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Michael Maharrey

Articles by Michael Maharrey

Fed Still Pouring Gas on the Inflation Fire; What Happens When Tries to Stop?

2 days ago

The Federal Reserve wrapped up its first Federal Open Market Committee meeting of the year yesterday without any real surprises. Despite everybody screaming about an inflation problem, the Fed will keep its loose, inflationary monetary policy in play for at least two more months.Interest rates remain locked at zero. But the FOMC said it will likely raise rates “soon.”With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”Most analysts expect “soon” to be at the March meeting.But Jerome Powell left some wiggle-room in the trajectory of the Fed’s monetary policy, saying, “At this time, we haven’t made any decisions about the path of policy. I stress again that we’ll be humble

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Mainstream Suddenly Realizes Raising Interest Rates in a World Buried in Debt Might Be a Problem

4 days ago

The Federal Reserve is talking about raising interest rates. But the US economy is buried under piles of debt. I’ve been asking how this is going to work for months. Apparently, the question has finally occurred to the mainstream.A CNBC article declared, “Fed rate hikes will intensify a global debt crisis, research warns.”Well, yeah. Duh.According to the study came from a UK non-profit the Jubilee Debt Campaign, debt payments rose in developing countries by 120% between 2010 and 2021. They are currently at their highest levels since 2001.The sharp increase in debt payments is hindering countries’ economic recovery from the pandemic, the report suggested, and rising US and global interest rates in 2022 could exacerbate the problem for many lower income countries.”The study and the CNBC

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Joe Biden’s Economic Dumb-Guy Argument

10 days ago

President Joe Biden is running around trying to take credit for a “booming” economy. It’s the ultimate political dumb-guy argument.Politicians tend to play to the lowest common denominator and Joe Biden is no exception.In a social media post, Biden claimed credit for an improving labor market, comparing various jobs numbers today with the same data a year ago. “One year in, America is on the move again,” Biden exclaimed.If you take these numbers at face value – and you’re a dumb guy – you would think Biden is an economic miracle worker. But of course, data needs context.In January 2021, the US economy was just coming out of a year in which governments across the country shut down the entire economy. Businesses were forced to close. People were banned from going to work. , there was

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Biden Is Going to “Fix” the Meat Supply Chain? The Government Broke It Decades Ago

12 days ago

Elizabeth Warren and others are running around blaming inflation on greedy corporations’ “price gouging.” Of course, this narrative falls apart when you realize producer prices are rising faster than consumer prices. If anything, producers are letting consumers gouge them by not passing on all of their rising costs.But the “greedy corporation” narrative is great for politicians. It lets them deflect the fact that their reckless borrowing and spending is the problem.It’s also empowering for them. Now they can come in and fix things!But here’s a truth you’d be wise to remember — if the government is telling you it’s going to fix something, it probably broke it to begin with.Warren isn’t the only one blaming business for inflation. Biden is on the bandwagon too. He has specifically zeroed

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Abandoning the Gold Standard Undermined Labor Productivity

December 21, 2021

Labor market productivity has been dropping for decades. And you can trace the plunge back to the demise of the gold standard.US labor market productivity plummeted in the third quarter of 2021. Revisions to the data showed a 5.2% drop in productivity, even worse than the dismal initial reading last month. It was the worst productivity decline since 1960.Workers earned more and hours worked increased, but output plunged.Labor productivity is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers.Even with the steep Q3 decline, productivity is expected to chart a small increase of 1.7% this year. One economist told CNN that would be a “solid gain.” But historically speaking it’s not a solid

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Worst Taper Ever: Fed Adds $92.1 Billion to Balance Sheet in One Week

December 20, 2021

Taper? What taper?Last week, the Fed announced that it plans to speed up the pace of its asset purchase taper. But so far, this taper hasn’t been very impressive. Between Dec. 8 and Dec. 15, the Fed added another 92.1 billion to its balance sheet, expanding it to a record $8.757 trillion.If this is the taper, it’s the worst taper ever.The trajectory of the balance sheet in the era of the taper looks a whole lot like the trajectory of the balance sheet before the era of the taper.The perception is that the Fed has pivoted to fight inflation. But in reality, it is still throwing gasoline on the inflationary fire.Here’s a question: if you’ve got a fire, wouldn’t you just stop pouring gasoline on it?Of course, you would. You wouldn’t just gradually pour on less gas. You’d just stop.The Fed

