Started as a snipe at Trump but then catalogued the Fed's crimes, misdemeanors and just plain F ups over the years. Sure the market's tanked over the tariffs. That's what the market does. But if you don't sell into the hysteria, you've lost nothing. And somebody had to inject sanity into world trade; especially bringing China to heel. If not Trump, nobody else would take that on. Certainly not the human turnip who preceded him.
LOL I thought it was about "bringing manufacturing back to the US" - now it's just "bringing China to heel"? FFS, China DGAF. That ship has sailed. The only caving in Trump has done over trade with China has to do with his allegiance to "da markets" and consumer pain over electronics.
Explain how Trump's policies are about bringing MFG back. Be detailed, please. Use links if needed. I want to know what industries and when. Thanks in advance. (LOL)
Fair trade will bring jobs here that should be here. This isn't only about tariffs. But query why other countries protect their industries. Can't get out of that conundrum can you?
America is filled with morons, that is why! MFG would take years, if not decades, to move back and are Americans ready to pay much higher prices and/or work for lower wages? Trump's idiocy is emblematic of America as a hole (a hole of Neanderthals stuck in the 1950s). Skim the headlines for your news, think little about the details, easily distracted by moronic matters like trans, illegals or Israel (war criminals) and poof, our pockets picked.
Make no mistake, the GOP is evil and the Dems are right there with them. We are a corrupt nation and our courts have merely legalized corruption. The golden rule of American politics- the rich will get richer at the expense of the middle class. The kleptocrats and oligarchs own and control everything and we let them do it because they say "America first!" Nonsense, lies and scumbaggery greed is USA!! F&ck Yeah!
What I think you will find that much of what Trump is doing is explained in detail here. It is strategic, with things like Greenland, the Panama Canal and much else interconnected.
If afterwards you are looking for someone to blame, Mr. Taibbi has very clearly pointed you in a specific direction. Tariffs may be the trigger, as Deep Seek was before, for a stock market selloff, but look no further than the Fed for the problem.
I'm not a Trumpie, but I can explain. Tariffs make foreign goods more expensive. If there are local industries, then this enables them to raise their prices. It also enables local firms to raise prices for local labour. So far, so New Deal. But tariffs create opportunities for local industry to start up, employ local workers. So, tariffs will put up prices. Probably. But will likely employ more local labour AND drive up wage rates. Again, very New Deal. Who will pay the higher prices? Certainly the elite. They'll pay more for their Ferrari's, expensive jewellery, perfume, labour to mow their lawns, service their pools, serve their margaritas. The rest? The working class will probably net benefit, and psychologically from having better paid jobs. Middle class? Possibly a wash, but dunno, really. Elite? Worse off. That's really why they're squealing so much.
The very fact this post/reply got double my likes is such a testament to Racket's enshittification now. Like you didn't even bother to try explaining anything, but you were flooded by likes. This is fuckin high school. Matt and Walter have failed us, they just got rich.
Actually it's about personal grift, permanently crashing the U.S. economy and securing total social control over the entire U.S. population---with a helping hand from all the phony christians who are actually hard core (and I mean HARDCORE) christo-fascists with a strong Nazi aftertaste and hints of totalitarianism and a strong finishing bouquet of rat-infested gulags for those who choose to eschew the new Nazi-"christian" dispensation.
Ultimately replacing the dollar with crypto and bitcoin. And the big kahoona, the wet dream of wet dreams for the Muskovites and crypto bros and gals---their very own "Network State," where they rule and we grovel!
I dunno, it all sounds rather unpleasant to me. Cabin in the woods for me, thank you very much.
You might enjoy yesterdays edition of Matt Stoller's Substack BIG. It outlines the "airbrushing" out of our political leaderships anti-monopoly stance in the 30's and 40's. His report on the connection between monopoly and the rise of facism in Hitler's Germany (and elsewhere) is worth reading.
Good recommendation, as long as the history books are written by actual historians and not activists such as Nicole Hannah Jones and the idiot 1619 Project. Or literary scholars and activists Geraldine Heng or Cord Whitaker, et al. Try “Not Stolen” by Jeff Fynn-Paul to start with. You’ll need to have nuance and facts, not activist nonsense that contains half truths and can be debunked in short order under scrutiny.
It would be nice if more things were made here (a lot is still made here, actually), especially if it’s quality that lasts. The only way to compete against slave wages elsewhere is through automation, which in turn means relativity few jobs created. Politicians like to lie that there will be semi-skilled assembly line jobs that will provide a middle class income; it will never happen.
I worked an entire career in manufacturing, in consumer products and then health care, including at the global level, not one plant (though I worked in plenty of plants). The number of people in plants is dizzying. And more plants are being planned for growth. Good jobs that pay well and have good benefits. And this nonsense that young people will never work in a factory is proven wrong every time there are good paying jobs open.
Saying that manufacturing here will not produce jobs is not only contrary to economic knowledge, it's just dumb.
I hope you will talk a little about automation, how it will impact American manufacturing. Will the nature and number of manufacturing jobs change significantly?
Logically, that’s not true. There’s no incentive for automation other than significantly reducing the number of people and wage outlay required. Otherwise, why do it?
The point is, semi-skilled workers like the “olden days” won’t have a middle class income. And there won’t be armies of workers in huge plants, like before.
Could be, but this approach has the same dangers Progressives are famous for: addressing one issue without taking into account its side-effects. I still think if’s worth a try, because what we were doing was going off a cliff, especially for regular people.
It's worked in a lot of places, hopefully again here. One problem is the private equity vultures are snapping up small businesses, like veterinarians, medical clinics, grocery stores. They have no local loyalty, just either profit or liquidation. (I live near a small town in Texas, by the way.)
"I suggest you deploy capital to small businesses and see what an impact tariffs are already having."
What the fuck does this even mean? The only impacts Trump's tariffs have had is to beggar small businesses and individual citizens---and all those who are seeing their 401k accounts and retirement savings circle the drain.
And that is all Trump's tariffs will accomplish because that is what Trump's tariffs are designed to do.
Thanks, but I'll hang on to my own capital, not that it will be worth much after Trump and Musk pilfer it and start feasting on it---the millions of IRA's, 401ks. Your kids' lunch money...
Had no idea. Hard to believe. You wouldn't logically think this of China as the Chinese only have 4 times the population and fifty times the industrial capacity of the U.S.
China installs way more than 4 times the number of US robots and has a higher robot density as well. The US isn’t competing with slave labour but with superior automation in China.
The U.S. is competing with a totalitarian state that currently hosts 1.4 billion citizens.
And China, as do most other Asian nations, has a well-developed, and planned (and controlled) state industrial policy. One policy initiative was an aggressive build-out of robotics for Chinese industry and manufacturing.
The CCP snapped its fingers and the robots magically appeared. That's how the CCP rolls.
Taking the the current global technological regime into consideration, it's quite obvious that the U. S. will never compete with the rest of world, let alone China, without a serious, coherent industrial and manufacturing plan that weds both government and industry in the same common goals.
Brace yourself for a shock: The Trump admin *still* has not laid all its cards on the table to reveal its true intentions.
It may not be about international trade at all.
A lot of analysts have observed signs suggesting China may be preparing for an invasion of Taiwan. It's possible the Trump administration's real goal is to destabilize China to make military action more difficult, or else to goad them into a premature attack.
