Low Marx for Jay
Powell is a (Chico) Marxist Part 4 - Crackers animals....
Why is this a problem?
It would have been far better for one-time (or three-time) universal income boosts to have been spread over time, rather than concentrated at times when supply chains were compromised. The mismatch between artificially clustered demand and situationally constrained supply let the ‘inflation genie’ out of the bottle. It’s taken over 3 years so far to put inflation back in the bottle. The short-term wealth effect for the majority of Americans (which resulted in temporarily boosted spending) has been supplanted by a longer-lasting poverty-effect phenomenon. This effect has been generating a negative feedback loop to the economy that has been evident for some time in a range of metrics, including new vehicle sales (lowest level for a decade):
Broad retail activity has stagnated for the past year:
The narrative that surging property transactions following the pandemic released pent-up demand which would usher in a new property bull market hasn’t worn well:
In short, the US, and in varying degrees, the global economy has been running at 2-speeds for a while. Or rather the financialised economy of capital markets has been running hot while the real economy of wages, manufacturing, retail etc has been slowing to stall speed.
This is a direct consequence of the impact of monetary policy primarily on the labour market and fiscal + unconventional policy on capital markets.
next week we’ll take a look at why the ‘real’ economy is performing so much more poorly than the financialised economy.
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Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment planner.
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