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Fun on Friday: Messing With Your Christmas Memories

December 17, 2021

‘Tis the season for Christmas specials.I’m not going to lie – even as a grown man, I love watching Christmas specials. Snoopy decorating his dog house. The Grinch folding up the Christmas tree like an umbrella and stuffing it up the chimney. And Frosty the snowman melting in the greenhouse.A lot of great memories in those shows.And today, I’m going to mess with one of your Christmas special memories!My all-time favorite Christmas special is Rudolph the Red Nose Reindeer. Ever since I was a little kid, I loved Rudolph.I still do.It was different then though. We had to wait until the shows came on TV.  I think that’s lost on a lot of people today in our world of on-demand streaming. I used to scour the TV guide from our local newspaper beginning in the first week of December (boy, I’m

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Retail Sales Disappoint Despite Surging Prices

December 16, 2021

In October, retail sales surged much higher than expected, rising 1.7%. The mainstream gushed over retail spending, asserting that it was a sign that the economy is booming. At the time, I argued that it wasn’t necessarily good news.Well, the news just got even worse. Retail sales in November disappointed, despite another big surge in inflation.Retail sales in November only rose 0.3%. The consensus expectation was for a 0.8% gain with some economists projecting sales to jump by as much as 1.5%.The mainstream blamed continuing shortages and suggested that rising prices might be cramping consumers’ wallets.“Stubbornly higher prices — which consumers had shrugged off in recent months — are finally taking a toll on household budgets,” one economist told the . “While grocery stores still

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A Runaway Inflation Freight Train the Fed Won’t Stop

December 15, 2021

The producer price index rose at the fastest rate in the history of the data set in November. This is a runaway inflation train hurtling down the tracks toward consumers. And despite all the talk, the Fed won’t be able to stop it.The Producer Price Index (PPI) rose by 0.8% month-on-month in November. The expectation was for a 0.5% gain. Year on year, producer prices were up a whopping 9.6%. That was the biggest increase since the series was revamped in 2010.This comes on the heels of Friday’s report than consumer prices charted their biggest gain since 1982.We continue to see a large gap between producer and consumer prices. Ultimately, producers of goods and services will pass at least some of these increasing costs on to their customers. That means consumers will see more price hikes

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Benjamin Franklin: Government Welfare Is Not “Doing Good to the Poor”

December 7, 2021

The federal government lacks any legitimate constitutional authority to establish welfare programs for the poor. Not only that, the federal welfare system fails in its promise to “help the poor” out of poverty.Supporters of the expansive federal welfare system argue the “general welfare clause” authorizes them. But the general welfare clause is not a blank check. It does not grant blanket authority for the federal government to do anything it decides in its infinite wisdom is for the “general welfare.” The clause is limited by the delegated powers that follow. James Madison explained this in .If you search through the enumerated powers in Article 1 Sec. 8, you will find nothing even hinting at congressional authority to establish programs for the poor. That means the power remains with

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Five Inflation Myths

December 7, 2021

Inflation is running rampant. At first, the powers that be tried to convince us it wasn’t a problem because it was just a temporary phenomenon caused by coronavirus. (As if a virus could cause the money supply to increase.) But now, the transitory inflation narrative is dead. Jerome Powell recently admitted that it’s time to “retire” that word. The new strategy seems to be to try to convince you that rising prices are “good for you” and the broader economy. You can decide for yourself the veracity of that argument.The truth is the federal government needs inflation. It depends on Federal Reserve money printing to support its borrow and spend budgeting strategy. Without the Fed’s inflationary activity, the government couldn’t finance its out-of-control spending habit. But politicians

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That Was One Weird Jobs Report

December 6, 2021

That was one weird jobs report.The labor department released the November employment data on Friday. The numbers simply don’t make any sense. As one chief investment officer put it, “One of the weirdest reports I have ever seen.”One thing seems pretty certain. The labor market has not recovered, no matter how the powers that be spin the numbers.The headline number was extremely disappointing. The US economy added just 210,000 non-farm payroll jobs. It was the lowest level of job growth since last December. The consensus expectation was for an increase of 550,000 jobs.But the unemployment level plunged to a 21-month low of 4.2%. That was down from 4.6% in October.Of course, President Biden chose to focus on the low unemployment rate, not tepid job growth. He took to Facebook and

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I’m Dreaming of a Red Christmas?