That's just pure speculation of course. But in light of the moves by both countries lately, it appears there's something much bigger at stake than China's ability to sell plastic garbage to US consumers.
You nailed it! The priorities: defeat the CCP in their prelude to control the world via unchecked economic & potential WWIII kinetic war; put the US economy back on track to sustainable fiscal conditions; reset the world’s global trade system based on post-WWII “rules” where the US & $$ pay for everything
It’s about many things. Too many for some to grasp, but if they’d calm down, park the hysteria and give it five minutes we might actually accomplish good things. Unless Powell demonstrates his usual incompetence and bad judgment, then it’s a toss up.
China's ambitions are now laid bare. China under Xi Jinping has been run to benefit an extremely small minority. Ethnic and ideological diversity has not been a priority for China's elites within China. It would be foolish to expect ethnic and ideological tolerance from Xi Jinping's China.
Something that unfortunately does not receive a lot of attention is the extent and depths to which the international Chinese mafia is embedded in the CCP. And they have a firm, ubiquitous presence around the globe.
Like Putin's oligarchs, the various mafia dons have free reign to terrorize in the name of the CCP and manufacture anti-American propaganda at will, just as long as they don't start getting any ideas about the politics of the CCP.
Among many other unpleasant characteristics, China and Russia are two authoritarian nations that also are unapologetically gangster states that our man Donny wishes to emulate.
If China has an Achilles’ Heel, it is time. Birth rates are down in most first-world nations, but the ChiComs’ enforcement of the “One Child” policy on its citizenry in the last half of the 20th century mean it’s population will decline much sooner/faster than other nations.
This looming threat has an oversized impact on China’s macro and micro-level vision and strategy. Things aren’t as rosy for the Chinese as some want us to believe.
No doubt China will receive rather poor demographic news in the coming years. Birth rates are falling all over the world in developed nations, and most of them in the West will face similar demographic bottlenecks.
For example, the U.N. Department of Economic and Social Affairs projects that declining birth rates combined with an aging population in both Italy and Japan could reach crisis levels in 30-40 years.
Wealth produces longer lives, smaller families, fewer able-bodied workers, and lots of old people to take care of.
And the U.S. was ambitious enough to contribute to Chinese ambitions by moving its industrial plant there and everywhere else, at the time a very ambitious plan for U.S. industrialists and politicians.
Thanks for distilling the problem that we all understood already. Now, if you'd like to engage in the "what do we do about it?" discussion, there's no doubt you'd have value to add.
Or you can keep sniping, until you move to that cabin in the woods.
It's true. Tariffs have been about many goals in the last few months. Many of the goals have ben contradictory. Here is a (partial?) list.
Tariffs are a way to get manufacturing back into the US.
Tariffs are about getting other countries to pay for their fair share of defense.
Tariffs are about bringing China to heal.
Tariffs are about pressuring neighbors to secure the borders.
Tariffs are an emergency reponse to fentanyl.
Tariffs are a negotiating tactic which will ultimately bring down trade barriers.
Tariffs are replacing the income tax (External Revenue Service).
I think the truth is closer to "Trump just like tariffs. He's Tariff Man." Then his minions have to try to figure out how to sell them. The sales slogans don't actually have to make any sense.
Trump's tariffs are actually two things: a means of destroying the American economy, and a distraction for the fact that Trump is both destroying the economy as he also loots the American economy.
Don't believe King Chaos is the man to "inject sanity" into world trade. So, you'd rather dissemble ridiculously rather than admit that, hey, maybe these fuckin' tariffs don't work and the President just might be criminally insane. This seems more accurate to me.
Sure, we're all paupers, at least the free ones who are living in the forests, and most of the not-too-alert-folks are sequestered in the gulags and even have hot water on the weekends. The gulags all have mattresses on the bunk beds...so why all the cavilling?
No pain, no gain. It certainly holds true in the case of Trump’s tariffs. If we can weather the period between pre-tariff & a stronger American manufacturing core, it will well be worth it. The problem is that people are hooked on next day cheap crap simply by swiping or touching their phones.
"But if you don't sell into the hysteria, you've lost nothing."
Yup! I scarcely ever look at my stocks and couldn't care less if they're up or down. Pre-Covid, post-Covid, pre-Biden, post-Biden, pre-inflation, post-inflation they've continued pouring dividends into my account, regardless, and that's all that matters to me.
Matt, thanks for summarizing the vaunted Fed's shortcomings--missing trends, understating inflation early on, malfeasance and corruption of many of its Governors, and stonewalling of Congressional investigations. I was unaware of much of this, especially examples of Presidential arm-twisting of past Fed chairmen.
You could also mention the Cantillon Effect, whereby those closest to the new money supply benefit most when new money is injected into the economy--another 1-percenter windfall.
But "crashing" in the market may have been a bit of hyperbole, Matt. The DJIA and S&P 500 are down 15% from their high--more of a "correction" than a "crash". The dollar is down 9% for the year per the DXY (compares dollar value to a basket of major currencies), which should benefit our exports, dampen enthusiasm for our imports, and perhaps lead to more on-shoring.
Because this is a totally unnecessary, man-made drop. It's similar to how people get more worked up by a terrorist crashing a plane than a plane crashing due to mechanical failure. Actually it's worse, because in this scenario, the man-made disaster threatens to have far-reaching consequences for our reputation as a reliable trading/security/etc. partner.
So Biden giving free money to everyone and huge budget deficits wasn't a man-made-drop? The inflation just naturally occurred because of the phase of the moon or some such event? I think not.
Deficit spending during COVID was within the norm for western nations, so Biden's "free money" didn't signal any kind of break with accepted policies. That's why inflation has been worldwide. Trump's unnecessary tariffs (paired with his weird, victim-complex belligerence) is a break with the norm, and is spooking markets.
Excellent point. I guess it's just bad luck for Trump that markets nosedived under him. That dastardly Biden must have fixed it that way to make Trump look bad! But at the same time, Biden is incompetent and senile. Maybe Trump can turn this around by changing his mind about tariffs 10 more times. If there's one thing markets love, it's arbitrary policy decisions dropped in the middle of the night via a tantrum on X.
"When Biden took office on January 20, 2021, the S&P 500 was at 3,816. As of the date of the U.S. Bank report, July 12, the large cap benchmark was over 5,600 for a total return of 48% in almost exactly 3.5 years. That’s an annualized return of about 12%, which is higher than the historical average of the S&P 500.
"Biden’s term was marked by two separate bull markets, with a bear market sandwiched in between. In 2021, Biden took over in the middle of a bull market and the S&P 500 returned 27% that year, while the Nasdaq Composite climbed 21%.
"In 2022, U.S. stocks had their worst year since the Global Financial Crisis in 2008, as the S&P 500 fell 19% and the Nasdaq was down a whopping 33%."
"But the end of 2022 began a new bull market, which we are currently in. In 2023, the S&P 500 climbed 24% while the Nasdaq gained 43%, erasing all of the losses from 2022. It was the highest annual return for the Nasdaq since 2009."
"In 2024, the bull market continues as the major large cap indexes have all set all-time highs. Year-to-date as of July 24, the S&P 500 is up 16% while the Nasdaq has increased 18%."
It is a self-induced roller coaster by the rich to get richer. It's been fakery since wall street dumped long term analysis for short term gains to legitimize the 'new' market swings to their advantage. I've lived through too many of them.
In 2028 we will have the same view of Trumps' actions as you have presented above for the previous administration. We will sill what the case is then. Anything else right now is at best a guess and at worst projection.
