Better strap on your parachute and exit the plane ahead of landing because there is no getting out of a crash landing now that inflation is burning the landing gear off the bottom of the Fed’s plane. Captain “Bring-her-home Jerome” Powell was already trying to land his Federal Airlines 747 at the steepest angle of decent ever attempted in the middle of a California forest-fire hellscape of inflation.
Some of us were already concerned about his plan to dump the jet fuel while landing because he didn’t jettison the Fed’s fuel earlier. He was just about to start dumping the Fed’s holdings at a rate of more than 90 billion a month while cutting back the Fed’s financial thrusters at twice the normal rate of deceleration in order to get the plane down to the ground before the rising flames of inflation incinerated everything.
How this was ever supposed to be anything other than a disaster no one but his co-pilot had ever figured out. Co-pilot Janet “I was wrong again” Yellen is now yelling through the intercom, “We’ll all be fine.” She has mistakenly strapped on a pair of welding goggles, instead of her old-fashioned ace flying goggles, and has just assured the passengers of Flight 666, “I don’t see a recession anywhere on our horizon,” though what she meant to say was, “I cannot see the runway through all the smoke of burning inflation and these damned goggles.”
Her sight was none too good even before she put on the wrong goggles. As too many of her passengers recall, Mrs. Magoo once infamously and boldly stated she did not see another financial crisis happening in her lifetime. We’ve had two since then, though she may have been right about them not happening while she was alive, as no one can vouch that she is still alive since there appear to be no signals going from her brain to her mouth.
The geriatric condition of our pilots is of little concern to us because the nation’s navigator is older still and was born before there were airplanes. “Bring me back better” Biden was last seen stumbling up the ramp and is now fast asleep behind the Pilot, having promised to keep his mouth shut. We’re long past the days of needing navigators anyway because this plane can land “on autopilot,” just as it did when Powell attempted a similar landing pattern in 2018 and crashed into the biggest ball-of-flames repo crisis the world had ever seen, bringing down stocks in the process … and that was from a much lower height with a shallower glide angle.
Now Yellen is reassuring everyone in the cabin by saying she is sure the fires of inflation will die down around us as the gruesome twosome land the plane or, at least, she does “very much hope” inflation will be coming down now. If you ask me, she looks a little worried:
Apparently hope is the new strategy. Our veteran pilots have filed their flight plan with the FAA, and announced to the passengers they “hope it works.” Few seemed appeased. No sooner had she confessed her earnest hopes for such favorable landing conditions, than the flames of inflation shot up higher than they have reached in forty years!
With “Throw in the towel” Powell and Mrs. Magoo doling out the bland assurances, what better pair of contrarian warnings could we possibly have for knowing it is time to short the entire US economy and go long on financial survival preparations? Better have packed some lunch with your parachute because you’re going to need it. One of highest flames in CPI was food prices — up 0.7% in just one month for food eaten out and 1.2% for food at home. One thing is certain, prices will remain highly elevated longer than our plane.
In response to the tongues of fire licking our landing gear and spitting off gobs of molten rubber, stocks did as could be expected today and bailed headlong into the ashes of the former California forest, sticking a perfect head-plant landing. Bond prices begged to lead the jump .
One of the tail winds that brought the flames up to our landing gear and burned off Yellen’s hopes just as investors and economists were getting a little too comfortable with their own reality-defying notions that inflation would actually cut the Fed a break, is the one I warned you to expect: Housing costs are still raising the official inflation readout and will be for months to come because they, by government design, have a year-long lag-time for working their way into CPI:
As expected in my own prognostications, housing costs are consistently rising like an arrow shot into the sky, unlike the Fed’s doomed jumbo jet. What we see on the gauge now is, after all, how housing prices were actually rising a year ago, and those numbers are still sparking their way into the government’s readouts. This is inflation you personally have already experienced but which the government likes to dampen in the Fed’s favorite gauges on its instrument panel. It does not do this to trick the Fed but to avoid adding large cost-of-living increases to monthly social-security payments, which are required to follow what the gauges say. Still, it means we fly in a plane with an intentionally false altimeter, and the government has lots of incentive to report the facts as errantly as it can legally justify.
We all know that instruments that falsely tell you you are not as high as you actually are virtually assure you’ll stick a hard landing if you fly by instrument, and the Fed has many times told us its landings are instrument dependent. So, what could possibly go wrong?
[I know I promised last time to bring you a new revelation in this article — at least new to me — and I do not mean to string you along. I just couldn’t resist commenting on the totally predictable inflation that just came through and surprised many while doing exactly what I had said it would do — go up — as well as commenting on the Fed’s silly responses all around this moment. You can be certain that their knowledge of how to land the plane is just as inferior as their knowledge about the weather they are landing in. Now I’ll get back to the promised enlightenment about how and why this inflation could rapidly turn into one of these:]
Reprinted with author’s permission from The Great Recession Blog