This headline from the WSJ was certainly revealing. It attributes rationality to liquidity-besotted trading in the bond pits that has nothing to do with anything, except whether at any given moment the momo pack has gone student body-left or student body-right.
As we showed last week, there is an extra $60 trillion of household assets hanging around the US economy and that didn’t happen by the economic equivalent of immaculate conception. It’s the product of the Fed’s unhinged money printing spree over the last three decades and amounts to gross inflation of financial assets.
June retail sales allegedly rose at a booming +15.6% YoY rate, thereby reminding us once again that just because you can look it up on Bloomberg doesn’t make it true. Actually, inflation-adjusted retail sales have fallen at a -13.5% annual rate since the March peak.
The Fed’s balance sheet crossed the $8.2 trillion mark this week, up a staggering $105 billion from, well, last week!
We have set the 100.0 fulcrum point on the chart below at Q4 1965 because it tells you all you need to know about your grandfather’s inflation. During the previous 14 years, real GDP grew at 3.9% per annum, and that occurred at a time when both the Fed and consumer inflation were well behaved.
There is no way to understand the virulent all sectors inflation that has overcome the American economy apart from the fulcrum financial event of modern times. That is, Richard Nixon’s scrapping of the Bretton Woods monetary arrangement and the dollar’s last link to gold at Camp David in August 1971.
Well, that should settle it. The June CPI came in 5.32% ahead of last year and up 3.00% per annum on a two-year stacked basis.