I posted this (below) a few weeks ago, to show how overpriced the S&P 500 was (and still is), relative to PE. Matt made a good observation about Greenspan’s “new paradigm” about the value of new companies with no earnings or capital. This belief is still current, apparently.
Yes! The market was going to have a correction this year regardless of what Trump did, although I agree that uncertainty around tariffs is exaggerating the ups and downs.
In recent podcasts Walter Kirn pointed out the market has been desperate for any excuse for a downward correction for a year or more. I thought Matt concurred so he should have mentioned that here probably.
They say generals always fight the last war, and the way the Fed addressed COVID was perfect evidence of that.
The Fed attacked the COVID slowdown the same way they attacked the demand collapse after the burst real estate bubble - by driving interest rates to 0% and buying large quantities of Treasuries and mortgage backed securities.
Since this was not a demand-driven slowdown, once the lockdowns were lifted and people returned to work, all that excess liquidity had to go somewhere, and it went to the real estate market where prices rose 20% - 25%.
Shelter inflation, driven by high real estate prices, was the main source of inflation since.
The Fed's policy error was not uttering "transitory" - it was creating the inflation in the first place.
Great points....I was trying to imply this with the "clean up" of the liquidity flood they left after COVID QE and ZIRP. From their vantage point, the Fed should have been able to see the amount of fiscal stim being poured in as well as the mother of all mortgage refinancing waves they triggered with QE that put hundreds of extra dollars a month in homeowners pockets...
They should have at least stopped QE well before they did in 2022....they were afraid of a 2013 style taper tantrum I guess.
The covid inflation was caused by the Congress, not the Federal Reserve. Several of the governors including Powell warned pelosi that the House’s fiscal policy of handing out money would be inflationary but she did not care.
The Federal Reserve manages monetary policy, but they can only obey the Congress when they act with fiscal policy. The Fed has been warning for twenty years that Congress must rein in spending.
Having now read Matt's David Brooks column and this one on the Fed/Trump imbroglio back to back at 5am, it's impossible not to see the two as directly related: a) Brooks and the Bobos are running around with soiled undershorts in re: Trump and all the rest of us breaking all their stolen playthings, and b) the Fed is an abomination of a plaything that also needs breaking. I'm still in support of breaking things and attending a daily "auto da fè" or two. It's early innings.
The leftist Main Street media refers to the current volatility as the stock market crashing. Please don't become like the sheep and repeat the narrative. The market is in a correction. Look at the 27% correction in September 2022; since then, it has been up +50%. Look at the market valuations, stretched P/E, and average earnings projections. All of this is normal. Put Chicken Little back in the hen house.
Inflation is only caused by too much money supply. The Biden/Fed policies pumped money into the economy causing high inflation. Price inflation is a symptom of too much money chasing too few goods.
The Fed has a number of tools at its disposal to reduce inflation - higher interest rates - including reducing money supply but this would not sit well with the money-men reaping the rewards of a glut of money.
Tariffs inevitably increase consumer prices, which will dampen demand then lower prices, lower price inflation. Producers will see their costs increase and dampen their exuberance for borrowing cheap money to increase output. Unemployment will rise.
What is needed is deflation and fall in the $. This would boost exports and redirect consumers to buy domestic product and boost domestic production. Employment will pick up.
When Governments manipulate an economy to increase consumer demand - the aim being to increase tax-take, lower unemployment - by increasing the money supply, low interest rates, this is known as “boom”. It is inevitably followed by “bust” which will be much bigger, more painful than if Government had minded its own bloody business.
“Bust” is inevitable but Governments try to avoid it by more of what caused it - but the market always wins.
The Biden era “boom” and inflation cannot be corrected by Trump’s executive orders or in his four year term. The economic damage is deep and tax to work its way out of the system by natural market prices = much pain.
These are all good points. To your point about monetary and fiscally induced inflation under Biden, I do not think raising interest rates to address price increases created by tariffs (or an adverse supply shock like an oil embargo) is an effective policy. I think it would be needlessly destructive and ineffective and might only appear constructive in the long run due to the destruction it yielded. It is worse than giving antibiotics to someone who has a viral infection. If signs of monetary inflation resume, I would say raise rates but one is not going to drop the price of eggs or Chinese crap, by raising interesting rates.
I may not have been clear, interest rate rise is to tackle inflation prior caused - nothing to do with the effect of tariffs. (Tariffs have been around for centuries- about time they got the adverse publicity they deserve.)
Interest rates should have been raised much higher prior to Trump, but would have been recessionary and as I said Governments avoid doing what they should to correct the boom they caused by their reckless policies. The only way quickly to reduce price inflation is to raise interest rates to at least, or above, the inflation rate. That hurts, but is over quickly - the equivalent of tearing a Bandaid off quickly, or peeling it off slowly.
Whilst interest rates help with price inflation, the root cause it too much money and the Fed has to use other tools like selling its securities and destroying the money, for example, to take money out of the financial institutions.
Raising interest rates has two effects: first it makes borrowing for business and consumers more expensive, this reduces demand for credit and debt; second it encourages saving, less buying. Both then reduce consumption/demand. When demand falls, price falls as suppliers try to encourage people to buy. More expensive borrowing discourages businesses from misallocation of resources to serve an overheated consumer market.
Tariffs - and their buddies, non-tariffs - are BAD. The only winners are those businesses and market sectors protected by them - even that is short term as everyone is a consumer. They harm consumers, small businesses and workers throughout the economy and overall dampen economic progress.
I certainly don’t advocate them, but they do reduce consumer activity, and economic activity. The by-product may be to reduce price inflation, but the cost is increased unemployment. Unless… there is a devaluation in the currency which stimulates consumption of domestic produced goods - imports being more expensive with a weak $ - and boosts exports as USA goods become cheaper to the World.
Some opine the Trump Tariff escapade is actually designed to cause devaluation of the $. This would be much better for the US economy than higher import tariffs.
In short there are two antagonists at play here: Main Street and Wall Street. High $ value, money sloshing round the top of the economy, high consumer prices = higher profits = higher share values which please Wall Street at the expense of Main Street.
Trump’s tariffs threw a big spanner in the works to the displeasure of Wall Street - and if it’s bad for Wall Street, that’s a sure sign it will be good for Main Street. We’ll see.
Thanks, rereading my own comment, I was somewhat unclear myself. I was basically saying rate increases will do nothing to directly reverse inflation created by a supply shock or by tariff increases and agreeing with your point about interest rate increases addressing the Biden/Powell fiscal and monetary inflation. I also agree that rates should have been raised long ago, before Trump's first term.
The Fed and the US gov has been protecting the assets of Wall St over the needs of Main street for decades. It's so sad to see liberals freaking out over Trump attempting to do something for Main St for once.
"It is worse than giving antibiotics to someone who has a viral infection. " Actually, physicians seem much more willing to give antibiotics, at least to people struggling with respiratory viral infections. They learned during Covid that opportunistic bacterial infections pop up in those whose immune systems have taken a beating fighting the virus, and probably many old people in particular die from bacterial pneumonia than from common cold or mild influenzas.
And while overuse of antibiotics can lead to resistance (particularly if the course is not finished because they feel fine), this is mostly a hospital/ nursing home phenomenon. And most physicians I know who travel abroad take prophylactic antibiotics to avoid Montezuma's Revenge or other bacterial infections novel to their bodies.
