Is the U.S. Economy Starting to Roll Over?

TL;DR

US consumer prices show lower-than-expected inflation, leading to lower treasury yields and mixed equity performance. The larger question is whether the Federal Reserve can return to pre-GFC monetary policy or if a new monetary era is emerging.

Transcript

foreign is U.S economy rolling over hi everyone Welcome to the Real Vision Daily Briefing with me today is Jesse feldler founder of Felder investment research hi Tessie it's nice to see you again hi good to be back Maggie thanks so we had U.S consumer we've all been waiting for this inflation data for a while we had U.S consumer prices CPI index co... Read More

Key Insights

• 🧑‍🏭 The focus on monthly inflation readings may overshadow long-term inflationary forces and structural factors.
• 😮 Changes in the Fed's monetary policy have consequences, as seen with the recent rise in inflation.
• 😮 The declining labor share of income has led to economic imbalances and the rise of populism.
• 😀 The Fed faces a dilemma in determining its tightening posture and when to pivot based on economic indicators.
• 💳 The regional banking crisis and potential credit squeeze could impact the US economy.
• 🏅 Gold and other commodities may outperform in a hard landing scenario due to supply and demand dynamics.
• 🖤 The lack of interest in gold despite its potential breakout suggests a bullish contrarian signal.
• 😮 The rise of AI in tech companies could lead to increased competition and potential profit margin challenges.
• ✋ Bitcoin has shown a higher correlation to the NASDAQ 100 index rather than traditional safe havens like gold.

Questions & Answers

Q: Is US inflation likely to continue moderating?

It is probable that inflation will continue to moderate in the short term due to tough comparables and disinflationary trends. However, it is important to focus on long-term inflationary forces and structural factors.

Q: Can the Fed go back to its pre-GFC monetary policy?

It is doubtful that the Fed can return to its previous policy, considering demographic and structural changes. It will likely have to normalize monetary policy to some extent, which will impact different asset classes.

Q: How has the economy fared since the Great Recession?

The economy has not experienced significant growth since 2008, with wealth creation mainly benefiting asset prices. The growth in wealth is primarily driven by the growth in the money supply, creating a money illusion.

Q: How can the economy be stimulated without relying on asset levels?

To promote sustainable economic growth, it is crucial to find ways to stimulate the economy without relying solely on monetary policy and asset price inflation. This may involve focusing on fundamental growth and increasing the labor share of income.

Summary & Key Takeaways

• US consumer prices show moderate inflation, but the focus should be on long-term inflationary factors and structural forces.

• The big question is whether the Federal Reserve can return to pre-GFC monetary policy or if a new monetary era is emerging.

• The economy has experienced no real growth since 2008, with the wealth effect created by quantitative easing mainly benefiting asset prices rather than the overall economy.