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Good Friday Morning! If you’re a fan of good meltdowns in college sports, you won’t get much better than the current state of Kentucky Basketball. After getting shot down by the coaches of Alabama, Baylor, and UConn, Kentucky is allegedly targeting BYU Coach Mark Pope. How are Kentucky fans taking this? There are also calls to fire Mark Pope, and the Athletic Director’s phone number got posted so people can harass him.
The SEC is the best soap opera on earth. Speaking of soap operas, the death of O.J. Simpson coincided with the 30th anniversary of the infamous white Bronco car chase. In bizarre coincidence, Ford issued a recall of both the Bronco and Escape models for 2022-2023 the same day of Simpson’s death.
I have a column at the Conservative Institute on how the trial changed America. One of the pieces I relied on was a long essay by Lili Anolik in Vanity Fair, arguing that O.J. Simpson killed pop culture. It was written ten years ago, on the 20th anniversary. It’s worth your time.
This week, I’m going to do a deep dive on inflation, and where the Federal Reserve is headed with more hot inflation reports coming in – links to follow.
Quick Hits:
- Sen. John Fetterman of PA has somehow become one of my favorite people in the Senate. I’ve joked with some friends that the more conservative candidate won that Senate race. He’s been one of the strongest, and loudest advocates for Israel in the Senate. It’s a startling stance to take, given that Biden is becoming incoherent on Israel. He’s continuing at this track despite his staffers quitting, seemingly in droves. He’s not progressive enough for them. That’s not to say Fetterman is conservative – he’s a reliable Democratic voter in Senate. But because he’s not kowtowing to the progressive far-left, it makes him seem far more centrist than he otherwise is. In the otherwise full party fighting in Congress, Fetterman is at least entertaining, and says things that make sense to this conservative.
- Donald Trump is pushing the debate portion of the campaign hard. His campaign formally requested the Commission on Presidential Debates move the scheduled debates earlier on the calendar, and have more of them. He did the same thing in 2020. But what’s notable about this race is that Biden has not publicly committed to debating, yet. Trump clearly believes he can win if he gets Biden on a stage on multiple occasions. Performing well once is possible, but multiple times is likely too much for Biden.
Where you can find me this week
Please subscribe, rate, and review my podcast on iTunes, Spotify, or Google Play — the reviews help listeners, and readers like you find me in the algorithms. Make sure to sign up for the Conservative Institute’s daily newsletter.
America Is Falling Behind In Global Naval Arms Race – Conservative Institute
NPR’s Own Reporters Prove The Case To Defund NPR – Conservative Institute
O.J. Simpson (1947 – 2024) And The Murder Trial That Created Modern Culture – Conservative Institute
Inflation Rears Its Ugly Head In An Election Year
One of the consistent points I’ve hit regarding the Federal Reserve and the battle over inflation is paying careful attention to what Wall Street Journal reporter Nick Timiraos says. When the Fed surprised everyone and hiked by 0.75 basis points for the first time in 2022, they leaked it to him. When the Fed has ever had a change of heart on something, Timiraos is the one who publishes the Fed’s thoughts, often directly based on what Jerome Powell thinks.
When the monthly CPI report came in hot, again, showing inflation was gaining ground, I was very interested in seeing what Timiraos said. Up until now, he’s been floating out a dovish path toward rate cuts.
At the start of this month, he wrote a piece headlined: “Powell Still Sees Room for the Fed to Cut Rates This Year.” But he cautioned in a piece later that the March CPI report loomed big for the Federal Reserve.
That optimism is gone now. After the March CPI report, Timiraos had a piece headlined: “Fed Rate Cuts Are Now a Matter of If, Not Just When: Central bank officials started the year with the wind seemingly at their backs. No more.“
At the beginning of the year, markets were expecting as many as five rate cuts. Morningstar was still calling for five cuts as late as March. Timiraos and mainstream news sites like CBS News caution that there will be no rate cuts at all for 2024.
What changed? Everything. The Fed believed it had lucked out and inflation was trending down. That belief is on rocky footing. Timiraos writes:
The latest data raises two different possibilities. One is that the Fed’s expectation that inflation continues to move lower but in an uneven and “bumpy” fashion is still intact—but with bigger bumps. In such a scenario, a delayed and slower pace of rate cuts is still possible this year.
A second possibility is that inflation, rather than on a “bumpy” path to 2%, is getting stuck at a level closer to 3%. Without evidence that the economy is slowing more notably, that could scrap the case for cuts altogether.
“Underlying inflation is down. We have made progress. Frankly, we’ve made more progress than I would have expected a year ago,” said Jason Furman, a Harvard University economist. “But we’ve made less progress than anyone was hoping for three months ago.”
Timiraos and the Fed say that inflation shifted paths three months ago, which makes this seem like a recent phenomenon. But I agree with Ben Hunt at Epsilon Theory—inflation stopped going down nine months ago.
We’ve flatlined above the point where the Fed wants inflation. Economic growth trends also suggest that if the Fed cuts rate snow, inflation roars back because demand is set free.
History is a guide here. Jimmy Carter’s economic malaise began in 1967 when inflation started spiking. In response, the Federal Reserve raised rates to counter it. However, in the middle of the 1970s, they started getting positive inflation data. In response, the Fed eased off those rate hikes and even started cutting.
Inflation roared back to life, strangling economic growth for the better part of the 1970s. That led to Fed Chair Paul Volcker taking interest rates sky-high in the 1980s, combined with Reagan’s supply-side economics, which extinguished the inflation threat. The double-dip recession between 1980 and 1982 killed inflation, which allowed the economy to grow, giving us the Reagan boom.
