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100 Basis Points Please, Chairman Powell

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The democrats are clearly coming for the Fed Chairman next. They’ve blamed this economy on everyone and everything but this feeble administration, yet an attack on Jerome Powell and his tightening campaign could actually catch some support from notable pundits — unlike blaming gas stations, the “Putin Price Hike,” etc.

They would be wrong to blame Powell but it doesn’t mean they won’t try — and that it won’t work to some extent.

Further, a rush of falling prices across major economic sectors later this year will give the false impression of inflation has been “solved” and plenty of ammunition not only to those blaming the Fed, but to those who will beg for a policy reversal and interest rate cuts in early 2023.

Retailers are stating very clearly that a massive inventory liquidation is coming, which will temporarily drive down prices across a range of consumer goods. More on the consumer in a minute.

Used auto inventories are starting to build, in part based on a notable uptick in repos; prices are going to come down meaningfully here, as well.

And the housing market is where people are most carelessly whistling past the graveyard. Unsold inventories are already at levels not seen since 2010 and thanks to the spike in interest rates — the necessary spike in interest rates — mortgage originations are grinding to a halt. Red states will fare better than blue ones from which buyers are fleeing but if you don’t think we’re going to see a major correction in home prices, you’re kidding yourself.

Circling back to the consumer: the New York Fed, National Bureau of Economic Research and many others have definitively shown that falling home prices have a chilling effect on consumer spending. Spending behaviors are already changing measurably so just wait until home prices hit the skids.

In short, those hoping for a short, shallow recession don’t seem to realize that economic conditions are actually going to get much tougher from here.

And yet the Fed should raise rates as aggressively as possible. And this is the key: they need to do it quickly. The consumer is set to crash in a way that resembles the 2008 downturn so there isn’t much time left for lifting rates.

Why did the Fed surprise with a 75 basis point hike last month? I think one big factor, one I haven’t seen anyone talk about, was Japan: the Fed saw a zombie economy and its for-some-strange-reason-still-revered currency and saw a bit of ourselves. Japan’s long-term game of MMT is more mature and more severe than America’s but make no mistake: we have both played the dangerous game of wild monetary inflation too aggressively for far too long, something I suspect Powell does understand.

So why should the Fed bless us with a 100 basis point hike today? Because time is running out, politically, for any further hikes.

We need — yes need — a major recession here in America to clear out the ridiculous malinvestments that blew up the Everything Bubble. Few politicians understand this and none is willing to live through such an environment, which leaves only the Federal Reserve to burst the balloon to enact a little fiscal discipline by raising borrowing costs for both the private sector and government itself.

With a looming election, political assaults on the Federal Reserve’s tightening campaign are about to increase dramatically — bet on it.

At 2pm EDT today, the Fed will probably announce a 75 basis point hike to the targeted Fed Funds rate.

Here’s to hoping for 100 basis points instead.

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Americans sense things are on the wrong track, and have been for quite some time. Among our many challenges, for example: It can no longer be denied that income inequality is skyrocketing. But it is not capitalism that is enriching the few while slowly impoverishing the many. It is America’s long, slow turn away from free markets -- and the vital medium of exchange that underpins them -- that’s doing us in. This pseudonym is a nod to a somewhat-fringey, indulgent personal suspicion I hold with a 1% probability of being accurate: Alan Greenspan never ceased being Ayn Rand’s “man in Washington.” What if the well-known central bank chairman put on the show politicians wanted from him for years, all while secretly trying to return this world to rationality? Instead of destroying copper like D’Anconia, however, Greenspan destroyed money. Without realizing it now, some of you know me but I write under this pen name for two reasons. First: Of all the potential tyrannies we face today, by far the greatest threat to America is the misunderstanding, and therefore the ongoing destruction, of the U.S. dollar. Second: I write with the hope my ideas will stand on their own, aside from any political party, even apart from my own considerable charm and personality. Love me for my ideas, not because I'm beautiful. Politics, markets, more ... the things on which I’m qualified to opine will be unveiled here over time.



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News

Can the Party of “No” Beat the Party of “Free?”

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Have you noticed the rhetoric, “At least we have the House to stop some of Biden’s crazy plans!” The GOP’s keyword is “STOP.” Have you noticed that the Democrats have positioned themselves as the party of more “FREE” gifts from the government?

