boss. The Fed is the monetary equivalent of the Kabul airport. After dumping $5 trillion of helicopter money into the U.S. economy and overstretching supply chains in almost every industry, the Fed is faced with the worst inflation since the Carter era. And the worst is yet to come, as I wrote in Asia Times today (extract below). The rent on a new lease has jumped 10% year-on-year according to the search site Zillow, but rent inflation according to the government is just 2%. That’s because it takes a year or two for leases to expire and the new, higher rents to kick in. A huge jump in inflation driven by higher rents is baked into the cake for 2022. That’s the elephant in the parlor, and Powell didn’t mention it.
The Fed can’t control inflation except by reducing demand, and that means slowing the economy. It’s damned if it does and damned if it doesn’t, so it might as well pretend that nothing is wrong for as long as possible — kind of like Biden’s commanders in Afghanistan.
Real income is falling and families are losing ground. Powell’s performance recalls Groucho’s line, “Who are you going to believe — me or your own eyes?” Anyone who has tried to buy a pound of hamburger, rent a house, buy a used car or a household appliance, or any other item in the consumption basket knows that inflation is out of control.
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Continue reading this article published August 27, 2021 at PJ MEDIA.
