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US - Opinion: "The reality is that the economy is contracting and personal finances are worsening. Inflation is high and wages are not keeping up." - May 4, 2022

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  • US - Opinion: "The reality is that the economy is contracting and personal finances are worsening. Inflation is high and wages are not keeping up." - May 4, 2022


    It’s Mid-2022 and the Fed Has Still Done Nothing to Fight Inflation


    05/04/2022

    Ryan McMaken

    snip


    But reciting employment statistics in the midst of forty-year inflation highs and a shrinking economy has its limits. In fact, it betrays a sizable level of denial since, as Danielle DiMartino Booth noted on Tuesday, “Unemployment is the most lagging of all economic indicators.” If Powell relies on unemployment numbers to explain why the economy is “strong,” he will simply “evicerat[e] his credibility.”

    The reality is that the economy is contracting and personal finances are worsening. Inflation is high and wages are not keeping up. Under these conditions, the Fed will desperately want to embrace more easing so as to stave off a full-blown recession. An example of the Fed tightening just as the economy is weakening? That's practically a unicorn. The big exception, of course, is Paul Volcker who in the economically weak days of the early 1980s embraced true monetary tightening to reduce inflation. It’s hard to see how Powell could do the same, as Powell has continually demonstrated that his Fed is very much a Fed committed to kicking the can down the road to serve short term political interests. This is an election year, after all.

    more..

    In November, the Fed started its hawkish talk. Six months later, the economy is weakening, and the Fed has still done virtually nothing at all.


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