Inflation, the Economy, Politics and the Fed
We can’t go on together, with suspicious minds.
And we can’t build our dreams, on suspicious minds.
We’re caught in a trap. I can’t walk out.
Suspicious Minds – Elvis Presley
…..
Last week, the stock market was rocked, albeit briefly, when the soon to be confirmed Vice Chairman of the Federal Reserve, Lael Brainard, stated that she supported a 50-basis point rise in interest rates in May and a plan to pull $95 Billion a month out of the economy through the sale of bonds in order to reduce the rate of inflation. The markets saw this as one of the Fed’s main “doves” reversing course and becoming a policy “hawk.”
I disagree. There is something else in play here.
I know Lael Brainard well. She was Undersecretary of Treasury under Obama when I was Chairman of the House Subcommittee on Monetary policy. We had several meetings both in my office and in hers over a couple of years. We never came to agreement on a single thing in those meetings. I was willing to make a deal; to give her something she wanted in exchange for something I wanted. She refused and then continued to tell me why I should just agree to her thing because she was obviously right and what I wanted was bad. She is a committed leftist. Everything I ever saw her do had the objective of advancing leftism in all of its elements. The federal reserve is just a tool for advancing the climate change, social, cultural and political agendas of the left. I don’t think she is a “dove” in the classical sense at all. I think she is a leftist and that informs all her decisions.
As proof that nothing has changed with her, I listened to a 30-minute Wall Street Journal interview with her just before I sat down to write this. In it, she made the point several times that the inflation was caused by the uncontrollable factors of pandemic and the Russian invasion. Nothing about trillions in handouts and money printing by the Biden regime. It’s as though she were reading off Jen Psaki’s notes.
So, my reading of what she said last week is different than that of the financial press.
The Democrats’ internal polling is shockingly bad. They are really worried. Every poll shows inflation to be the number one concern of citizens for which they naturally blame the party in charge. Lael Brainard knows this. She also knows that inflation will not go away by November. However, she desperately hopes that they can have inflation peak before then so that they can triumphantly declare in October that the Biden regime and the Fed in concert are getting inflation under control. They will do this even if it drops from 9% to 7%. Raising interest rates and sucking some cash out of the economy are the Fed’s only tools to do this.
There is a risk, however. A risk that the Fed’s rate hikes and balance sheet reductions move the country into recession. But if you are Lael Brainard, as long as that recession doesn’t hit or isn’t declared by their controlled media machine before the election, all is good.
Let’s look at some of the timing of this. The last inflation print before the election will be the numbers from September that will be released in October. That’s only 6 months from now. Inflation is still on the way up at the moment. If the Fed gets more aggressive in both word and deed, maybe they can get inflation turning down by then.
Technically, a recession is 2 consecutive quarters of a decline in GDP. Current estimates for the 1st quarter GDP are that it will be positive perhaps by 1.5-2%. Those numbers will be released at the end of April. If the 2nd quarter GDP can stay positive, and again most forecasters predict that, then there can be no declared recession until well after the November elections. You may remember (if you are old enough) the “great recession crash” that occurred in the Fall of 2008. Yet later, we were told that the recession had actually begun at the beginning of the year and we just didn’t know it yet.
Lael Brainard has not suddenly become a hawk. She is desperately trying to help the Democrats chances in November by giving improved news on inflation. She believes she can hold off any announcement of recession until after those elections. And, if a recession happens later this year or early next and is not declared until after the midterms, that gives Democrats plenty of time to have the recession in the rear-view mirror by the 2024 election and to blame any new problems that arise on the Republican majorities elected in 2022.
A post-midterm recession also gives Democrats the opportunity to propose lots of new spending and social programs to deal with the problem they caused. You know, never let a good crisis go to waste.
A bit Machiavellian you say? Niccolo may have written The Prince over 500 years ago, but the nature of people does not change. The objective of Fed Governor Brainard, and others on the Fed including Biden’s new nominees, is to use this supposedly independent, non-partisan board of financial geeks and wizards to advance the agendas of climate change, CRT, educational indoctrination, gender fluidity, gun confiscation and Marxist utopian economics.
Do not underestimate our political opponents. They are so sure of their moral superiority, that there is little they won’t do to establish the society they crave.
I remain respectfully,
Congressman John Campbell
Drive fast & live free