Interesting to know - thanks! I was suggesting giving the antibiotics was ineffective but harmless (as opposed to raising rates which actually would do harm to interest rate sensitive parts of the economy while not reducing the cost of eggs -supply shock- or Chinese goods subject tariffs). It is good to know that antibiotics can be beneficial in some circumstances, and your explanation makes good sense.
Good morning. I'm the weirdo who handed Walter Kirn the Tom Sawyer in Russian book after his talk at Fairfield University several weeks ago. When he noticed it was a Russian translation, I reminded him yada, yada, yada. I hope one or both of you enjoy the book.
It does also seem that the Fed has sought to create bubbles and busts rather than sustainable growth, at least during my adult life. It works not for me and you, but for it's owners.
An interesting point. The Mainstream Media et al likes to make it sound like Trump broke a wonderfully functioning economy, with a stable political situation (as long as “misinformation” was controlled). The fact is he was voted in because enough people could see with their own eyes it was already failing. If it collapses, Trump will get the blame, forgetting that it was doomed already.
The Fed is the Breaking Bad A1A carwash for Wallstreet. Interest rate policy seldom has anything to do with their “stated purpose” of “fighting inflation”- they are there to coordinate the Corporate Socialism US taxpayers have so generously granted the financial sector.
We went through 20 years of 0% interest rates so that the Fed could facilitate repairing the banks balance sheets from their malfeasance that caused the GR of 2007-2009. This was not mismanagement (no way Jamie Diamond thought hosing prices would keep going up). People were making a ton of money and the Fed facilitated it. They all recognized that the emergency breaks of “Capitalism”- where these institutions would have died by their decisions and some people might even go to jail (S&L Loan Crisis) were largely dismantled.
With regards to tariffs causing inflation- you already have major retail institutions saying they’re starting to see things they haven’t seen in years, like people picking food over medication or forgoing purchases of things they need… can’t get blood from a stone. Too much money printing, debt and shitty geopolitics are all contributing factors to interest rates vs the ebbs and flows of “economic activity” imho. There are less buyers for the meth, so they need to raise the price….
Agreed. Wouldn't want the workforce to get any pesky ideas like demanding a living wage to deal with the government completely trashing the currency through money creation, otherwise you'd have to do something crazy like allow 15 million replacement workers to walk into the country to keep wages - and unemployement- at an "acceptable" level....
Powell is in a very difficult position, not all of it his fault.
He knows full well that tariffs are in no way shape of form inflationary. The total amount of money does not change from tariffs.
And he knows that this inflation, unlike other versions, has been caused by Congress’s fiscal policy over covid relief, not the Fed’s monetary policy. Congress ordered the Federal Reserve to print money and handed it directly out to everybody in the country.
And he knows that if they don’t lower rates the national debt will overwhelm the country .
But he also knows we have been in a deflationary environment for years now.
This piece presupposes that "The Fed" isn't completely controlled by... OK, YOU fill in the blank. Didn't the FJB "Inflation Reduction Act" (!!) print a gazillion greenbacks twenty minutes ago? Common Wisdom™ has always said the Fed's primary "mandate" was to "control inflation" and The Fed has done anything BUT control inflation. Deplorables™ scream into the void "STOP printing money, @ssholes!" but our shouts fall on deaf ears. Covid, my frens, now THAT was a sweet, sweet Operation from on high, now wasn't it? These scumbags. Greedy, corrupt, dare I say it, evil? The Fed. End the god-damned Fed.
The Fed's main job is and always has been to protect "assets" by keeping their values high. Prior to covid bux, inflation from too much cheap money sloshing around was contained within certain areas: fine art, high fashion, fancy jewelry, stonks, real estate, insurance, etc. (Everyone but bond holders and savers made out.) Biden bux rained on Average Joe made inflation hit everyone, not just the asset owners.
I hadn't heard of the historical nugget about LBJ pushing the Fed Chair against a wall. He's fortunate LBJ didn't bring out "Jumbo" something the secretarial pool was well aware of.
Started as a snipe at Trump but then catalogued the Fed's crimes, misdemeanors and just plain F ups over the years. Sure the market's tanked over the tariffs. That's what the market does. But if you don't sell into the hysteria, you've lost nothing. And somebody had to inject sanity into world trade; especially bringing China to heel. If not Trump, nobody else would take that on. Certainly not the human turnip who preceded him.
LOL I thought it was about "bringing manufacturing back to the US" - now it's just "bringing China to heel"? FFS, China DGAF. That ship has sailed. The only caving in Trump has done over trade with China has to do with his allegiance to "da markets" and consumer pain over electronics.
Lol yourself. It's about all that, and more. Wake up.
Explain how Trump's policies are about bringing MFG back. Be detailed, please. Use links if needed. I want to know what industries and when. Thanks in advance. (LOL)
Please go f yourself. If you want a research assistant, hire one,
Tariffs aren't bringing manufacturing back, they're a ruse. That's why nobody in Trumplandia can explain them. MIGA.
Fair trade will bring jobs here that should be here. This isn't only about tariffs. But query why other countries protect their industries. Can't get out of that conundrum can you?
America is filled with morons, that is why! MFG would take years, if not decades, to move back and are Americans ready to pay much higher prices and/or work for lower wages? Trump's idiocy is emblematic of America as a hole (a hole of Neanderthals stuck in the 1950s). Skim the headlines for your news, think little about the details, easily distracted by moronic matters like trans, illegals or Israel (war criminals) and poof, our pockets picked.
Make no mistake, the GOP is evil and the Dems are right there with them. We are a corrupt nation and our courts have merely legalized corruption. The golden rule of American politics- the rich will get richer at the expense of the middle class. The kleptocrats and oligarchs own and control everything and we let them do it because they say "America first!" Nonsense, lies and scumbaggery greed is USA!! F&ck Yeah!
Let me help you out, assuming your plea is genuine and not some anti-Trump rant.
Check out Michael Shellenberger and Oren Cass on the topic here https://substack.com/home/post/p-160593070
Check out Yanis Varoufakis on UnHerd at https://unherd.com/2025/04/will-liberation-day-transform-the-world/ and https://unherd.com/2025/02/why-trumps-tariffs-are-a-masterplan/
Check out Michael Every at https://www.rabobank.com/knowledge/our-experts/011085368/michael-every or watch here https://www.youtube.com/watch?v=s7EwfjK0FP0
[Rabobank a few years ago had a report Deep Ship. There is now an office of shipping at the White House.]
Here is an excellent interview from the Hoover Institution covering China and trade https://www.youtube.com/watch?v=goEU7C1xmis
What I think you will find that much of what Trump is doing is explained in detail here. It is strategic, with things like Greenland, the Panama Canal and much else interconnected.
If afterwards you are looking for someone to blame, Mr. Taibbi has very clearly pointed you in a specific direction. Tariffs may be the trigger, as Deep Seek was before, for a stock market selloff, but look no further than the Fed for the problem.
I'm not a Trumpie, but I can explain. Tariffs make foreign goods more expensive. If there are local industries, then this enables them to raise their prices. It also enables local firms to raise prices for local labour. So far, so New Deal. But tariffs create opportunities for local industry to start up, employ local workers. So, tariffs will put up prices. Probably. But will likely employ more local labour AND drive up wage rates. Again, very New Deal. Who will pay the higher prices? Certainly the elite. They'll pay more for their Ferrari's, expensive jewellery, perfume, labour to mow their lawns, service their pools, serve their margaritas. The rest? The working class will probably net benefit, and psychologically from having better paid jobs. Middle class? Possibly a wash, but dunno, really. Elite? Worse off. That's really why they're squealing so much.
