ECONOMYNEXT – Federal Reserve Chairman Jerome Powell who has been firing a global commodity boom and asset price bubbles at home, pushing inflation to 30-year highs says liquidity injections may be terminated faster that earlier indicated.
“We haven’t made a decision on that,” Powell told a congressional hearing. “The most recent data particularly since the November FOMC meeting show elevated inflation pressures, a rapid improvement in many labour market indicators, without an accompanying addition of labor supply.
“And also strong spending that signals significant growth in coming months. Remember that every dollar of asset purchases actually add accommodation to the economy.
“But at this point the economy is very strong and inflationary pressures are high and it is therefore appropriate to consider wrapping up the taper of our asset purchases which we actually announced at the November meeting perhaps a few months sooner.
And I expect that we will discuss that at our upcoming meeting in a couple of weeks.”
Sri Lanka’s inflation hit a 12-year high as Powell was giving testimony to the congress.
Sri Lanka inflation hits 12-year high in Nov 2021 amid money printing.
Sri Lanka has been printing money for two years, with inflationists defending their actions pointing to US and other reserve currency central bank money printing, which has now pushed prices to 30 year highs in advanced nations.
Sri Lanka’s rupee is soft-pegged to the US and whenever it depreciates the inflation is amplified.
Powell grilled by a senator on persistent inflation said it may be time to retire the word ‘transitory’.
Senator Pat Toomey, a former Wall Street Banker, roasted the Powell saying the agency’s “new flexible average inflation targeting” framework remains at 2.0 percent but the time frame is unspecified.
Headline inflation which people fell is already above 6.0 percent.
“Core PCE the Fed’s preferred inflation metric is running above 2.0 percent over the past five years, nearly 3.0 percent over the past three years, and 4.1 percent over the past year,” Toomy charged.
“So it is above target, it has been above target, and it is accelerating.
“Yet the Feds maintained an extraordinary emergency monetary policy stance.”
“This framework looks to be like a weakening of the Feds commitment to stable prices.
“Now I know you believe this is transitory. But everything is transitory. Life is transitory. How long does inflation have to rise above your target, before the Fed decides may be it is not so transitory”
Powell admitted that inflation has run above 2.0 percent for “long enough”.
“I think the word transitory has different meanings to different people. To many it has a sense of short lived. We tend to mean that it won’t mean a permanent mark in the form of higher inflation.
‘I think it is a good time to retire that word and explain more clearly what we mean.”
Toomy pointed out that the US economy was “well past recovery” and was in a “full blown expansion” and raging asset prices had made houses were unaffordable to people in many areas.
“And yet the Fed’s going to purchase 35 billion dollars of mortgaged backed securities in December alone. And scheduled to continue purchasing mortgage backed securities for months on end.
“I would strongly urge you to reconsider the pace of the tapering.”
Tighter US policy has always hit pegged nations that do not tighten in tandem, triggering meltdowns and defaults.
Sri Lanka’s rupee fell in 2015 and 2018 as then Fed Chief Janet Yellen first withdrew liquidity in a first tightening cycle in 2014, also raised rates in the second ccle while withdrawing liquidity.
Sri Lanka’s central bank is one of several set up by Fed ‘money doctors’ in Latin America styled after Argentina’s central which go into regular external default.
Sri Lanka’s stocks have also been soaring partly driven by export firms on expectations of a falling rupee.
Laughably rising inflation in the US and has been blamed on supply chains not the worst aggregate demand bubble seen in 20 yeas and the highest money supply growth the US has seen in decades.
Classical economists have said that Powell was delusional for suggesting that there was no link between money supply growth and inflation.
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The Fed is the biggest known global bubble blower in history. It created the Great Depression after stumbling on open market operations in the 1920s triggering the “roaring 20s” bubble and busted a centuries old gold standard in 1971, trying to target an “output gap”
Most recently it created the Great Recession after firing the Greenspan-Bernanke bubble and is now in the midst of the Powell Bubble pushing up food and energy prices across the globe. (Colombo/Dec01/2021)