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Tuesday, October 4, 2022


“Very Worried” Liz Warren Slams Powell, Says Rate-Hikes Will Push “Millions Of People Out Of Work”

Maybe Socialist Democrat senator Elizabeth Warren simply chose not to not listen to Jerome Powell on Friday when Chairman “Doom” explicitly warned that fighting inflation will “bring some pain”, not to mention millions of layoffs during the upcoming period of slow economic growth as the Federal Reserve raises interest rates to fight the high inflation it unleashed in the past two years when it erroneously said that inflation would be transitory, but over the weekend the outspoken “native American” echoed her most recent Humphrey Hawkins head-to-head with Powell (whom she hates since day one), and said that she is “very worried” that the Fed was going to tip the nation’s economy into recession and that interest rate hikes would put people out of work.

“Do you know what’s worse than high prices and a strong economy? It’s high prices and millions of people out of work. I am very worried that the Fed is going to tip this economy into recession,” Warren told CNN on Sunday.

Well, of course the Fed is going to tip this economy into recession: Powell could not be any clearer that is precisely what the Fed plans on doing next (just as this weekend’s Jackson Hole symposium made it clear that central bankers plan on pushing the entire world into a coordinated recession). Powell’s clarity has only been matched by that of Democrats – with Warren at the helm (since Biden has completely lost touch with reality and has zero understanding of what is going on at any given moment) – who have made it just a clear they will blame Powell for the coming recession.

“What he calls ‘some pain’ means putting people out of work, shutting down small business because the cost of money goes up because the interest rates go up,” said Warren, whose views on the economy are often influential among progressive Democrats.

Shockingly, Warren was actually right when she agreed with what we have been saying for the past year, namely that inflation was high partly due to supply chain problems, the COVID-19 pandemic and the war between Russia and Ukraine.

“There is nothing in raising the interest rates, nothing in Jerome Powell’s tool bag, that deals directly with those and he has admitted as much in congressional hearings,” Warren said.

Warren’s criticism of Powell was also apt, if not for the reasons she mentioned, but for reasons addressed by Rabobank’s Michael Every addressed overnight:

If J-Hole produced brave and intellectually honest assessments it would have said rates are only part of the solution to this economic war, which the IMF and World Bank implied. Moreover, if we have a 2% CPI target, why can’t we have a median wage target; a productivity target; a target for the % of GDP accounted for by industry; for spare capacity in critical areas; share of imports in key sectors; and trade concentration? (Of course, you won’t hear any of that!)

Logically, we need sustained higher rates to: crush dead/fictitious credit/capital; push down the price of commodities paying for the other side’s war-machine and claiming to back new dollar rivals; and to suck Western capital out of rival economies to pump it into more geopolitically-friendly alternative destinations. This will blow up the dead/fictitious credit/capital without incentivising investment in what we most need: many important things *lose* money, but we all lose without them. ‘Billions’ won’t do that job, and if ESG could we wouldn’t be worrying about boiling, freezing, starving, or the inability to do any fighting.

Assuming nobody will pay higher taxes –because the rich won’t, and the poor can’t– then that logically leaves only two paths.

  • First is MMT, yet even that theory says don’t print when inflation is high. The American Mind article added, “we know what happens when we allow the boundless desires of politicians to become the basis of credit creation.” And President Biden just gave students debt relief of $10-$20,000 owed to rich, rentier private universities specialised in the dead/fictitious because of a “Midterm Covid emergency”: even the Washington Post calls it “a regressive, expensive mistake [which] will provide a windfall for the upper-middle class and wealthy – with American taxpayers footing the bill.” Yet MMT **only** into live/productive credit/capital areas such as agriculture, energy, industry, infrastructure, and defence , and into local/bloc supply chains not imports, might work, even if it means more inflation now. That is de facto industrial policy and Bretton Woods-era credit rationing to reallocate scarce resources and maintain social stability, if central banks read their own history. (And isn’t the ECB starting down this path with its anti-fragmentation policy? All it needs it state supply-side spending now.)
  • Second is to force private capital to do the things society desperately needs by narrowing its horizons. That means: telling banks what to do; high tariffs; capital controls; credit rationing; and moral suasion like under China’s “Common Prosperity”. Any Western takers?

Both paths lead to a bloc/values-based neo-mercantilism: thus the IMF and World Bank silence. Both are inflationary short-term and mean higher base inflation long-term. Today the Financial Times says “A post-dollar world is coming”. I will take the other side of that bet, while agreeing the can-still-soar-higher-than-this US dollar won’t be used in certain balkanized parts of the world ahead – and good luck to them with their choice of replacement.

Finally, it is unfortunate that there was little discussion on the reality that the US is already in a recession, which however the NBER won’t admit until just a few hours after November’s midterms.

As for Powell sparking a recession, nothing there that we haven’t already covered and as we discussed previously – all those claiming there will be no Fed pivot, let’s readdress after the BLS reveals that the US has lost a few hundred thousand jobs in one month and it becomes the biggest political talking point. Powell will pivot so fast, heads will spin.

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