No one can explain what a tariff is? No one can explain the trade deficit? No one can explain what exactly? https://apnews.com/article/jobs-economy-unemployment-inflation-federal-reserve-trump-d43b08bda57cb5d90b5bac1f092e1f3d
The very fact this post/reply got double my likes is such a testament to Racket's enshittification now. Like you didn't even bother to try explaining anything, but you were flooded by likes. This is fuckin high school. Matt and Walter have failed us, they just got rich.
Cry me a river.
To the sea...
Take a deep breath Bruce. :)
You can’t manage it on your own?
Actually it's about personal grift, permanently crashing the U.S. economy and securing total social control over the entire U.S. population---with a helping hand from all the phony christians who are actually hard core (and I mean HARDCORE) christo-fascists with a strong Nazi aftertaste and hints of totalitarianism and a strong finishing bouquet of rat-infested gulags for those who choose to eschew the new Nazi-"christian" dispensation.
Ultimately replacing the dollar with crypto and bitcoin. And the big kahoona, the wet dream of wet dreams for the Muskovites and crypto bros and gals---their very own "Network State," where they rule and we grovel!
I dunno, it all sounds rather unpleasant to me. Cabin in the woods for me, thank you very much.
Congratulations for the dizzying amount of name calling in that post.
You have to name names to be name calling.
Oddly, the only prez that did any of that was FDR. Just sayin'
Sounds like a good description of the WEF, the polar opposite of Trump.
Be careful, your projection is showing.
My zipper is broken and I'm not wearing underwear. Thanks.
Watch out for the bears out in them woods. We'll miss ya.
You might enjoy yesterdays edition of Matt Stoller's Substack BIG. It outlines the "airbrushing" out of our political leaderships anti-monopoly stance in the 30's and 40's. His report on the connection between monopoly and the rise of facism in Hitler's Germany (and elsewhere) is worth reading.
Yeah, "LOL" is the last refuge of somebody who's got nothing of value to say.
And insults. Not as bad here as what I experienced over at The Free Press, but on some topics...
Spot on my friend. IMHO.
I've seen a smattering of articles here and there about why China has the ass at the West, but none that summarizes it to the basic facts:
- The West stole land, treasure and materials from China
- The West forced the Chinese to become drug addicts
- The West punished them repeatedly if they attempted to rise up
The Chinese play the long game and - like many cultures that have been in place for centuries (everywhere but the US) - hold major grudges.
Got your own little tiny version of history that manages to tell only one side. Well done.
Thanks! You should check out a history book or two; they are very illuminating.
Good recommendation, as long as the history books are written by actual historians and not activists such as Nicole Hannah Jones and the idiot 1619 Project. Or literary scholars and activists Geraldine Heng or Cord Whitaker, et al. Try “Not Stolen” by Jeff Fynn-Paul to start with. You’ll need to have nuance and facts, not activist nonsense that contains half truths and can be debunked in short order under scrutiny.
It would be nice if more things were made here (a lot is still made here, actually), especially if it’s quality that lasts. The only way to compete against slave wages elsewhere is through automation, which in turn means relativity few jobs created. Politicians like to lie that there will be semi-skilled assembly line jobs that will provide a middle class income; it will never happen.
Many jobs are created, the automation created a need for constant maintenance- electritions, programmers and engineers- jobs Americans actually want!
lol. I worked in a large automated factory that once employed more than a 1000 people, 3 shifts, before it became fully automated.
Now, a staff of 15 is sufficient to get the work done. Automated means AUTOMATED.
I worked an entire career in manufacturing, in consumer products and then health care, including at the global level, not one plant (though I worked in plenty of plants). The number of people in plants is dizzying. And more plants are being planned for growth. Good jobs that pay well and have good benefits. And this nonsense that young people will never work in a factory is proven wrong every time there are good paying jobs open.
Saying that manufacturing here will not produce jobs is not only contrary to economic knowledge, it's just dumb.
I hope you will talk a little about automation, how it will impact American manufacturing. Will the nature and number of manufacturing jobs change significantly?
Logically, that’s not true. There’s no incentive for automation other than significantly reducing the number of people and wage outlay required. Otherwise, why do it?
The point is, semi-skilled workers like the “olden days” won’t have a middle class income. And there won’t be armies of workers in huge plants, like before.
I guess that depends on what semi-skilled means in the modern economy. I hope someone will talk about this.
Factories that create the automation equipment. Medical factories so that we can produce our own medicine instead of India. Think out of the box..
The above is cheap propaganda disseminated by creepy ghouls such as that Lutnick chud.
Tariffs directly level wages allowing American workers to compete with foreign slave labor.
Could be, but this approach has the same dangers Progressives are famous for: addressing one issue without taking into account its side-effects. I still think if’s worth a try, because what we were doing was going off a cliff, especially for regular people.
Small businesses are already lifting .
It works for Germany and China and Austria and Korea and Norway and India and Japan and everywhere else on earth and it will work here
It's worked in a lot of places, hopefully again here. One problem is the private equity vultures are snapping up small businesses, like veterinarians, medical clinics, grocery stores. They have no local loyalty, just either profit or liquidation. (I live near a small town in Texas, by the way.)
Listen to the junior Lutnick!
How does one know if one is or is not "regular people?"
ID tag.
Ya, American workers can't wait to get started on competing with foreign slave labor in the big Global-Race-To-The-Bottom!
Not the most ignorant thing I've read on this site, but...
It has that direct effect for every other country on the planet. It will work here.
I suggest you deploy capital to small businesses and see what an impact tariffs are already having.
"I suggest you deploy capital to small businesses and see what an impact tariffs are already having."
What the fuck does this even mean? The only impacts Trump's tariffs have had is to beggar small businesses and individual citizens---and all those who are seeing their 401k accounts and retirement savings circle the drain.
And that is all Trump's tariffs will accomplish because that is what Trump's tariffs are designed to do.
Thanks, but I'll hang on to my own capital, not that it will be worth much after Trump and Musk pilfer it and start feasting on it---the millions of IRA's, 401ks. Your kids' lunch money...
Psychopaths must be sated!
China installs far more industrial robots than the US. It’s not even close.
Had no idea. Hard to believe. You wouldn't logically think this of China as the Chinese only have 4 times the population and fifty times the industrial capacity of the U.S.
Real head scratcher this.
China installs way more than 4 times the number of US robots and has a higher robot density as well. The US isn’t competing with slave labour but with superior automation in China.
The U.S. is competing with a totalitarian state that currently hosts 1.4 billion citizens.
And China, as do most other Asian nations, has a well-developed, and planned (and controlled) state industrial policy. One policy initiative was an aggressive build-out of robotics for Chinese industry and manufacturing.
The CCP snapped its fingers and the robots magically appeared. That's how the CCP rolls.
Taking the the current global technological regime into consideration, it's quite obvious that the U. S. will never compete with the rest of world, let alone China, without a serious, coherent industrial and manufacturing plan that weds both government and industry in the same common goals.
If they have any goals.
You said that in your original post.
Brace yourself for a shock: The Trump admin *still* has not laid all its cards on the table to reveal its true intentions.