The GOP wants to cut budgets, cut government jobs, stop abortions, stop illegal aliens crossing the border, stop election cheating, stop student loan giveaways….and the list goes on. The Democrats have effectively positioned the GOP as the party of “NO!”

With a small margin in the House, Biden’s veto, and a likely Democrat Senate virtual majority, the Republicans face a difficult challenge. How do you shape a narrative that can win in 2024 and minimize the damage that the Democrats can do until then?

It starts by capitalizing on an issue that Republicans have been reticent to exploit-school choice. Have you noticed that the youngest voters went Democrat in every state? We have let the Democrats control public schools. Teacher unions have used their money and influence to ensure adequate funding. The result is clear-the youth under their influence have rejected the responsible values of their parents. The young lack confidence in their ability to make free-enterprise work, and they like government entitlements, rent relief, and promises of student loan forgiveness. In short, they have settled for the party of “FREE”-the Democrats!

School choice wasn’t even part of the Republican’s Commitment to America. Our leaders missed its role in Youngkin’s win in Virginia. It’s time to start becoming the party of “YES” to school choice. Many minority parents feel trapped in underperforming schools, and they want better schools for their children. Conservatives want an end to the indoctrination of liberal values that public schools provide. In short, it’s time to embrace school choice as a central focus in the GOP’s 2024 campaign.

There is no question that the issue of abortion also played a key role in impacting the Republican gains in the November election. The Democrats were able to turn fears over the Supreme Court reversal of Roe vs Wade into voter turnout in key races. It’s time to be the party of “YES” to reasonable limits on abortion and responsible support for adoption for unwanted children. Most Americans are supportive of reasonable limits on abortion. House Republicans could introduce federal legislation to make abortion after the first trimester illegal. Let the states take the role of considering even more restrictive measures. Make Democrats the party of “NO” to sane abortion limits.

Be the party of “YES” to government support for organizations that provide vulnerable women with support and material resources to help them consider both parenting and adoption. Democrats would have women believe that abortion is their only option. There are parents ready to adopt, and it can be a beautiful experience for all involved. It’s time to convince women to support life for their unborn child by providing loving options instead of trying to force the total elimination of abortion. Abortion disproportionately impacts minorities. To meet the needs of the future, America needs all the births our citizens can bring into this world.

Say “YES” to responsible citizenship-every citizen working to find a satisfying career in pursuit of their true American Dreams instead of settling for government dependence. The Republican message must be strong and clear-we belief in all Americans’ ability to gain their mojo and take back their future. There is no future in dependence-Getting “Free” entitlements are not “Freedom!” Let people know that America is still where the “pursuit of happiness” is not just something to justify a revolution. It is what has made America great and the envy of the world. It is by improving your skills and earning advancements or starting one’s own business that true dreams are achieved. No citizen should settle when she can soar.

Say “YES” to a secure border and legal immigration. America remains the land of opportunity, and we need immigrants. We don’t need millions of illegal immigrants unvetted and unprepared to add value to our country. Stand for completing the building of our Southern border wall and increasing our focus on expanding legal immigration. Republicans must not be against immigrants; we are only against welcoming illegal immigrants who do not honor our immigration process. Americans want a secure border, and they want to be known as a country that welcomes immigrants. Have the strength and wisdom to stand for both.

Say “YES” to law and order. Stand in support of law enforcement and accountability for criminals. Yes, we want fair treatment of all Americans, but citizens are tired of criminals having the upper hand. They want to feel safe in their homes and their businesses. We need DAs who will prosecute criminals instead of letting them go. There is a simple formula for the GOP to reflect most Americans-“Do the crime and do the time!”

Say “YES” to energy independence and an all of the above approach to energy policy. Instead of saying “No” to climate change paranoia, affirm the importance of developing all of our energy resources to be independent of foreign dependence. Capitalizing on all available energy options will also strike a blow at inflation, since the cost of energy impacts all facets of our economy.

If you want to beat the “Party of FREE,” we need to become the “Party of YES” to the things that Americans truly value. It’s time to begin preparing a narrative that can win in 2024. May it be so.

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Elections

Three Things Republicans MUST Do Now

The Republicans have a very important job to do!

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Now that the Republicans have taken the House, they have a few VERY important jobs to do. In this short five minute video, Chris Widener, Founder of PolitiCrossing, makes the case that there are three things the Republicans must do to be successful through 2024 and take back the Senate and the White House as well.

1. Investigate
2. Defund
3. Cast a Positive Vision for America

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