The Macro Moment: CPI Hits 7%
(Edited)
We got another big number on the CPI-7% for last month. This is only going to feed into the mantra that the Fed caused this.
In this video I discuss how people are looking to the Fed to solve the issue. The problem with that is the Fed is stepping up...and will crash the economy. It is why every recession from the 1960s either was double dip or got close to it. Inflation is a lagging indicator yet people use this while ignoring the forward looking metrics.
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Check out the last post from @hivebuzz:
I expected the economy to crash eventually because of all the indicators. I am a bit surprised about how used car prices are one of the biggest contributing factors. The Fed can only do so much before things catch up to reality.
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Yes YoY used car prices is enormous. It is amazing how one sector can add so much. It is a big ticket item though and a lot are sold each year.
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Summary:
In this video, Task presents a macroeconomic analysis focusing on the latest CPI report in the US indicating a 7% increase, fueling concerns of hyperinflation. He discusses the Federal Reserve's plan to address this by potentially increasing interest rates aggressively. Task argues that the Fed's actions may lead to economic troubles, citing gasoline inventories as a warning sign. He predicts that the economy will suffer due to rising prices, impacting consumer behavior and overall economic activity. Task also highlights the relationship between energy prices and consumer spending, suggesting that high oil prices could negatively affect the economy. He concludes by forecasting a different economic scenario by the fourth quarter of the year.
Detailed Article:
Task delves into the recent release of the CPI report by the US government, revealing a 7% increase that has sparked concerns about hyperinflation. He acknowledges the skepticism surrounding government statistics but underscores the gravity of the situation, with figures now on the rise. Task mentions prominent figures like Peter Schiff warning about potential skyrocketing inflation rates and hyperinflation looming just around the corner.
The discussion shifts towards the Federal Reserve's response to combat inflation, with Task referencing Chairman Powell's testimony indicating a possibility of four interest rate hikes in 2022, a more aggressive approach than initially anticipated. Despite this, Task raises doubts about the efficacy of such measures, citing research from the St. Louis Fed suggesting that interest rate adjustments have minimal impact on long-term yields, which are more influenced by external factors like news and market sentiment.
Task then transitions into analyzing broader economic indicators, drawing attention to gasoline inventories as a critical metric often overlooked but signaling underlying economic weaknesses. He emphasizes the significance of driving habits as a key driver of economic activity, with rising inventories potentially indicating subdued consumer demand or broader supply chain issues.
The discussion expands to encompass market indicators like bond and gold prices, which Task notes are not aligning with narratives of robust economic growth or impending hyperinflation. He warns of a potential economic downturn if current trends persist, drawing parallels to the events of 2018 when a similar trajectory led to near-recession conditions.
Task delves into the intricate relationship between inflation, consumer behavior, and GDP, arguing that rising prices may not necessarily translate to genuine economic growth, especially when considering inflation-adjusted volumes. He points out that inflated growth figures may be illusory, masking underlying weaknesses in the economy, particularly when energy prices surge, impacting consumer spending habits and causing ripple effects across various industries.
The video concludes with Task's forecast for a different economic landscape by the end of the year, hinting at potential challenges for retailers and consumer-facing businesses amidst evolving economic conditions. Task's insightful analysis provides a comprehensive overview of the current macroeconomic dynamics and the potential implications of policy decisions and economic trends on various sectors of the economy.