It may not be about international trade at all.
A lot of analysts have observed signs suggesting China may be preparing for an invasion of Taiwan. It's possible the Trump administration's real goal is to destabilize China to make military action more difficult, or else to goad them into a premature attack.
That's just pure speculation of course. But in light of the moves by both countries lately, it appears there's something much bigger at stake than China's ability to sell plastic garbage to US consumers.
You nailed it! The priorities: defeat the CCP in their prelude to control the world via unchecked economic & potential WWIII kinetic war; put the US economy back on track to sustainable fiscal conditions; reset the world’s global trade system based on post-WWII “rules” where the US & $$ pay for everything
"...It may not be about international trade at all."
No shit.
Of all the comments in this thread, this is one of them. Well done.
It’s about many things. Too many for some to grasp, but if they’d calm down, park the hysteria and give it five minutes we might actually accomplish good things. Unless Powell demonstrates his usual incompetence and bad judgment, then it’s a toss up.
Haven't we all noticed smokestack factories springing up to make cheap Chinese goods? They do pop up like tulips in the spring, right?
China's ambitions are now laid bare. China under Xi Jinping has been run to benefit an extremely small minority. Ethnic and ideological diversity has not been a priority for China's elites within China. It would be foolish to expect ethnic and ideological tolerance from Xi Jinping's China.
Something that unfortunately does not receive a lot of attention is the extent and depths to which the international Chinese mafia is embedded in the CCP. And they have a firm, ubiquitous presence around the globe.
Like Putin's oligarchs, the various mafia dons have free reign to terrorize in the name of the CCP and manufacture anti-American propaganda at will, just as long as they don't start getting any ideas about the politics of the CCP.
Among many other unpleasant characteristics, China and Russia are two authoritarian nations that also are unapologetically gangster states that our man Donny wishes to emulate.
If China has an Achilles’ Heel, it is time. Birth rates are down in most first-world nations, but the ChiComs’ enforcement of the “One Child” policy on its citizenry in the last half of the 20th century mean it’s population will decline much sooner/faster than other nations.
This looming threat has an oversized impact on China’s macro and micro-level vision and strategy. Things aren’t as rosy for the Chinese as some want us to believe.
No doubt China will receive rather poor demographic news in the coming years. Birth rates are falling all over the world in developed nations, and most of them in the West will face similar demographic bottlenecks.
For example, the U.N. Department of Economic and Social Affairs projects that declining birth rates combined with an aging population in both Italy and Japan could reach crisis levels in 30-40 years.
Wealth produces longer lives, smaller families, fewer able-bodied workers, and lots of old people to take care of.
China's ambitions were laid bare 30 years ago.
And the U.S. was ambitious enough to contribute to Chinese ambitions by moving its industrial plant there and everywhere else, at the time a very ambitious plan for U.S. industrialists and politicians.
Blowback is a bitch.
To quote a comment I read a minute ago, no shit.
Thanks for distilling the problem that we all understood already. Now, if you'd like to engage in the "what do we do about it?" discussion, there's no doubt you'd have value to add.
Or you can keep sniping, until you move to that cabin in the woods.
"Bringing China to heel", good luck with that. Another example of the typical USA arrogance.
It's true. Tariffs have been about many goals in the last few months. Many of the goals have ben contradictory. Here is a (partial?) list.
Tariffs are a way to get manufacturing back into the US.
Tariffs are about getting other countries to pay for their fair share of defense.
Tariffs are about bringing China to heal.
Tariffs are about pressuring neighbors to secure the borders.
Tariffs are an emergency reponse to fentanyl.
Tariffs are a negotiating tactic which will ultimately bring down trade barriers.
Tariffs are replacing the income tax (External Revenue Service).
I think the truth is closer to "Trump just like tariffs. He's Tariff Man." Then his minions have to try to figure out how to sell them. The sales slogans don't actually have to make any sense.
Ah ha! So that's why it's "the most beautiful word in the English language." Thanks for the insight.
Trump's tariffs are actually two things: a means of destroying the American economy, and a distraction for the fact that Trump is both destroying the economy as he also loots the American economy.
That's all these tariffs are.
Amazing how all other countries have them isn’t it. Will they be destroyed too?
No, apparently tariffs only work that way in America.
Don't believe King Chaos is the man to "inject sanity" into world trade. So, you'd rather dissemble ridiculously rather than admit that, hey, maybe these fuckin' tariffs don't work and the President just might be criminally insane. This seems more accurate to me.
Sure, we're all paupers, at least the free ones who are living in the forests, and most of the not-too-alert-folks are sequestered in the gulags and even have hot water on the weekends. The gulags all have mattresses on the bunk beds...so why all the cavilling?
Right?
Bring China to heel, what planet do you live on?
You're right about the stock market. You're wrong about bonds. You cannot ignore the bond market. They will destroy a country.
No pain, no gain. It certainly holds true in the case of Trump’s tariffs. If we can weather the period between pre-tariff & a stronger American manufacturing core, it will well be worth it. The problem is that people are hooked on next day cheap crap simply by swiping or touching their phones.
"But if you don't sell into the hysteria, you've lost nothing."
Yup! I scarcely ever look at my stocks and couldn't care less if they're up or down. Pre-Covid, post-Covid, pre-Biden, post-Biden, pre-inflation, post-inflation they've continued pouring dividends into my account, regardless, and that's all that matters to me.
So much corruption, so little time. Rand Paul and his father should be put in charge!! End the Fed. Audit the Fed.
When was the last time”good” Fed Chair?
Paul Volker, in the 1980s.
Corruption vs.corruption. So sad to see.
Hell yeah brother
Matt, thanks for summarizing the vaunted Fed's shortcomings--missing trends, understating inflation early on, malfeasance and corruption of many of its Governors, and stonewalling of Congressional investigations. I was unaware of much of this, especially examples of Presidential arm-twisting of past Fed chairmen.
You could also mention the Cantillon Effect, whereby those closest to the new money supply benefit most when new money is injected into the economy--another 1-percenter windfall.
But "crashing" in the market may have been a bit of hyperbole, Matt. The DJIA and S&P 500 are down 15% from their high--more of a "correction" than a "crash". The dollar is down 9% for the year per the DXY (compares dollar value to a basket of major currencies), which should benefit our exports, dampen enthusiasm for our imports, and perhaps lead to more on-shoring.
Yes, funny how these people panicking at the market drop of 15% didn't get upset when the market went down 22% under Biden.
"Stocks plummet on news of Deepening Worries, Growing Concerns, Heightened Warning Signs, and Unprecedented Policy Moves."
Because this is a totally unnecessary, man-made drop. It's similar to how people get more worked up by a terrorist crashing a plane than a plane crashing due to mechanical failure. Actually it's worse, because in this scenario, the man-made disaster threatens to have far-reaching consequences for our reputation as a reliable trading/security/etc. partner.
So Biden giving free money to everyone and huge budget deficits wasn't a man-made-drop? The inflation just naturally occurred because of the phase of the moon or some such event? I think not.
Deficit spending during COVID was within the norm for western nations, so Biden's "free money" didn't signal any kind of break with accepted policies. That's why inflation has been worldwide. Trump's unnecessary tariffs (paired with his weird, victim-complex belligerence) is a break with the norm, and is spooking markets.
Yea, sure.
