Date: 07/20/2023
Author: Mr. X
There is an inherent bias in financial journalism towards doomsaying. It gets more eyeballs to say that the economy is going to collapse, that the dollar is on the way down, or that we are all going to be broke unless you act now, NOW, NOW!
The problem is that it isn’t true. My entire life, people have been predicting that the swelling federal debt will doom the dollar and possibly collapse the United States itself. No, it can’t just go on forever. However, so long as the dollar remains relatively better than most other currencies and remains the world’s reserve currency, it really can go on a long time.
And there are few signs the dollar is doing down. In fact, just a few months ago, India and Russia suspended negotiations on a much heralded plan to settle bilateral trade in rupees. BRICS may be something if China is willing to back down on border disputes, but until then, there’s no way any alliance where China and India remain in the same bloc will lead to anything significant.
Inflation is still well above the Federal Reserve’s target, but it has proven effective in limiting inflation while not crashing the economy. Unemployment is near a 50-year low, defying the predictions of many Republicans and (critically) Democratic senators critical of Jerome Powell like Elizabeth Warren. Core inflation is slowing, online sales are robust, and airlines are reporting record earnings.
There does seem to be something artificial about all of this. About half of Americans say they do not have enough savings to cover three months of emergency expenses. About a third are “very uncomfortable” about their current rate of savings. More than one in five just don’t have emergency savings. Just about 37% of Americans approve of President Joe Biden’s economic performance.
RIPPED STRAIGHT FROM THE HEADLINES… NOW MORE IMPORTANT THAN EVER
DON’T MISS THIS ABSOLUTELY CRITICAL PRESENTATION
Steve Eisman of The Big Short fame has said that the stock market will “probably continue to melt up” as long as there is no evidence of a recession. This is quite a difference from Michael Burry telling us to sell earlier this year. Eisman said further that there’s “simply no data to support” the idea that the Fed will raise interest rates and have a negative effect on the economy. It could happen, but it hasn’t happened yet.
The Federal Reserve will meet this week. If there is one sign of pessimism, it’s that some are expecting the Federal Reserve not to raise interest rates. The majority opinion is that we will get a quarter-rate increase, most likely this week. One more is expected this year. If there is a third, the expectation of a “soft landing” could be quashed.
There are two major complications. First is the political instability in Israel, which is coinciding with newly aggressive efforts by Iran to disrupt oil supplies. The second is the American election. There is likely to be a mild recession in early 2024 – just in time for the presidential election. That could force the Fed into the center of the political debate. Jerome Powell has thus far resisted political pressure from both left and right. He may not have that if President Biden needs to go after him for political reasons – especially if a foreign policy crisis causes a threat to oil supplies at a time of low American production.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing
