Stocks Down, Inflation Climbs Up, Fed Trapped

Here’s today’s headline from MarketWatch: ‘Dow skids 650 points, tech stocks battered as inflation climbs to highest in 13 years’.

U.S. stock indexes closed sharply lower Wednesday, after a reading on inflation for the year to April climbed 4.2%, the highest rate in about 13 years, reigniting fears that the Federal Reserve may need to dial back its easy-money policies earlier than expected.

Trading on Wednesday was punctuated by heavy selling in technology shares, while the Dow Jones Industrial Average suffered its biggest one-day percent decline since Jan. 29.

Darn…just when the fake recovery from the fake plague…financed with fake money…given away under false pretenses…

…was going so well.

Token wealth

Stocks were hitting new high after new high. Most old people got vaccinated, while young people got rich buying worthless crypto coins with their stimmy money.

Just last week, ‘Internet Computer’ was launched. Already, in less time than it takes cement to harden, it has a market value of around US$45 billion.

Who wants to build a factory, when you can score that kind of money with a ‘token’ — without getting out of bed?

And poor Dogecoin. The crypto pooch is in the doghouse, after self-proclaimed ‘Dogefather’ Elon Musk called it a ‘hustle’ on Saturday Night Live. The joke didn’t go down well…

But not to worry, the joke isn’t over. There’s another bow-wow coin called Shiba Inu (SHIB) which is taking up the slack.

At its high on Monday, the new dog-based meme coin was showing a 1,700% gain — in a week…and is now worth more than US$6 billion.

Which just shows what we know. Here at the Diary, we wouldn’t have paid 10 cents for it.

The idea behind the world’s first crypto, bitcoin, was that the computer algorithm would limit the supply, making the new money a plausible substitute for the dollar…and even for gold.

But Dogecoin — a spoof currency — was never limited…and neither apparently is SHIB. There are said to be nearly 400 trillion of these coins already cluttering up the cryptosphere.

And where these puppies go from here is something we are not qualified to say. Dear readers are invited to go and look at the dog’s ‘woof paper’ and report back.

In the meantime, we would put some newspaper on the floor, just in case.

HOODWINKED! Why Australia’s ‘miracle’ economy is a farce

Inflation has arrived

While the ‘free market’ is destroying real capital by ‘investing’ time and resources in these pranks, the federales are destroying even more wealth with their jackass programs.

This week, Democrats and Republicans huddled together to see how they could misuse some US$4 trillion more.

Of course, it was obvious to one and all that the feds don’t have that kind of money…and can’t raise it by borrowing private savings or increasing taxes.

They will have to print it, which guarantees price increases.

But until yesterday, many people were betting that inflation would never arrive. And the Federal Reserve was so afraid that it was stranded somewhere, it sent a bus to pick it up.

That is, official Fed policy was to keep interest rates low…low…low…to try to raise the Consumer Price Index (CPI).

Then, yesterday, the bus rolled into town.

Here’s the report from TheStreet…on the biggest increase in US inflation in 40 years.

The consumer price index rose last month to 0.8% from a 0.6% gain in March. The core CPI, which strips out food and energy costs, rose 0.9% in April from March. It was the largest increase in the core measure since 1982.

On an annual basis, CPI surged to 4.2%, though comparisons are skewed by the pandemic in 2020. Economists had forecast consumer inflation to rise 3.6%.

Inflation concerns have gripped markets for much of the past few weeks, sending stocks into their longest losing streak in two months and pulling the Dow to its biggest single-day decline since late February on Tuesday.

So far this year, according to our colleague David Stockman, consumer prices have been rising at a 7% rate, annualised. And if housing were properly included (rather than the statisticians’ ‘owner-equivalent rent’ fantasy), the real rate would probably be over 8%.

Inflate or die?

And so…the ‘inflate or die’ trap closes in on Treasury Secretary Janet Yellen and Fed chief Jerome Powell…and on the whole company of dreamers and schemers who thought they could print money forever.

I don’t think there’s going to be an inflationary problem. But if there is, the Fed will be counted on to address them,’ said Ms Yellen just last week.

But now that inflation is back in town, how will the Fed ‘address’ it?

As recently as last Friday, it thought it could duck the question. The coast was clear; higher unemployment numbers left the Fed free to keep printing money.

But now what? Does it inflate more? Or let the boom die?

More next week…


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Bill Bonner,
For The Rum Rebellion

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Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries.

A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally.

With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance.

Bill has been a weekly contributor to The Rum Rebellion.

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