Consumers simply won’t have enough cash for consumer discretionaries.

The August U.S. inflation numbers that were released on Sept. 13 should concern consumers as headline inflation continues to inch upward, printing at 3.7 percent, exceeding expectations, and defying the efforts of the Federal Reserve to contain it. Core inflation, which excludes the cost of food and fuel, dropped slightly but still printed at 4.3 percent.

Since inflation compounds, and is cumulative, Americans are now paying about 17 percent more than they did when the Biden administration first pronounced the most recent bout of inflation to be “transitory.”

We have long said that the principal cause of the current inflation is the enormous size of the Fed’s balance sheet, exacerbated by federal spending. As we look at a now $7 trillion federal budget and record $2 trillion deficits as far as the eye can see, it’s clear the Fed balance sheet won’t be shrinking sufficiently or rapidly enough to arrest the inflation we are suffering.

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Iron Will

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