3 Takeaways: Powell Tells Senate Banking Committee Recession a 'Possibility'

Powell called inflation "transitory"

Federal Reserve Chair Powell Testifies on Inflation and U.S. Economy.

Federal Reserve Chairman Jerome Powell on Wednesday told the Senate Banking Committee that recession in the U.S. is “certainly a possibility.”

Here are three key takeaways:

• BLAME PUTIN: Powell told lawmakers one of the reasons that it has been challenging to engineer a “soft landing” is due to “events of the last few months around the world have made it more difficult for us to achieve what we want,” a clear reference to the Ukraine War and subsequent economy-killing sanctions imposed on Russia.

TRENDPOST: Politicians and “mainstream economists” like to blame the Ukraine War for spiking inflation and energy prices due to supply chain issues and sanctions imposed on Russia. But to make this perfectly clear, as we had noted, inflation was spiking long before the Ukraine War and the continuing spike in U.S. home prices have zero to do with the invasion.

BACKGROUND: On 15 June, the U.S. Federal Reserve raised its benchmark interest rate by three-quarters of a point, the largest such increase since 1994.

WATCH FULL SESSION HERE

The Fed also indicated that it will continue to raise rates at every meeting this year in its attempt to quell inflation, which set a 40-year record pace of 8.6 percent in May.

Readers of the Trends Journal are fully aware that the Federal Reserve incorrectly downplayed inflation risks for months --calling it "transitory"-- and just now are seeing the dangers. Jamie Dimon, the CEO of JPMorgan, said recently that the U.S. must prepare for an “economic hurricane,” due to the Fed’s monetary tightening.

SUBSCRIBE TO THE TRENDS JOURNAL MAGAZINE

• ONGOING RATE INCREASES LIKELY APPROPRIATE: “Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”

• WARREN: DON’T DRIVE THE ECONOMY OFF A CLIFF: Sen. Elizabeth Warren warned Powell not to act too aggressively with rate hikes because it could cost millions of people their jobs. “Inflation is like an illness and the medicine needs to be tailored to the specific problem, otherwise you could make things a lot worse,” Warren said. "Right now, the Fed has no control over the main drivers of rising prices but the Fed can slow demand by getting a lot of people fired and making families poorer."

  

TREND FORECAST: The future economic conditions will greatly deteriorate as central banks raise interest rates. Covering up their inaccuracy over the past year-and-a-half that inflation was “temporary” and then “transitory” the Fed committee removed a line from its guidance statement that, in May, had said inflation would drop to 2 percent and the labor market will remain strong as the bank continues to hike interest rates.

Gerald Celente says the same Federal Reserve officials and business media reporters who got inflation wrong a year ago, saying it was “temporary” and “transitory,” are wrong yet again.

BIDEN: WE NEED MONEY FOR THE NEXT PANDEMIC

“It’s dragflation. The economies won't be stagnant, they will drag down as inflation rises,” Celente said. “We’ve been writing about it for a year. Are they too ill-informed to see the facts, or are they lying to hide the truth of how bad it will be?”