THE INCREDIBLE SHRINKING DOLLAR
As this country experienced in the 1970s, inflation can have extremely detrimental consequences... Not only does it cause prices to spike, but inflation also erodes purchasing power, decreases the value of cash and investments, and can cause interest rates to rise. THE FED’S SHADOWPLAY I remember when Powell was appointed chairman of the Federal Reserve. I had high hopes because he was someone who hadn’t spent his entire life in an academic ivory tower nor in a Washington, D.C.-based think tank... Rather, Powell had some real-world experience on Wall Street as an investment banker. According to the Washington Post , today the cost of shipping a container from China to Los Angeles is quadruple what it cost in January of this year. And in 2018, I applauded him for resisting the temptation to print more money – despite the former president’s insistence that he do so. (In fact, it was in an interview with me, on-site at the White House, in which then- President Trump first slammed Powell for failing to act like other Central Banks around the world.) How things have changed... While the Fed’s intervention in the spring of 2020 during the height of the pandemic was understandable, the continued meddling from the Fed has since become problematic.
We now risk too much money in our system, too much printing, and therefore, too much inflation . Since President Biden took office, Powell seems to have drank the Kool-Aid and somehow believes the Fed is capable of controlling our financial future. The central bank’s balance sheet has now soared to more than $6 trillion. And he’s suddenly “frustrated” when he realizes all this money printing is leading not to greater levels of employment and more robust economic fundamentals, but instead a mass increase in inflation. Food prices are up 3.4% from this time last year. Gas prices are up 41%. Diaper prices are up 14%. Fresh fruits are up 5.4%. And donuts are up nearly 3%. Wages, meanwhile, adjusted for inflation, are down 1.2%. And judging by all the recent headlines about supply chains, it’s clear prices are only going to tick higher... SUPPLY-CHAINWORRIES I spoke with my contractor recently about adding some built-in shelves in one of our bedrooms. He had just given me an estimate a couple of months ago. But when I called him this week to give the green light on the project, he told me he needed to revisit the numbers. “Everything is more expensive,” he explained. The pandemic, labor shortages (more on that in a minute), surging prices of raw materials,
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October 2021
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