US GDP came out at -1.4%, the FOMC is screwed

Stagflation baby

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A negative GDP number effectively takes the FOMC out of the market. They may be able to raise rates once or twice but no where near what should be needed for the inflation that we are seeing and the inflation that will be coming.

The FOMC is so far behind the 8 ball and they have completely screwed the economy.

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The US is following the economic and monetary policy of Japan when their economy collapsed in the late 80’s

If this quarter gets reported as a negative GDP number we are officially in a recession. Banks have been predicting that we will be in a recession by fall. We may already be in a recession. Next GDP number will confirm.

Thank god BBB didn't get through. That would have been gas on the fire.

I think GumboPot and SFP were posting money supply charts from COVID about a year ago -- when I saw those, I knew we were screwed and the bill was coming due soon. Throw in a war in a region controlling a decent amount of the world's food and energy supply, spending and arms to support that war, and lockdowns in China...well, the future isn't so bright.

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I think GumboPot and SFP were posting money supply charts from COVID about a year ago

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If it was this guy...



... it's a bit misleading. That massive spike you see over the course of a month or so is the Fed changing the definition of the Money Supply to include savings accounts. This was done because with the COVID lockdowns, more and more people were moving money in and out of savings accounts as if they were checking accounts.

Don't get me wrong, the Fed has been injecting a lot of money into the market for a long time and the COVID stimulus checks were MASSIVE in cause market problems, but that particular spike doesn't show what people think it shows (full disclosure: I was one of those until I read up on it a few months back).

First inflation and now a recession. Why would Putin do this to us?!?

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I would just like to note for those that are not really well-versed in economics that the combination of negative nominal GDP growth and out of control inflation is incredibly difficult to produce. A government has to basically interfere with markets to such a high level that I'm not even sure the last time a comparable situation was seen in the US, if ever.

I'm hesitant to cite 1980-81 since the fed funds rate was at 20% to combat inflation. We haven't even approached a double digit nominal interest rate. This is like a rainbow unicorn of sadness.

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Typically high inflationary periods in the US are also associated with energy cost spikes. This is why progressives are so damn foolish to rankle energy markets without a true transition plan other than no more fossil fuels.

During the early 80's, Volker raised rates and Reagan cut taxes. We switched from demand side spending, with high inflation and corresponding rates, to low rates and a big boost in investment. This gave us the period of the 80's until 2008.

The rise in unchecked progressive ideology infiltrating the media, universities, and economic thought, has given us a return to demand side theory and all the problems that come with it.

Don't screw with energy markets, though. You will produce stagflation in a hurry.

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Enjoyed your post.

The level of intervention is so high and incompetent and highly incompetent that we are currently in something worse than stagflation--negflation. Contraction with outrageous inflation and overwhelming government spending is engineered, not naturally occurring, in my opinion.

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Thanks.

I'm increasingly shocked at the level of incompetence in policy makers. I know that sounds like, gee, no shite, but I believe policy is being hijacked by the grenade throwers and abject partisan politics.

By the late 90's and early 2000's, I think we reached a fairly stable consensus on economic policy. There was debate on the margins of government involvement. Even Clinton was a Greenspan supporter. No current Democrat would nominate someone like him. Now they nominate leftists of the sort typically found in European countries with low growth, high unemployment, and high taxes. No one in their right mind would have said things like high gasoline prices are good, advocate for socialism, or say deficits don't matter. Both R's and D's have lost the script for stable long term growth, but the D's have gone moonbat nuts.

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I'm hesitant to cite 1980-81 since the fed funds rate was at 20% to combat inflation. We haven't even approached a double digit nominal interest rate..

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The problem is the federal debt effectively prevents high interest rates. A rise of 2% equals annual interest increase of $418 billion in debt service for the US budget. Double-digit rates would mean government default.