Ironically, we need that combo again. But we’re only getting half of it: the rate hikes. Congress must pass a swatch of measures that ease pressure on the supply side. Lawrence Summers put this up on X/Twitter: “I think monetary restraint does influence the economy, which feeds through into the inflation process. But gosh, we ought to be doing everything we can on the supply side. Any time anybody sees a bottleneck, we ought to be going after it.”
That won’t happen because Biden has wedded himself to the idea that “trickle-down economics” doesn’t work. That’s a great talking point. Here’s the problem: our inflationary problem is almost exclusively supply-side.
We need more workers, production, widgets, and everything. Demand is sky-high, even with these interest rates. We need supply to catch up with that problem. It can’t. The Fed is choking off the demand problem as much as it can, but supply has to be the answer.
Instead, the White House is focused on “greed” and “shrinkflation.” In the White House’s mind, this is an unsolvable problem. It’s an identical mindset to Jimmy Carter’s —this is a malaise, and everyone just needs to buck up and deal with it. Or, if you’re in the liberal press corp, “focus on the good stuff!”
Returning to the Fed: they’re in a bind. The election is in November. Politics makes the possibility of a rate hike, called for by Lawrence Summers, a non-possibility. But they can’t stay elevated forever, either.
Commercial real estate is crumbling everywhere. The Wall Street Journal did an in-depth look at how commercial real estate is imploding in St. Louis, a city in decline and in a “doom loop.”
Car sales are struggling, too. Interest rates are eating into profits across the board, and consumers don’t want to pay current prices combined with high-interest rates. The largest carmakers in America are engaged in layoffs. The growing disaster of the EV transition compounds part of the problems in the auto sector.
That’s not to say things are all doom and gloom. If you look at any of the top-level data, you will see that the economy is continuing to boom. Recruiters are trying to steal people from other industries.
Where does Timiraos see this headed? According to him, the Fed is split:
Still, the latest data does little to clarify a broader debate inside the Fed over what is driving the inflation process. Some officials and economists outside the central bank have taken a bottom-up approach to inflation. They argue that higher services inflation in recent months reflects the aftereffects of pandemic-related disruptions and not an overheated labor market. Services prices should cool, they say, as labor market imbalances fade.
But other Fed officials are skeptical of that bottom-up look and say a top-down approach is warranted. They worry the economy and labor markets will need to slow down more to prevent businesses from pushing along more price increases.
If you listened to Powell’s statements in 2022-2023, he was in the second camp. Powell pushed hard on the message that job losses were needed to slow down inflation.
This is the proverbial last mile of the inflation fight. The Fed ultimately has to choose whether to fight to 2% or give up to avoid an economic downturn with the country headed towards a contentious and tight presidential election, complicating decision-making. If the Fed tackles inflation now, they risk dragging things down economically for Democrats. If they wait until after the election, it gets pushed onto the winning party.
It’s a lose-lose situation. And based on previous Fed statements, we know they want to cut. That’s the significant difference between now and prior years. The Fed wants to cut rates. But they’re being stopped. How does that impact decision-making?
It’s hard to tell, but one thing is certain: inflation is still here. It hasn’t been defeated, and the Fed is worried we’re in a second wave inflation surge now.
Links of the week
Why I Got a Gun: My Glock is an ugly little monument to the historic threat facing my family, my neighbors, and all of Israel. – Matt Friedman, The Free Press
I’ve Been at NPR for 25 Years. Here’s How We Lost America’s Trust. Uri Berliner, a veteran at the public radio institution, says the network lost its way when it started telling listeners how to think. – Uri Berliner. The Free Press
NPR’s Hilariously Weak “Response” To the Above Piece – NPR
‘Mistake’: Kabul Bug-Out Author Wonders Why Israel Won’t Just Stop Fighting for a Couple of Months – HotAir
The Arsonist: Tucker Carlson whitewashed murderers to set fire to evangelical-Jewish relations – TabletMag
The Hateful Candace Owens – Christine Rosen, Commentary
Addiction Activists Say They’re ‘Reducing Harm’ in Philly. Locals Say They’re Causing It: Addicts have turned a minority neighborhood into an open-air drug market. Residents blame the mostly white advocates for ‘destroying’ their community. – Olivia Reingold, The Free Press
The Navy Needs to Fix Its Cash Flow Problem to Grow the Fleet – AEI
Interview with Lawrence Summers where he calls for the Fed to raise rates. – Bloomberg / YouTube
Nashville is emerging as a national economic powerhouse, Barron’s reports – Axios
Astronauts Watched the Eclipse From ISS Space Station And Grabbed Some Cool Pictures and Video – Good News Network
Total Solar Eclipse Seen From Space – Weather Channel
X/Twitter Thread(s) of the week
Chart showing how many months inflation has been above 3% compared to previous eras.
Satire of the week
FDA Warns Americans If They Eat Now They Won’t Be Hungry For Supper – Onion
White House Announces Inflation Doing Great If You Hold The Chart Upside Down – Babylon Bee
NFL Refs Prep For Next Season By Staring At Eclipse – Babylon Bee
Fort Liberty to solve trash problem with innovative ‘burn pit’ program: GWOT proven tactic no part of the war on trash – Duffel Blog
‘School Never Taught Us About Taxes,’ Says Woman Who Wouldn’t Remember It Even If They Had – Reductress
Just Give Me an Address, and I’ll Scare Your Birds Away, Free of Charge (Guest Column by Gary Busey) – The Hard Times
New Bambi Horror Movie Technically Less Scarring to Children Than Disney Original – The Hard Drive
Irish Hen Parties Rise Three Places On International List Of Terror Organisations – Waterford Whispers News
Thanks for reading!