Trick or Treat Economy

Policy Changes

Trapped Money

Modified Stagflation

New York, Dallas, and Dinners

To Jerome Powell and the Fed:

It’s a lesson too late for the learning,
Made of sand, made of sand.
In the wink of an eye, prices are rising
In your hand, by your hand.

Are you going away with no word of farewell,
Will you leave your inflation behind?
You should have tightened sooner, don’t mean to be unkind.
I know tightening was the last thing on your mind

You’ve got reasons a-plenty for waiting—
This I know, this I know—
Yet, the weeds of inflation have been growing.
Please, don’t wait, don’t be Burns.

—Inspired (sort of) by Tom Paxton, 1964

The nice thing about Halloween is we can act scary without actually being scary. The vampires and zombies who knock on your door are just dressed-up kids having fun. We adults play along and give them candy. Everyone has a good time. The hardest part is staying away from the Snickers before the kids come.

The vampires and zombies knocking on the economy’s door are quite real. Sugary treats won’t make them go away, either. They have plans to complete, whether we like it or not. There’s almost no chance it will end well for us mortals.

Last week, I gave you my nutshell opinion: We are facing demand-driven inflation as a consequence of misguided monetary policy and misdirected fiscal stimulus. Those aren’t the only problems by any means, but they are the main ones. We may face the worst policy-induced economic calamity since the Smoot-Hawley tariffs triggered the Great Depression.

But even if not calamitous, it will be bad. Those in power have slowly but surely painted the economy into a corner. Every option is bad. All tricks, no treats.

Today, I’ll describe what I think will happen over the next year or so. I rarely make short-term forecasts because I’m usually early. Reaching the major turning points takes longer than we think.

This time may be different.