The challenge with the sentiment promoted by the Fed is that when real people start losing their jobs, reversal becomes very difficult. It is one thing to appeal to markets, most participants arent going to be horrifically affected. 🧵 7
But you send things spiralling down, and you end up taking out tens of millions of jobs, most of whom who have no cushion to weather something like that.
We are getting numbers in that are telling us the economy is not chugging along. New orders have been hit for 4 months in a row. This is something that has a horrific effect on earnings for companies. 🧵 3
The disinflation is still rather strong but can turn to deflation quickly. While many consider inflation to be bad, deflation is catastrophic. The Great Depression was a period of massive deflation. 🧵 5
Powell is adament the Fed is not going to stop raising interest rates. They are operating off the Phillips curve, something that was negated during the 1970s and the stagflation of that decade.
The average person gets obliterated in deflationary spirals. This is one thing Marx and Keynes were right about. The lower end of he economic spectrum take it on the lip. 🧵 6
This is a repeat of 2018 when Powell and company thought that raising interest rates was needed. They went along swearing that things were great, right up to the point they made a quick reversal. 🧵 4
The challenge with the sentiment promoted by the Fed is that when real people start losing their jobs, reversal becomes very difficult. It is one thing to appeal to markets, most participants arent going to be horrifically affected. 🧵 7
But you send things spiralling down, and you end up taking out tens of millions of jobs, most of whom who have no cushion to weather something like that.
That is where the Fed is going with this.
We are getting numbers in that are telling us the economy is not chugging along. New orders have been hit for 4 months in a row. This is something that has a horrific effect on earnings for companies. 🧵 3
The disinflation is still rather strong but can turn to deflation quickly. While many consider inflation to be bad, deflation is catastrophic. The Great Depression was a period of massive deflation. 🧵 5
Powell is adament the Fed is not going to stop raising interest rates. They are operating off the Phillips curve, something that was negated during the 1970s and the stagflation of that decade.
The average person gets obliterated in deflationary spirals. This is one thing Marx and Keynes were right about. The lower end of he economic spectrum take it on the lip. 🧵 6
This is a repeat of 2018 when Powell and company thought that raising interest rates was needed. They went along swearing that things were great, right up to the point they made a quick reversal. 🧵 4