Excellent point. I guess it's just bad luck for Trump that markets nosedived under him. That dastardly Biden must have fixed it that way to make Trump look bad! But at the same time, Biden is incompetent and senile. Maybe Trump can turn this around by changing his mind about tariffs 10 more times. If there's one thing markets love, it's arbitrary policy decisions dropped in the middle of the night via a tantrum on X.
"When Biden took office on January 20, 2021, the S&P 500 was at 3,816. As of the date of the U.S. Bank report, July 12, the large cap benchmark was over 5,600 for a total return of 48% in almost exactly 3.5 years. That’s an annualized return of about 12%, which is higher than the historical average of the S&P 500.
"Biden’s term was marked by two separate bull markets, with a bear market sandwiched in between. In 2021, Biden took over in the middle of a bull market and the S&P 500 returned 27% that year, while the Nasdaq Composite climbed 21%.
"In 2022, U.S. stocks had their worst year since the Global Financial Crisis in 2008, as the S&P 500 fell 19% and the Nasdaq was down a whopping 33%."
"But the end of 2022 began a new bull market, which we are currently in. In 2023, the S&P 500 climbed 24% while the Nasdaq gained 43%, erasing all of the losses from 2022. It was the highest annual return for the Nasdaq since 2009."
"In 2024, the bull market continues as the major large cap indexes have all set all-time highs. Year-to-date as of July 24, the S&P 500 is up 16% while the Nasdaq has increased 18%."
Trump will not have this rebound.
It is a self-induced roller coaster by the rich to get richer. It's been fakery since wall street dumped long term analysis for short term gains to legitimize the 'new' market swings to their advantage. I've lived through too many of them.
Wow — just the guy I'm looking for: someone who can accurately predict the future of markets. I'd like you to become my investment advisor.
In 2028 we will have the same view of Trumps' actions as you have presented above for the previous administration. We will sill what the case is then. Anything else right now is at best a guess and at worst projection.
I posted this (below) a few weeks ago, to show how overpriced the S&P 500 was (and still is), relative to PE. Matt made a good observation about Greenspan’s “new paradigm” about the value of new companies with no earnings or capital. This belief is still current, apparently.
https://substack.com/@leetd/note/p-160880848?r=1wkjx4&utm_medium=ios&utm_source=notes-share-action
Yes! The market was going to have a correction this year regardless of what Trump did, although I agree that uncertainty around tariffs is exaggerating the ups and downs.
In recent podcasts Walter Kirn pointed out the market has been desperate for any excuse for a downward correction for a year or more. I thought Matt concurred so he should have mentioned that here probably.
post is not written by MT, its from Eric Salzman
Good point.
Folks, Matt did not write this.
Matt did mention this 1%er effect in the last ATW podcast.
They say generals always fight the last war, and the way the Fed addressed COVID was perfect evidence of that.
The Fed attacked the COVID slowdown the same way they attacked the demand collapse after the burst real estate bubble - by driving interest rates to 0% and buying large quantities of Treasuries and mortgage backed securities.
Since this was not a demand-driven slowdown, once the lockdowns were lifted and people returned to work, all that excess liquidity had to go somewhere, and it went to the real estate market where prices rose 20% - 25%.
Shelter inflation, driven by high real estate prices, was the main source of inflation since.
The Fed's policy error was not uttering "transitory" - it was creating the inflation in the first place.
Great points....I was trying to imply this with the "clean up" of the liquidity flood they left after COVID QE and ZIRP. From their vantage point, the Fed should have been able to see the amount of fiscal stim being poured in as well as the mother of all mortgage refinancing waves they triggered with QE that put hundreds of extra dollars a month in homeowners pockets...
They should have at least stopped QE well before they did in 2022....they were afraid of a 2013 style taper tantrum I guess.
The covid inflation was caused by the Congress, not the Federal Reserve. Several of the governors including Powell warned pelosi that the House’s fiscal policy of handing out money would be inflationary but she did not care.
The Federal Reserve manages monetary policy, but they can only obey the Congress when they act with fiscal policy. The Fed has been warning for twenty years that Congress must rein in spending.
Having now read Matt's David Brooks column and this one on the Fed/Trump imbroglio back to back at 5am, it's impossible not to see the two as directly related: a) Brooks and the Bobos are running around with soiled undershorts in re: Trump and all the rest of us breaking all their stolen playthings, and b) the Fed is an abomination of a plaything that also needs breaking. I'm still in support of breaking things and attending a daily "auto da fè" or two. It's early innings.
The leftist Main Street media refers to the current volatility as the stock market crashing. Please don't become like the sheep and repeat the narrative. The market is in a correction. Look at the 27% correction in September 2022; since then, it has been up +50%. Look at the market valuations, stretched P/E, and average earnings projections. All of this is normal. Put Chicken Little back in the hen house.
Inflation is only caused by too much money supply. The Biden/Fed policies pumped money into the economy causing high inflation. Price inflation is a symptom of too much money chasing too few goods.
The Fed has a number of tools at its disposal to reduce inflation - higher interest rates - including reducing money supply but this would not sit well with the money-men reaping the rewards of a glut of money.
Tariffs inevitably increase consumer prices, which will dampen demand then lower prices, lower price inflation. Producers will see their costs increase and dampen their exuberance for borrowing cheap money to increase output. Unemployment will rise.
What is needed is deflation and fall in the $. This would boost exports and redirect consumers to buy domestic product and boost domestic production. Employment will pick up.
When Governments manipulate an economy to increase consumer demand - the aim being to increase tax-take, lower unemployment - by increasing the money supply, low interest rates, this is known as “boom”. It is inevitably followed by “bust” which will be much bigger, more painful than if Government had minded its own bloody business.
“Bust” is inevitable but Governments try to avoid it by more of what caused it - but the market always wins.
The Biden era “boom” and inflation cannot be corrected by Trump’s executive orders or in his four year term. The economic damage is deep and tax to work its way out of the system by natural market prices = much pain.
These are all good points. To your point about monetary and fiscally induced inflation under Biden, I do not think raising interest rates to address price increases created by tariffs (or an adverse supply shock like an oil embargo) is an effective policy. I think it would be needlessly destructive and ineffective and might only appear constructive in the long run due to the destruction it yielded. It is worse than giving antibiotics to someone who has a viral infection. If signs of monetary inflation resume, I would say raise rates but one is not going to drop the price of eggs or Chinese crap, by raising interesting rates.
I may not have been clear, interest rate rise is to tackle inflation prior caused - nothing to do with the effect of tariffs. (Tariffs have been around for centuries- about time they got the adverse publicity they deserve.)
Interest rates should have been raised much higher prior to Trump, but would have been recessionary and as I said Governments avoid doing what they should to correct the boom they caused by their reckless policies. The only way quickly to reduce price inflation is to raise interest rates to at least, or above, the inflation rate. That hurts, but is over quickly - the equivalent of tearing a Bandaid off quickly, or peeling it off slowly.
Whilst interest rates help with price inflation, the root cause it too much money and the Fed has to use other tools like selling its securities and destroying the money, for example, to take money out of the financial institutions.
Raising interest rates has two effects: first it makes borrowing for business and consumers more expensive, this reduces demand for credit and debt; second it encourages saving, less buying. Both then reduce consumption/demand. When demand falls, price falls as suppliers try to encourage people to buy. More expensive borrowing discourages businesses from misallocation of resources to serve an overheated consumer market.
