In this episode, Peter analyzes the Fed’s conference in Jackson Hole and the pivot Jerome Powell signaled in figure monetary policy. He also dives into the hot political topics from this week, namely, the Democratic National Convention and RFK Jr.’s endorsement of Donald Trump for President.
Despite what Powell says, Peter is convinced there’s not sufficient evidence to support rate cuts in September:
“And during the speech, Powell said that now, finally, after all of these months, now I’m convinced that inflation is headed back down to 2%. But why? What data have we seen that has shown a significant improvement that you would think that inflation is headed back down to 2%? It’s 3% right now. … If you look at the actual CPI, 2.9% was the last one.”
The Fed’s dual mandate to fight both inflation and unemployment is proving problematic, since improving one often worsens the other:
“He [Powell] said that any additional weakness in the labor market is unwelcome. See, before he was saying we wanted some weakness in the labor market, because that’s how we were going to bring down inflation. But now, based on all of the weak data that we got on the labor market— especially that last non-farm payroll report— he’s saying, ‘No, we can’t have any more weakness in the labor market.’ So the Fed has really pivoted now from fighting inflation to fighting unemployment, which is on the rise.”
These problems are inevitable when you tamper with interest rates, which are fundamental to a healthy economy:
“The Fed gets the economy all juiced up on cheap money. They build the entire phony recovery on a foundation of artificially low interest rates, and as a result, everybody goes into debt. And now they think they can raise interest rates without having a collapse. That’s impossible. You can’t have a foundation built on debt and then raise interest rates and expect the foundation not to collapse.”
Moving on to politics, Peter explains what stood out to him about this year’s DNC:
“I’ve watched a number of these over the years. Again, I’ve been to a couple of them— not as a delegate. I was there on a press pass. I’ve never been a delegate. But I’ve never seen a convention where they vilified the opposition and the opponent anywhere near to the degree that they vilified Trump. I thought that they would have backed off on that kind of characterization, given the fact that someone tried to kill him.”
Many of the DNC’s criticisms of Trump are outright lies:
“They spend almost all their time lying about Trump. Most of the things— almost everything, actually— that they accuse Trump of doing or wanting to do, he’s not going to do. And they repeated all these lies where they take things out of context, like the ‘bloodbath’ or ‘bad people on both sides’ or whatever it is or all these quotes that have already been proven were either not said or were taken out of context and don’t even apply to the way they’re using them.”
One silver lining from the week is RFK Jr.’s endorsement of Donald Trump for president. Constituting arguably the first true “unity campaign” in decades, the revitalized Trump ticket is a legitimate threat to the establishment, and hopefully it can take action to end wasteful wars around the world:
“At least Robert Kennedy and Donald Trump care about all these people who are dying, and they want to stop it. Now, secondarily, we’re wasting all this money so all these innocent people could die, and for what reason? Ukraine is in much worse shape now than it was two years ago. For what? For nothing. Again, there was more freedom in Russia than in Ukraine before the whole thing started. We were trying to preserve Ukrainian freedom; they’re less free now than they were before because of this war. … This has been a disaster. So at least you’ve got Kennedy and Trump that are thorns in the side of the political establishment, and that’s what we need. We need to break the stranglehold of the neocons.”