December 2, 2021

It appears American consumers are going to have a red Christmas this year.Red — as in going deeper into debt.Shoppers plan to spend less, but borrow more this holiday season.Black Friday spending fell this year, both in stores and online. It was the first year-over-year Black Friday decline on record.Online retailers rang up $8.9 billion in sales, down slightly from the $9 billion spent online in 2020. It marked the first time ever year-on-year online sales dropped.Foot traffic in brick-and-mortar stores dropped by 28.3% compared to prepandemic levels in 2019.According to the National Retail Federation’s annual survey consumers plan to spend an average of $997.73 this holiday season. That’s down from the prepandemic high of $1,047.83 in 2019. When you factor in inflation, it means

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The Fed Is Between a Political Rock and an Economic Hard Place

November 30, 2021

Black Friday was a black and blue Friday as US stock markets saw their sharpest declines since April 2020.The selloff was spurred by a new COVID variant and fear of new lockdowns. The markets recovered on Monday, but the sudden stock dip was telling.Peter Schiff pointed out that another economic shutdown would require more stimulus and that would mean an end to a taper that barely got started. In fact, it would probably require an even bigger round of quantitative easing.I don’t think the Fed simply saying, ‘We’re going to maintain the stimulus we have now,’ — that ain’t going to cut it. When you have a drug addiction, you build up a tolerance. And I don’t think the Fed can really stimulate the economy again by maintaining the level of stimulus that is already in place. The markets

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Fun on Friday: Why Is Black Friday Black?

November 26, 2021

So, did you hit the Black Friday sales Friday morning?That’s an emphatic “No!” for me. You’d have to just about give away stuff for free to lure me out on Black Friday. No thanks. Too peoplely!My Black Friday tradition is to ignore it completely.On top of my very strong desire to avoid crowds, you have to get up really early in order to join the Black Friday hordes. There isn’t a Walmart deal ever conceived that can entice me to go shopping at 5 a.m. I like to sleep more than I like saving a few bucks.I have zero desire to go out at the butt-crack of dawn, fight traffic, elbow through a smelly mass of humanity to get into a retail store, risk a fistfight over the last discounted laptop on the shelf, stand in a long line to pay for said discounted laptop, fight traffic some more and

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The Pilgrims Did Socialism and Died Trying

November 25, 2021

When I was a kid, we used to say some things only “sound good on paper.” In other words, they seem like good plans, but there is no way they’re going to work in the real world.That’s socialism in a nutshell.The Pilgrims found this out the hard way during their first couple of years in North America.Socialism really does sound good on paper though, right? We’re all going to own everything together and take care of each other. “From each according to his ability, to each according to his needs.It sounds so . And we all want to be nice, right? People are emotionally drawn to socialism because it sounds nice. It sounds fair. It sounds .Except when people start dying.Do you know what’s not nice?Corpses.That’s exactly what happened when the Pilgrims took a stab at socialism.Most Americans

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Jerome Powell 2.0

November 23, 2021

President Joe Biden has tapped Jerome Powell to serve a second term as chairman of the Federal Reserve.Biden said Powell’s “steady leadership” helped calm markets as governments shut down the economy due to coronavirus, and he expressed confidence in Powell’s future leadership. “I believe Jay is the right person to see us through,” Biden said.Over the last several days, there was speculation that Lael Brainard might get the nod. She is perceived as even more dovish than Powell, and she’s a Democrat. She will serve as vice-chair.Both Powell and Brainard must be confirmed by the Senate.Democrats were pushing hard for Brainard. Biden defended his decision saying Powell’s “independence” is a plus adding that he felt there was a need for stability at the Fed.At this moment of both enormous

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Booming Retail Sales Don’t Necessarily Signal “Strong Economy”

November 17, 2021

Retail sales surged at a higher than expected rate in October, rising 1.7%.The mainstream reported this as fantastic news signaling a strong economy. American consumers are out there buying lots of stuff. The stock market rallied and gold fell.But the mainstream narrative isn’t giving you the full picture. There are two important factors to consider as you analyze these surging retail sales numbers.First, retail sales aren’t inflation-adjusted. The data just reflects the amount of money Americans spent on retail goods. It is as much an inflation indicator as it is a sign of strong buying patterns.For example, if consumers buy 100 widgets in a month at $1 per widget, and the next month, they only buy 75 widgets, but the price inflates to $2 per widget, retail sales would rise 50%. But

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Fun on Friday: Silver Theft Buffoonery