Tariffs - and their buddies, non-tariffs - are BAD. The only winners are those businesses and market sectors protected by them - even that is short term as everyone is a consumer. They harm consumers, small businesses and workers throughout the economy and overall dampen economic progress.
I certainly don’t advocate them, but they do reduce consumer activity, and economic activity. The by-product may be to reduce price inflation, but the cost is increased unemployment. Unless… there is a devaluation in the currency which stimulates consumption of domestic produced goods - imports being more expensive with a weak $ - and boosts exports as USA goods become cheaper to the World.
Some opine the Trump Tariff escapade is actually designed to cause devaluation of the $. This would be much better for the US economy than higher import tariffs.
In short there are two antagonists at play here: Main Street and Wall Street. High $ value, money sloshing round the top of the economy, high consumer prices = higher profits = higher share values which please Wall Street at the expense of Main Street.
Trump’s tariffs threw a big spanner in the works to the displeasure of Wall Street - and if it’s bad for Wall Street, that’s a sure sign it will be good for Main Street. We’ll see.
Thanks, rereading my own comment, I was somewhat unclear myself. I was basically saying rate increases will do nothing to directly reverse inflation created by a supply shock or by tariff increases and agreeing with your point about interest rate increases addressing the Biden/Powell fiscal and monetary inflation. I also agree that rates should have been raised long ago, before Trump's first term.
Thanks to you both, enjoyed reading a thoughtful conversation.
The Fed and the US gov has been protecting the assets of Wall St over the needs of Main street for decades. It's so sad to see liberals freaking out over Trump attempting to do something for Main St for once.
"It is worse than giving antibiotics to someone who has a viral infection. " Actually, physicians seem much more willing to give antibiotics, at least to people struggling with respiratory viral infections. They learned during Covid that opportunistic bacterial infections pop up in those whose immune systems have taken a beating fighting the virus, and probably many old people in particular die from bacterial pneumonia than from common cold or mild influenzas.
And while overuse of antibiotics can lead to resistance (particularly if the course is not finished because they feel fine), this is mostly a hospital/ nursing home phenomenon. And most physicians I know who travel abroad take prophylactic antibiotics to avoid Montezuma's Revenge or other bacterial infections novel to their bodies.
Interesting to know - thanks! I was suggesting giving the antibiotics was ineffective but harmless (as opposed to raising rates which actually would do harm to interest rate sensitive parts of the economy while not reducing the cost of eggs -supply shock- or Chinese goods subject tariffs). It is good to know that antibiotics can be beneficial in some circumstances, and your explanation makes good sense.
This.
The damage is deep, and done over many, many years .
Good morning. I'm the weirdo who handed Walter Kirn the Tom Sawyer in Russian book after his talk at Fairfield University several weeks ago. When he noticed it was a Russian translation, I reminded him yada, yada, yada. I hope one or both of you enjoy the book.
It does also seem that the Fed has sought to create bubbles and busts rather than sustainable growth, at least during my adult life. It works not for me and you, but for it's owners.
Salzman chronicles decades of deception, corruption, incompetence, and favoritism at the Fed, then implies it's all about DJT's mean tweets.
An interesting point. The Mainstream Media et al likes to make it sound like Trump broke a wonderfully functioning economy, with a stable political situation (as long as “misinformation” was controlled). The fact is he was voted in because enough people could see with their own eyes it was already failing. If it collapses, Trump will get the blame, forgetting that it was doomed already.
DJT mean tweets 🤣. This is the funniest phrase to me. As opposed to lying to make you feel better.
The Fed is the Breaking Bad A1A carwash for Wallstreet. Interest rate policy seldom has anything to do with their “stated purpose” of “fighting inflation”- they are there to coordinate the Corporate Socialism US taxpayers have so generously granted the financial sector.
We went through 20 years of 0% interest rates so that the Fed could facilitate repairing the banks balance sheets from their malfeasance that caused the GR of 2007-2009. This was not mismanagement (no way Jamie Diamond thought hosing prices would keep going up). People were making a ton of money and the Fed facilitated it. They all recognized that the emergency breaks of “Capitalism”- where these institutions would have died by their decisions and some people might even go to jail (S&L Loan Crisis) were largely dismantled.
With regards to tariffs causing inflation- you already have major retail institutions saying they’re starting to see things they haven’t seen in years, like people picking food over medication or forgoing purchases of things they need… can’t get blood from a stone. Too much money printing, debt and shitty geopolitics are all contributing factors to interest rates vs the ebbs and flows of “economic activity” imho. There are less buyers for the meth, so they need to raise the price….
in a properly functioning market, less buyers for the meth would incent a lower price....
I guess I was equating meth with our debt so the price to get people to take it needs to go up.
yes....bond prices go down, the rate does go up.
Corporate socialism and to keep unemployment at the "optimal" (i.e., too high for Main Street) level.
Agreed. Wouldn't want the workforce to get any pesky ideas like demanding a living wage to deal with the government completely trashing the currency through money creation, otherwise you'd have to do something crazy like allow 15 million replacement workers to walk into the country to keep wages - and unemployement- at an "acceptable" level....
So basically you’re saying we should put Skyler in charge?
(Nods)
A fine reference double-down. Well-done.
Oh, come on now. Those reports are msm bs. The true effect of tariffs have not yet been felt in our economy. The stock market is not the economy.
Powell is in a very difficult position, not all of it his fault.
He knows full well that tariffs are in no way shape of form inflationary. The total amount of money does not change from tariffs.
And he knows that this inflation, unlike other versions, has been caused by Congress’s fiscal policy over covid relief, not the Fed’s monetary policy. Congress ordered the Federal Reserve to print money and handed it directly out to everybody in the country.
And he knows that if they don’t lower rates the national debt will overwhelm the country .
But he also knows we have been in a deflationary environment for years now.
This piece presupposes that "The Fed" isn't completely controlled by... OK, YOU fill in the blank. Didn't the FJB "Inflation Reduction Act" (!!) print a gazillion greenbacks twenty minutes ago? Common Wisdom™ has always said the Fed's primary "mandate" was to "control inflation" and The Fed has done anything BUT control inflation. Deplorables™ scream into the void "STOP printing money, @ssholes!" but our shouts fall on deaf ears. Covid, my frens, now THAT was a sweet, sweet Operation from on high, now wasn't it? These scumbags. Greedy, corrupt, dare I say it, evil? The Fed. End the god-damned Fed.
The Fed's main job is and always has been to protect "assets" by keeping their values high. Prior to covid bux, inflation from too much cheap money sloshing around was contained within certain areas: fine art, high fashion, fancy jewelry, stonks, real estate, insurance, etc. (Everyone but bond holders and savers made out.) Biden bux rained on Average Joe made inflation hit everyone, not just the asset owners.
"While we don’t want to go back to physical altercations..."
Not sure I agree with this. Somehow I think I the ruling class might have a change of heart if the returned home to find their mansions on fire.
The original Tea Party wasn't polite.
Ooh, a storm is threatening
My very life today
If I don't get some shelter
Ooh yeah I'm gonna fade away
You don't always get what you want
Don't....or can't 😘
Oops. Here comes my 19th nervous breakdown.
It’s all about perfecting ways of making ceiling wax.
I don’t care if she’s 16 years old. I don’t need no ID.
Oh wait…
I hadn't heard of the historical nugget about LBJ pushing the Fed Chair against a wall. He's fortunate LBJ didn't bring out "Jumbo" something the secretarial pool was well aware of.