Who are you going to believe? Federal Chair Jerome Powell or your own eyes? Despite some of his colleagues sounding the inflation alarm, Powell does "not see any inflation threat." Either this is mendacity or incompetence, considering that the consequence of adding trillions of dollars to the economy in less than a year guarantees inflation. But Powell wants to reassure the American people that currency debasement and rampant price inflation are not on the horizon – while another data signal suggests that he might be watching an entirely different motion picture than everyone else.
Jerome Powell’s Eyes
Many purchasing managers' index (PMI) readings have been published in recent days. The PMI is a measurement of the current direction of economic trends in various sectors of the U.S. economy.
IHS Markit released its manufacturing PMI, highlighting the sharpest increase in the rate of input cost inflation since April 2011. The composite PMI showcased input costs rising the most since 2019, with demand outpacing supply, causing firms to increase their selling prices to record levels. The services PMI spotlighted output charges climbing to the second-highest on record. Business sentiment is strong, despite their reluctance to hire workers amid growing labor costs.
This is in addition to the commodities supercycle prevalent throughout the agriculture, energy, and metals markets. Bloomberg News recently discussed how skyrocketing corn and soybean prices are raising production costs for farmers, particularly those who raise cattle, hogs, and poultry. Lean hog futures, for example, saw a 15% spike in the week of February 15 to February 19 to trade at just below $1 a pound. And this is the tip of the lettuce iceberg.
Businesses are going to adapt to the evolving landscape by boosting prices across the board. As Bloomberg noted, profit-hungry food producers, such as Tyson Foods, are beginning to slap higher price-tags on chicken, beef, and pork. This will eventually be a game of dominos that will impact supply chains in every economic industry. It is time to squeeze out every cent.
Need Some Quantitative Pleasin’
It is perhaps Powell's typhlosis that he is sticking to his guns, ready to aim and fire with more stimulus. At the same time, he has no other alternative but to continue re-screwing the training wheels on this vehicle of bubbles.
The U.S. central bank submitted its semi-annual update to Congress, promising that "monetary policy will continue to deliver powerful support to the economy until the recovery is complete." But if one combs through past Federal Open Market Committee (FOMC) minutes and prepared remarks from Powell, it becomes apparent that the Fed is committing to some quantitative pleasin' in the post-pandemic economy. For now, the Fed has dismissed tightening and tapering anytime soon. In other words, do not bet your depreciated banknotes on interest rate normalization:
“Tightening monetary policy in the absence of evidence of excessive inflation pressures may result in an unwarranted loss of opportunity for many Americans, whereas if an undue increase in inflation were to arise, policymakers would have the tools to address such an increase."
Showcasing its lack of self-awareness, the Fed wept that household earnings “declined as a result of the pandemic and recession" and "have seen their finances stretched." Of course, their wallets will be stretched even more when price inflation goes through the roof.
Example No. 2325 of Socialism’s Failure
Venezuela is quietly giving up on socialism, making Marxist millennials everywhere shed tears. According to Bloomberg News, President Nicolas Maduro has started transferring state assets to the private sector to revitalize the national economy. The government essentially has no idea what to do with the hundreds of failed state-owned firms, offloading these enterprises to private investors and offering profit in exchange for a share of revenue or products.
These entities will include dozens of coffee processors, chemical plants, hotels, grain silos, and many other organizations that the socialist government seized. Ramon Lobo, a legislator with the ruling socialist party and former finance minister, attempted to save face by noting that the government will still play an important role in the process. "We believe this is positive because it is the synchronization of the public sector with the private sector. The state acts as a supervisor and receives compensation," he said.
When former President Hugo Chavez anointed the vile socialist ideology as its chief economic model, the country fell into a humanitarian crisis. Citizens were forced to eat out of garbage bags, consume zoo animals, and munch on cats and dogs. Hospitals ran out of supplies, stores did not have toiletries, and policymakers suffered a shortage of intellect. But while this is a step in the right direction, the state will also need to remove price controls, abolish production quotas, and eliminate regulations.
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