Inflation is "transitory" eh?

More likely that Biden is transitory in my opinion

History is a great teacher but not every student can learn from it. Joe Biden was a Senator in the early 1980’s when inflation was rampant. Biden was first elected to the Senate in 1972 and served in the Senate for 36 years. I wonder if he was paying attention? Based on his leadership as President today, it seems likely his nickname “Sleepy Joe” was earned.

Inflation was a modest 4% when Biden took his seat in Congress. By the end of his second term, inflation had hit almost 15%.

American monetary policy tamed its runaway inflation by the mid-1980’s by raising interest rates to north of 20%.

Today, U.S. fiscal policy is the loosest in recorded history with massive deficits and profligate spending. Biden keeps promoting spending policies with trillion dollar price tags, and blames inflation on Vladmir Putin’s invasion of Ukraine. Biden’s advisors saw that invasion coming but Biden did little to prevent it, abrogating the Budapest Agreement of 1994 by which the United States had guaranteed Ukraine independence in return for Ukraine giving up the third largest nuclear arms cache on the planet. Democrat talking heads claim their token increases in interest rates will cool the current inflation rate of 8.5%, the highest since 1981. Good luck with that.

Biden’s head in the sand approach to both foreign policy and domestic economic management will have consequences. Russia will persist in its horrific attack on innocent civilians in Ukraine and Americans will suffer from inflation that is unlikely to abate any time soon. Inflation is the equivalent of a tax on the poorest in society, the Democrat’s voter base. Not all Democrats ignore the risks of inflation - Democratic economist Larry Summers has been outspoken about the risk and the inaction by the Biden Administration. Instead of squarely facing his problems in either foreign affairs or domestic economic risks, Biden spends his time trying to find scapegoats. That failure to lead is seeing ordinary Americans abandoning the Democrat ship faster than rats leaving a schooner hit by cannon fire. Biden’s “approval rating” is now his “disapproval rating” since a majority of Americans on both sides of the political aisle disapprove of his leadership on key issues.

The mid-term elections now only a bit more than six months away are shaping up to be a red wave with Democrats odds on to see their numbers dwindle in both houses of Congress and in my opinion a likely leadership review in the offing. Biden is too old and too lacking in competence to be a credible Presidential candidate in 2024 and Kamala Harris has become a laughing stock for, among other things, her own uncontrollable and awkward laugher when confronted with any important question. Her “cackle” is reminiscent of the same response by Hilary Clinton - a weak attempt to deflect criticism through what can’t really pass as “humor”.

Buckle up kiddies. Inflation is not going away and interest rates so far below the rate of inflation will do little to soften its bite. Central banks are now starting to unwind their bloated balance sheets - the reverse of quantitative easing - but haven’t yet starting selling bonds fearing an absence of buyers. Their theory that letting their bond holdings “roll off” through maturing issues is a laughable since the bloated government deficits will need an equal amount of support from fixed income investors and only the most foolish will buy American treasuries in a rising rate environment.

I project double digit inflation within the next few months and a dramatic rise in interest rates to stem that rise. With 11 million unfilled jobs in America, there is no slack in the labor market so expect organized labor to demand higher wages to keep employees solvent and corporations and institutions more than ready to accede to those demands and pass on the costs to consumers as quickly as they can. As major rate increases start to bite, a deep recession is a serious possibility and barring that, a decade of “staglation” with higher prices and no economic growth.

We have seen this move before, we know how it ends.