Wednesday, October 20, 2021


Stagflation Warning: Atlanta Fed GDP Estimate at 0.5%

October 20, 2021  by Michael Maharrey  0   0 As governments shut down the financial system in response to COVID-19 and the Federal Reserve…

By Staff , in Gold , at October 20, 2021


  by Michael Maharrey  0   0

As governments shut down the financial system in response to COVID-19 and the Federal Reserve put cash printing into hyperdrive, we warned that it was a recipe for stagflation. At present, it appears to be like like stagnation is right here.

Stagflation is an financial setting with quickly rising costs, a weak labor market, and low GDP development. It’s wanting an increasing number of like now we have all three parts.

We’ve primarily targeted on the inflationary side of stagflation. There isn’t any denying that costs are rising quickly. The CPI got here in hotter than anticipated once more in September. We’re a 6% inflation price even utilizing the federal government numbers that understate the true extent of rising costs.

However what about financial development?

It’s clearly slowing down as effectively.

We’ve gotten hints at this within the final two jobs reviews. Job development in each August and September got here in far beneath expectations. The September Labor Division report led Peter Schiff to declare “stagflation is right here.”

A weakening greenback with rising shopper costs, rising bond yields and weak financial information – that spells stagflation. I imply, stagflation is right here.”

In the meantime, the Atlanta Fed continues to ratchet down its estimates for financial development. In response to the newest information, “the GDPNow mannequin estimate for actual GDP development (seasonally adjusted annual price) within the third quarter of 2021 is 0.5% on October 19, down from 1.2% on October 15.”

Two months in the past, the Atlanta Fed was estimating 6% development, and again in Might, it was 14%.

GDP of 0.5% is getting dangerously near going destructive. Meaning recession.

Even when we’re not on the cusp of a recession — because the GDP estimate suggests — it’s crystal clear that financial development is slowing.

The Atlanta Fed stated, “Nowcasts of third-quarter actual private consumption expenditures development and third-quarter actual gross personal home funding development decreased from 0.9 p.c and 10.6 p.c, respectively, to 0.4 p.c and eight.4 p.c, respectively.”

In different phrases, American shoppers are slowing down their stimulus-fueled spending binge and inflation is consuming away no matter wage development they could be seeing. Zero Hedge summed up the present financial state of affairs properly.

In brief, every thing is slowing and it’s the shopper – that 70% driver of GDP development – which may be about to hit reverse.”

This is the reason I stated the Federal Reserve goes to have to select its poison within the very close to future. It might probably tighten financial coverage to struggle inflation, which clearly isn’t “transitory.” However doing so would collapse an financial system that’s clearly already laboring. Stimulus is the one factor pushing the financial system alongside. It appears to be like just like the American shopper wants extra stimulus, not much less. Pulling out the stimulus props will collapse your entire factor.

However persevering with this terribly free financial coverage will add extra gasoline to the inflationary hearth. In some unspecified time in the future, the central financial institution will danger hyperinflation if it continues to print cash with no restraint.

Issues are going to get very attention-grabbing within the subsequent yr.

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