Federal Reserve Chairman Jerome Powell is close to being forced to restart money printing despite the presence of inflation.
JP Morgan CEO Jamie Dimon warns; inflation driven by massive federal deficits will stay higher for longer than markets expect. He notes inflation may keep interest rates up. High interest rates harm smaller companies; keep mortgage rates up and credit card rates in the usury range.
Citigroup also put out a new report predicting a “rate-cut bomb.” It expects a series of 10 interest-rate cuts starting in a few months and running to next July. That’s a recession prediction because the Fed pumps rescue rate cuts into the economy only during a recession.
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JP Morgan plus Citigroup: JP Morgan thinks inflation will keep running, and Citi thinks the economy will collapse. Is that a stagflation prediction?
Normally, when the economy slows, the Fed lowers interest rates to goose spending. The new money drives up inflation, trading inflation for the illusion of growth.
The problem now is: We are looking at a slowing economy with inflation; stagflation is already here. The Fed’s standard tools don’t handle that; it’s not supposed to happen. But here we are. So, now the Fed is flying blind.
We’ve been flirting with stagflation since the money-printing orgy of 2020. All the government spending set off the worst inflation in 50 years, followed by the biggest series of rate hikes in 50 years. The surprise has been how long it’s taken for stagflation to hit.
Stagflation was postponed for four years by trillion-dollar federal deficits and massive private debt growth, which delayed it and made it worse.
The government imposed stagflation on an American public already drowning in debt. There are a couple of factors that might mitigate stagflation: geopolitics and Trump.