November 12, 2021

A story I ran across a couple of weeks ago provides an opportunity to make fun of all kinds of people, from a silver thief, to a silver buyer, to a really bad writer who somehow managed to land a job writing web stories for a local TV station.Our saga comes to you from the thriving metropolis of Lake Mills, Iowa, and was reported by KIMT 3 out of the thriving metropolis of Mason City.The story is short, so I’m just going to copy-paste it here for your reading enjoyment.LAKE MILLS, Iowa – A Winnebago County man is accused of being a silver thief.Daniel Joseph Martinson, 32 of Lake Mills, has been charged with one count of second-degree theft.Law enforcement says Martinson had sold a bar of silver to another Lake Mills resident but the buyer then asked for the bar’s serial number.

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They Expected Inflation to Come in Hot in October; It Came in Sizzling

November 11, 2021

The consumer price index was expected to come in hot yet again in October. It came in sizzling.The actual CPI numbers for last month were even hotter than expected as “transitory” inflation remained well above 5% on an annual basis for the sixth straight month.The projection was for the CPI to be up 0.6% month-on-month. That would have been a significant increase. But the actual number was even higher, with CPI up 0.9%. On an annual basis, the inflation rate was 6.2% compared with a 5.9% estimate. It was the highest annual CPI gain since 1990.The total CPI gain for 2021 now stands at 6.3% with two months to go. The annualized gain is 6.84%. That’s more than “moderately” above the Fed’s mythical 2% target.Stripping out volatile food and energy prices (as if consumers don’t have to eat

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Stagflation Warning: Atlanta Fed GDP Estimate at 0.5%

October 20, 2021

As governments shut down the economy in response to COVID-19 and the Federal Reserve put money printing into hyperdrive, we warned that it was a recipe for stagflation. Today, it looks like stagnation is here.Stagflation is an economic environment with rapidly rising prices, a weak labor market, and low GDP growth. It’s looking more and more like we have all three elements.We’ve primarily focused on the inflationary aspect of stagflation. There is no denying that prices are rising rapidly. The CPI came in hotter than expected again in September. We’re looking at a 6% inflation rate even using the government numbers that understate the true extent of rising prices.But what about economic growth?It is clearly slowing down as well.We’ve gotten hints at this in the last two jobs reports.

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A Messed Up Economy: Jobs Edition

October 13, 2021

Government policies – from shutdowns, to stimulus, to vaccine mandates – in response to the coronavirus pandemic have thrown the US economy completely out of whack. Looking at employment reveals just how messed up the economy has become.The number of Americans quitting their jobs surged to a record high in August. According to the Labor Department Job Openings and Labor Turnover Survey (JOLTS) report, job quits increased by 242,000 in August, pushing the total to a record 4.3 million. The quits rate surged to an all-time high of 2.9% in August from 2.7% in July.Meanwhile, job creation has tanked. The Labor Department reported an increase of only 194,000 jobs in September, well below the estimated 500,000. This followed on the heels of another big miss in August.And yet companies are

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Fun on Friday: The $1 Trillion Coin

October 8, 2021

Have you heard the latest news on the fake debt-ceiling fight?The Senate has approved a measure to kick the can down the road a couple of months. So, the “fight” will continue!The $480 billion increase raises the debt limit to $28.9 trillion, but that’s only going to last until Dec. 3. That means we have time for more political theater. Yippee!It’s so silly because there’s a 100% chance that the debt ceiling is going to be raised.Meanwhile, Treasury Secretary Janet Yellen wants to just get rid of the debt ceiling altogether. That would really be more honest. The whole concept is just a dog and pony show. This is what you get when you have a government completely untethered from any constitutional limits. The feds literally think they can do whatever they wantAnd they do.Or course, that

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If the Fed Can’t Hit It’s Inflation Target, Why Not Just Move the Goalposts?

September 26, 2021

The Fed has an inflation problem.The CPI is running well above the mythical 2% target and there isn’t any sign that it will ease soon. To deal with this problem, the central bank should tighten its monetary policy. But that would create a whole new problem, given that it can’t tighten in this economic environment. So, what is a central banker to do?Well, if the Fed can’t hit the target, how about just moving the target?That idea is apparently seriously being considered.In a article, Greg Ip floated the idea.One strategy [Powell]—or his successor—should consider in that eventuality is to simply raise the target.”Ip buys into Keynesian economic voodoo and thinks straitjacketing the Fed with a 2% inflation target will hinder job creation.Why would higher inflation ever be a good thing?

