Larry Summers sees more rate hikes
Hope for a "Fed put" is misplaced
Harvard economist Larry Summers on Bloomberg.com commented that the jobs market is so firm that rates need to go high to curb inflation. The interview with Summers is worth a few moments listening.
The talking heads who get paid to promote incessant trading by sell-side brokerages and by asset managers who get paid based on a percentage of assets under management (AUM) can’t stop themselves from bullish rhetoric despite the serious risks to their clients. Summers sees higher inflation despite the short-term relief forecast by many economists (including Summers) who is unsurprised that “transitory inflation” factors such as $120 a barrel oil last year have abated somewhat. He points to the firm interest rates with two-year treasuries at recent record levels.
Both the market and many economists seem keen to ignore the persistent and reckless spending of the U.S. (and Canadian) governments and the growing and likely unsustainable level of national debt. Low unemployment today is fueled in part by many workers entering the workforce to earn a second income to keep food on the table and meet nosebleed mortgage costs, neither of which are showing any signs of relief.
Canada’s rampant inflation remains a far cry from the two-percent target. Why anyone things 2% inflation is a good thing is beyond me. At that rate, asset prices double every 36 years with no increase in the actual value of the assets. But our Prime Minister and his sidekicks Ministers Freeland and Guilbeault think this is a good time to double down on the specious claim that CO2 emissions cause climate change and add another “carbon tax” to energy costs. These three politicians have reached the point of desperate need for mental health intervention to resolve their cult-like addiction to a theory than cannot survive even a cursory review against the laws of physics and thermodynamics. A 2022 study published by the Health Physics Society 1demonstrated that the composition of the CO2 isotopes present in the atmosphere today is inconsistent with the theory that the rise in atmospheric CO2 levels results primarily from CO2 emissions, with the following abstract.
This paper joins a parade of recent studies that show the anthropogenic global warming theory is without substance, including a Cornell University publication of a study by physicist Dieter Schindknecht that finds that CO2 concentrations above 300 ppm by volume are saturated and incapable of having any effect on global temperatures. Increasingly, physicists are displaying the courage to go public with their fact-based studies that confront the inane AGW theory with hard data and the laws of physics and expose themselves to the leftist cult which attacks anyone who opposes the left-wing narrative driven by a desire for a global socialist society to mitigate income and wealth inequality.
The outcome of all this effort by leftist governments is built-in and intractable inflation caused by a deep shortage of the fossil fuels that power 80% of the world’s energy needs. This gets a lot worse before it gets better. The solution in democracies is entirely at the ballot box. Elect leaders who eschew climate nonsense, encourage free markets, protect personal freedom and don’t care about pronouns.
In the meantime, keep enough cash to be in a position to benefit from the malaise foolish policies will inflict on capital markets since lower share prices are in the cards and it is only those with cash balances that will benefit from the coming fire sale.
Health Physics Society, 2022.
