The Street is Wrong, the U.S. Economy is Not Entering 'Stagflation,' it's Dragflation
The world could witness one of the worst socioeconomic and geopolitical catastrophes of modern history
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Investors have been trying to navigate choppy waters in the equities market in recent weeks due to the confluence of uncertainties in the world.
The Biden administration is pumping Ukraine with billions in weapons to keep fighting Russia, China’s COVID-19 lockdowns jeopardize supply chains, and the U.S. is still facing inflation at a 40-year highs.
The Dow Jones Industrial Average fell 103.81 points on Thursday, or 0.3 percent, to 31,730.30. The S&P 500 lost 5.10 points to end the day at 3,930.08, and the Nasdaq Composite rose 6.72 points to 11,370.96. Nasdaq has lost 24 percent of its value since November.
The DJIA took another rollercoaster ride Wednesday and at one point gained 400 points. The S&P 500 hit a 52-week low, but eventually regained some ground. It still closed at its lowest level of 2022.
Reuters pointed out that volume on U.S. exchanges “was 15.38 billion shares, compared with the 12.75 billion average for the full session over the last 20 trading days.”
As of 5:53 p.m. ET, bitcoin was trading at 28,340. Cryptocurrencies, like tech stocks, have been impacted by the Federal Reserve’s announced rate hikes intended to combat inflation.
Loretta Mester, the Cleveland Fed president, told Reuters that the volatility in the asset market has been "painful," but necessary.
The Bureau of Labor Statistics announced Wednesday that consumer prices rose by 0.3 percent last month compared to March, when it rose by 1.2 percent. The inflation rate rose 8.3 percent in April. The number in March was 8.5 percent.
Economists differed on what the numbers meant. Some said the slight cool down could mean the peak is over, but others point out that inflation is still at a 40-year high and the worst could be yet to come.
TREND FORECAST: Consumer prices in the U.S. spiked 8.3 per cent in April, staying at four decade high.
Yet, for well over a year, the Bankster Gang that calls themselves the “Federal Reserve” were bullshitting the public that inflation was “temporary.” Then when it kept spiking, they claimed it was just “transitory.”
Since the Fed wasn’t sure if it was temp or trans, how about in today’s Woke World, why not call it “transgendatory” inflation?
To illustrate the levels of the “official’s” arrogance and ignorance, the opening paragraph of the front page article in today’s New York Times states, “Some Federal Reserve officials have begun to acknowledge that they were too slow to respond to the rapid inflation last year,” and they “were hesitant to believe that rapidly rising prices would last.”
“Hesitant?” The facts were clear and we noted them week after week in the Trends Journal, forecasting that inflation was going to continue to escalate. And, in reference to John Williams Shadow Stats, we noted that the real inflation numbers were twice the “official” numbers.
Was the Federal Reserve that stupid or were they lying? Did they know interest rates had sped up, but wouldn’t admit to it so they could keep interest rates historically low so they could artificially pump in cheap money to keep the stock market and economy that were hard hit by the COVID War lockdowns from crashing?
Indeed, that equities, the economy and the housing market bloomed when the draconian COVID War mandates locked down businesses for months and ultimately destroyed the lives and livelihoods of scores of millions, was a farce.
From Bad to Worse
Now, with the sanctions the United States and NATO put on Russia, they have dramatically made bad inflationary pressures much worse. Overall, and across the globe, again as we have detailed in Trends Journals, as a result of the sanctions and the Ukraine War—from crude oil to sunflower oil, from wheat to potassium chloride—prices have spiked to record highs.
Therefore, the longer the Ukraine War rages and the tighter the sanctions get, the higher prices will rise and the deeper economies will decline.
And The Street is wrong. We will not enter into a period of stagflation whereby the economic stagnates and inflation rises. It is Dragflation; the economy drags down and inflation rises.
And, should the Ukraine War continue and rising tensions in the Middle East explode into military conflict, the world will witness one of the worst socioeconomic and geopolitical catastrophes of modern history.