What I Meant Was...

-  Say what you mean, mean what you say, and do what you'll say you will do.

- John Lennon 

We all have done it. It happens at family gatherings and parties. Mostly, it happens with a girl that we want to say something to get her attention. However, we let our mouth overload our brain. After the faux pas, we frantically push our cortex to solve the situation. Generally, we are given a second chance. This brings me to the chairman of the Federal Reserve. How many chances does this agency receive? 

History...

shows that they make the wrong call time-after-time. Their partners, the banking system, the elite and misdirected Congress always diffuse the pressure by bringing up other plausible reasons, pertaining to whatever crisis was happening at that point in time. The most recent is Bernanke saying that the financial crisis (2007) is contained. We got this!...We all know what happened then...

He lowered interest rates to nothing. He bought all the stimulus deficits from the Treasury. He expanded the Fed's power (QEs) to include entering into the market place to buy any and all loans, mortgages and overnight lending among banks. The system held. Bernard Bernanke gets accolades. Real Americans lose jobs, homes and standard of living. 

Now...

Jerome Powell told the nation in April that the apparent signs of inflation is "transitory." We showed and told you that the chairman waited as long as he could to mention the word, inflation. In fact, we showed you that lumber prices actually began rising in March of 2020. They would triple. I would almost bet that Powell or a crony will mention that the price of lumber has since crashed. Dear Reader, it is still above its historical level.

What happened? Closed mills reopened. The supply met demand and now, exceeds it. However, we expect the same scenario. When demand slows, those same early closed mills, will close again. Then, we repeat the price rise until they reopen again. The job will turn seasonal like mining in Canada. When winter comes, the mine closes. By the way, building permits are down 5% which doesn't bode well for those mills to remain open.

Back to the Fed...

The data from the government shows that inflation has not subsided. It grew in May and again, in June. In fact, it got even higher and it has moved to other sectors. This is how inflation works. Beside lumber, almost all commodities began rising in price back in 2020. When aluminum cost more, can packaging cost more. The producer raises prices. When there are less workers due to COVID-19, industries produce less. However, if demand is the same, that will still make an imbalance. More demand chasing less product means higher prices. We all saw the disappearance of toilet paper last year. Then, we found out how much of our supply is imported and from China. We could not even find masks to wear. Those problems are in the rear view mirror, but others surfaced. The supply chain disruptions has effected the global community. Inflation is moving to school supplies. Kids will learn two things fast. How to spell inflation, and what it means. School stuff is up 10%.

You want a vaccine? We got one. It goes to money. The price is too high for the poorer nations, but the need is universal. This problem has not been solved or vaccinated away. This will keep supply chains disrupted. 

Enter William Taylor. He is a CEO of an equipment manufacturer. He told Congress last week that the supply chain at every junction has bottlenecks. It begins with ocean containers. Transport prices went from $4K to $18K. When it reaches port, there are no truckers to continue the journey. This too increases prices. He, like us, believe that China has too much control over shipping with its dominant position in exports. This is a root source of the problem. However, it won't change for a long time. Mr. Taylor is not alone. CEOs publicly stated that they are raising prices. They include, Pepsi, a major beverage producer. Fastenal, many industrial uses. Conagra, a major food supplier, Helen of Troy, a beauty firm. Simply Good Foods, maker of granola type products and McCormick, the leader in spices.

Other economist are joining our chorus is believing that inflation will continue until the end of the year like James Knightly, ING chief international economist. The Fed is beginning to feel pressure. They received help from cronies like "Yellen" Yellen who second guessed herself about inflation. She now says it will end soon, but no date! Powell tried to smooth his faux pas by saying, "This is what I meant..." It is possible for inflation to be with us for a few more months, but it will end. Folks, like we said. He is trapped. He cannot raise interest rates to fight inflation because the dollar will implode with such high levels of debt. Remember, interest rates compound debt! Even while this is printed, the Fed buys treasuries. The outlays are up to $5.29T. With numbers like this and more stimulus on the way, one trip up and the gap becomes unserviceable. We have many stumbling points from supply chains to the delta variant. Keep in mind, inflation rotates from industry to sector to consumer.

The stimulus of the child care check will help our economy. It will allow families to weather this storm of rising prices, but other structural problems are surfacing. This is shown in the stock market as there are more down stocks than rising stocks. The Russell 2000 peaked in March. Used car prices are at all-time highs, but the number of actual sales is declining every month. Also, market debt is spiking along with household debt ($14.6T) and auto loans are at record levels as well as prices for new vehicles ($42K). Again, one little trip up and debt becomes unserviceable. There are 8-experts who joined our call for a market pullback and correction. In conclusion, all of the above are added to the many reasons to End the Fed!   Peace.