This week in Smart Money News the Fed appears poised to continue hiking interest rates in anticipation of coming inflation. Investor’s Business Daily urges caution to the Fed so as not to trigger recession.
IBD points out that the trio of tax cuts, deregulation and a labor force at or slightly better than full employment all mean that a higher demand for money could spark a return to inflation. IBD quotes the Federal Reserve’s report to Congress this week saying:
“The labor market appears to be near or a little beyond full employment at present…while wage gains have likely been held down by the sluggish pace of productivity growth in recent years, serious labor shortages would probably bring about larger increases than have been observed thus far.”
Wage growth is particularly worth of scrutiny. With the labor market fully engaged, competition for higher wages pushes payrolls higher and consumers begin to spend more. With the titanic amount of money pumped into the economy during the Obama slow-growth economy years, the spark of increased consumer spending could trigger the “velocity of money” ignition for inflation.
During the Obama years some wondered why we weren’t seeing inflation right away given the level of monetary stimulus. But suffocating regulation and other anti-growth policies kept that consumer spending spark dampened. Now that the economy is stirring to life, inflation is a real possibility.
IBD is concerned that the Fed is reacting too strongly too soon, and that the four proposed interest rate hikes for 2018 could strangle the newborn economic recovery in the cradle with a recession. Inflation is certainly rising, but not yet at the pace for which the Fed seems fearful, at least not yet.
The Feds aren’t the only ones jittery from the specter of inflation, as the markets have been volatile for the last couple of weeks.
Jerry foresaw this upcoming “fire” phase years ago
Whether inflation heats up at a slower or faster pace than the Fed thinks, Jerry predicted exactly this scenario in his book, “From Boom to Bust and Beyond”. Jerry explained how monetary and fiscal policy, coupled with a “demographic winter” as baby boomers age into the social security and retirement pension systems, would at first produce an “ice” phase of deflation. As the economy turned the corner from that, a “fire” phase would ignite as lowering unemployment led to increased wages, higher consumer spending and rising inflation.
The February 17th edition of Smart Money Radio
In the latest edition of Smart Money Radio, Jerry explained in detail how we are preparing to enter the fire phase and how the Fed raising of interest rates could send a shock to the bond market. Former Fed Chairman Alan Greenspan has said interest rates will “break” upward, not a gradual turn. So the 25 year down trend in interest rates is officially dead.
Join us for the next Smart Money Investor Training Conference
Jerry intends to spend a large portion of the next Investor Training Conference on March 8th preparing you for the coming fire phase. You probably remember the high flying inflation of the late 1970s. That period also saw the oil price shocks that exacerbated an already bad monetary policy. Not only is the monetary policy in place for a return to those bad old days, but the oil shock is waiting in the wings. Talk about déjà vu all over again!
At the March 8th conference, Jerry will give you the vital information you need to prepare to weather the storm. Our conferences have been filling fast, so sign up today. Call 800-327-4285 or click here to sign up. We only ask two things: that this be your first time to one of our Investor Training Conferences, and that you have a minimum of $100,000 in liquid, investable assets.
We’ll see you at the conference March 8th at the Smart Money Training Center in north Dallas.