In Contrast to Our Presiden't's 100 Minute Speech to Congress

Today we present a stark contrast to our President's 100 minute speech to Congress this past week. Yes, that was 100 minutes. Seem long? It was.

So long that it seemed to have little impact on the markets - at least at first. They had already been bouncing around with the short shots that come from the current crew in the White House: tariffs, fewer tariffs, more tariffs being perhaps the best example. Markets plunged when the full boat of tariffs were imposed this past week, then rebounded when some source indicated a plan to ease up. Then they plunged again.

Why the back and forth, up and down? The pundits keep yammering about "uncertainty" when things go down. Of course, they also claim that when things up it's because the Prez made some remarks that seemed to ease up on his commitment to those tariffs. Well, our fearless leader is simply being consistent in his inconsistency. If you've followed him over the years, you know what this means. If not, well, you're certainly learning quickly and in a big way, no?

Back to the speech. Indeed, it seems it was the longest speech to Congress in modern memory.

Of course, way back politician's could talk for - literally - hours and many famously did. Apparently folks stayed and listened.

Can you imaging anyone staying to listen to a politician for, let's say, three hours these days? 

Having not listened to the entire speech (and having no intention to do so), the following does present a start contrast. It comes from an intelligent source: Mike "Mish" Shedlock. You can find him HERE.

Having read his stuff (albeit on from time to time), he does seem to possess mental faculties that allow for sometimes valuable analysis and insights. This particular post falls in the category of simple, direct statements without lots of fluff. Sometimes it helps to read stuff that just says what the author thinks plain and simple.

We won't add any fluff to this. But if interested, you can always head for his site to find more background from previous posts. Even better, you can do some research and thinking of your own and burrow into some of the issues he raises here.

If nothing else, note the references to both inflation and deflation. They remind us that neither force typically dominates all the time in every part of the economy. Indeed they can coexist and typically do. 

There's also references to government policy (a/k/a "fiscal" policy) and the Fed's policy (a/k/a "monetary" policy). 

Of course, at the end of the day, let's not forget that the Fed, in its monetary policy, with full cooperation from our esteemed politicians, has pursued a policy for over 100 years of inflation that has resulted in a mostly slow, sometimes rapid and devastating (e.g., the 1970s) destruction of the purchasing power of the U.S. dollar. But that's a story for another time.

So, forthwith, here's Mish:

 

Inflationary and Deflationary Forces

• Free money and rising deficits are inherently inflationary

• The resultant rise in asset values is inflationary

• Boomer demographics and retirements are disinflationary but offset by rising asset prices and bubbles

• Inflation is punishing the non-asset holders who need PCTR to buy food and pay rent. This is deflationary.

• If asset prices sink, the entire mix becomes deflationary.

Government Dependence Synopsis

We have a growing dependence on government aid over time. The problem is exacerbated by rising benefit levels, inflation, and demographics.

Neither party will fix this. Neither party will fix anything because Congress is corrupt.

There are no fiscal conservatives to be found.

DOGE is a side-show relative to $4.74 trillion in PCTR and the entire budget.

Trump wants more money for defense and will get it by offering something to Democrats in return.

The Fed won’t fix anything either because fiscal policy will play an increasing role and the Fed does not even understand what inflation is.

Understanding Inflation

The Fed, Congress, and the White House have created a two-state economy that bails out the banks, the asset holders, and the wealthy time and time again.

The Fed does not recognize the result as inflation. Meanwhile, both parties support more spending on this in return for more spending on that fueling various bubbles.

Asset bubbles are by definition inflationary. Few understand that because the Fed and economists in general tout inflation as the CPI or PCE. The Fed repeatedly says “Inflation expectations are well-anchored”.

So what? Please consider Fedthink! The Fed Is Incompetent by Design and Can’t Be Fixed

Consumer inflation measures are a very poor measure of overall inflation. By failing to understand this simple point, the Fed has sponsored numerous bubbles of increasing amplitude over time.

Meanwhile, it takes more and more PCTR to keep the have-nots from revolting.

When the bubbles burst, the outcome will be very deflationary. Tariffs may easily be the proverbial straw.

Worth a read, and worth thinking about, no?

Have a pleasant Lenten weekend. (You do know Lent began this past week, right?)