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Fun on Friday: I Wish I Had This Superpower!

September 24, 2021

Wouldn’t it be cool if you could just talk and your words would alter reality?It would elevate you to superhero status — or super-villain depending on your propensity to use your power for good or evil.You know, there’s a real-life person who at least appears to have this superpower.Federal Reserve Chairman Jerome Powell.Think about it. This dude gets up and makes a speech and the entire stock market moves. Bond markets respond. Gold sells off or takes off depending on the Fed chair’s utterances. Powell talks and the entire direction of the economy shifts, or at least gives the impression of shifting. Powell is like EF Hutton – when he speaks, people listen! (If you are too young for that reference, just watch this.)It’s almost amusing. The Fed had a meeting this week. It didn’t

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Does the Fed Really Want a “Bond Market Tantrum”?

September 21, 2021

A article by Stefano Rebaudo argued that the Federal Reserve might welcome a “bond market tantrum” that pushes bond yields higher. But does the Fed really want higher interest rates? And what would that mean for the economy?Despite the post-pandemic economic improvement and wide expectations that the Fed will begin tapering quantitative easing in the near future, bond yields have remained stubbornly low. Ten-year Treasury yields remain stuck just above 1.3%.Analysts cited in the report said the Fed “needs bonds to respond to the end of the pandemic-linked recession.” ING Bank research analyst Padhraic Garvey told higher yields would align markets more with the signals coming from central banks.“To facilitate that, we argue that there needs to be a tantrum. If the Fed has a taper

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Fun on Friday: The Government Can’t Even Get Constitution Day Right

September 17, 2021

Today is Constitution Day.We’re supposed to be celebrating the day the Constitution was signed and presented to the states for ratification. But it’s pretty hard to celebrate because the Constitution is dead.On Sept. 17, 1787, delegates (most of them, but not all) at the Philadelphia Convention signed the proposed Constitution for the United States and sent it off to begin the long and arduous ratification process.James Madison is often called “The Father of the Constitution.” During the ratification debates, he explained the new government created by the Constitution would have very limited powers. Most of the authority in the American system was supposed to remain with the states and the people. Read carefully what Madison wrote in .The powers delegated by the proposed Constitution

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CPI Housing Cost Calculation Hides True Extent of Inflation

September 16, 2021

The government CPI data for August came in slightly under expectations. Nevertheless, a 0.3% month-on-month increase in prices is significant. And a dig into the numbers reveals something wonky. The way the government calculates housing costs drastically understates rising prices and skews overall CPI to the downside.Housing costs make up 1/3 of the CPI. If you’ve been looking to buy a home, or waded into the rental market, you know the price of housing has skyrocketed. Here’s some anecdotal evidence from a recent Facebook post.Is it me or do you think the rental home market has priced medium income and retirees on a fixed income out of the area? I have close family and local friends looking for a single-family rental home with a long-term lease in the North Pinellas (Florida) area for

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The Fed Is Helping Facilitate Trailer Park Evictions

September 7, 2021

The Federal Reserve is helping corporate real estate investors evict poor people from mobile home parks.NPR highlighted the growing number of mobile home part evictions. According to the report, real estate investors continue to buy up mobile home parks across the US. They then raise lot rents and fees, and evict residents who can’t pay.As the report explains, the government makes this scheme possible with easy financing through agencies such as Fannie Mae and Freddie Mac. Here’s how it works in a nutshell.A company raises rates and fees in a park. That makes the park more valuable. So they can now borrow more money against it, kind of like when you refi your house and get cash out of the deal. They pull out, say, $3 million, and they use that to go buy another mobile home park. And

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Fun on Friday: Politicians Lie

August 20, 2021

I have some sobering news for you.Politicians lie.No, no, not just the politicians you don’t like. I mean pretty much all of them – with a few rare exceptions. It’s like part of the political DNA.If you follow SchiffGold News, you know Sunday was the 50th anniversary of President Nixon closing the “gold window” and cutting the final tether between gold and the dollar.Nixon delivered a national TV address to announce the move. In the first 1:18, he told two big whoppers.First, Nixon promised the action would be temporary in order to “defend the dollar against the speculators.” Fifty years later, this “temporary” action remains in place. It just goes to prove that nothing is as permanent as a “temporary” government program, as Milton Friedman once said.Second, Nixon said, “Let me lay to

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