Who’s Playing Puppetmaster, And Who Is Master of Puppets

Before I go into the details of today’s meeting, I’d like to take this opportunity to speak directly to the American people. Inflation is much too high and we understand the hardship it is causing, and we’re moving expeditiously to bring it back down.

Montagu Norman this ain’t. I mean, how much clearer an example of raw political pressure does anyone need? The rate hikes themselves are pure theater engineered by increasingly desperate politicians without regard for any other factors; including, right off the top, how a higher RRP or IOER isn’t going to get more oil out of the ground or ship off empty containers to Mao’s Xi’s increasingly off-limits China.

One can only imagine (at least for the next five years of lock-up) what the FOMC’s private discussions look like. Maybe not totally Lagarde-like in being far more sober, yet quite probably more current European than previous Clintonian.

After expanding at a robust 5-1/2 percent pace last year, overall economic activity edged down in the first quarter. Underlying momentum remains strong, however, as the decline largely reflected swings in inventories and net exports, two volatile categories whose movements last quarter likely carry little signal for future growth. Indeed, household spending and business fixed investment continued to expand briskly.

Yeah, but, you see the catalog of evidence is stacking up like GDP rather than JOLTS’ notoriously misleading Job Openings. Just this week, ISM. Both of them.

Each ISM figure fell and not just in April. They’ve been down for some time – the same some time as GDP has been ringing the same alarm bells as markets. The latter is not merely an incidence of negative Q1; on the contrary, three straight quarters (and counting) of bad. In fact, taking Powell at his word, if you do take out inventory Q1’s contraction doesn’t go away, but Q4’s “strength” actually does.

Where the ISMs are right now, the Fed was in full-blown panic mode. Not inflation panic, either.

Hardly the only measure equaling 2019, up and down the line the same thing. Most importantly, the dollar which, as I’ve been writing all week, is decidedly in the not-inflation-it’s-recession camp and growing worse by the day (it seems).

Is Powell fooling himself, or only trying to fool the public? If the latter, it’s not working:

Americans are increasingly worried about the economy, with about 6 in 10 concerned that a major recession is “right around the corner,” according to a recent survey from AllianzLife.