Shameless plug: Last October, "The Unpleasant Truth About Inflation"
noted all the reasons why inflation was actually much higher than most
people (including the Economists on Wall Street) believed.
It took market participants an astonishing 8 months to figure this out.
Nothing much has changed except perception. Growth is still
slowing, and is as Real Estate dependent as ever. Prices continue to
increase, regardless of the idiotic focus on the Core rate (don’t sugar coat it, tell us how you really feel).
What has changed from last week, when the dominant meme was Pause!
to today, when the newfound fear is a Half-Point hike? Psychology.
Groupthink. Emotions and sentiment.
The only thing truly different is the Goldilocks fantasists have
changed trains, and are now on the Reality Express. Next stop: 2%
GDP, 5% inflation. ALL ABOARD!
Of course, the markets haven’t liked this. Goldilocks is a fairy tale, while Reality has warts. These are consequences for decades of easy money and years of bad policy. Like the twin deficits. Growing disparities in wealth, which will ultimately lead to spasmodic anti-capitalist legislation. Deficit producing tax cuts. Post crash damage still unresolved from 2000. A ruinous war costing treasure and lives and despoiling the United State’s reputation globally. Is it any surprise the greenback has gotten kicked around like a junkyard dog? All the while these markets have been as utterly dependent as a babe at its mother’s breast on massive government stimulus for ongoing growth. My name is Mr. Market, and I am stimulus-aholic (Hi Mr. Market!)
Keep repeating after me: Except for everything going up in price, there is no inflation . . .