Federal Reserved Board Chairman Jerome Powell, 69, said yesterday that there was no guarantee that the FOMC’s move to ratchet up interest rates would result in taming inflation without a recession. Powell said recently that he thought the Fed’s moves to end quantitative easing and hike rates would tame inflation enough to avoid recession, something that would happen if Q3 ends up negatives. Q2 already came in at minus 1.4%, with one more negative quarter making U.S. recession official. President Joe Biden, 79, has done almost everything to assure poor Gross Domestic Product [GDP], borrowing heavily from the Fed to fund a $40 billion proxy war in Ukraine. Apart from the actual expense on military hardware and civilian aid, Biden launched an embargo of Russian oil and natural gas, creating worldwide shortages and skyrocketing prices, practically guaranteeing recession.
Powell, who famously said the Fed has limited tools to deal with the global novel coronavirus pandemic, said that geopolitical factions like the Ukraine War throws a monkey wrench into the Feds attempts to tame inflation. Powell told NPR’s “Markeplace’ that he doubted the Fed’s ability to deal with the Ukraine War’s impact on the global economy. Slow growth in Europe and China have dampened the prospects of improved GDP growth in the U.S. But the biggest impediment to U.S. growth is Biden’s decision to wage proxy war against the Russian Federation, all in the name to helping Ukraine preserve its sovereignty and territorial integrity. But Biden has extended U.S. commitments in Ukraine to paying all government salaries, including supplying Ukraine with all lethal weapons to fight the Russian Federation. Biden’s new mission to weaken the Russian military in Ukraine has backfired.
Powell has little options left in his bag of tricks to accelerate GDP growth while curbing inflation. “The question whether we can execute as soft landing or not—it may actually depend on factors that we don’t control,” Power admitted. “There are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next years or so,” Powell said, telling Biden to end the war or face a high likelihood of recession. Biden says he has great empathy for the intolerable cost of living, sapping the income and savings of ordinary Americans. But if he had real empathy, he would implement reckless economic and military policies that have dragged down the U.S. economy. Powell said last week that he hoped the Fed’s moves on interest rates would create a soft landing but now thinks there are no guarantees because of the Ukraine War
Biden’s dutiful 75-year-old Treasury Secretary Janet Yellen, a former Fed Chairman, wouldn’t dare tell Biden to end the Ukraine War or face disastrous consequences to the U.S. economy. Recent news about baby formula shortages due to supply chain problems, Biden isn’t concerned about the ripple effect of waging war in Ukraine, crating obvious energy shortages and skyrocketing prices because the cost of oil and gasoline. Biden insists that all Western countries punish Russian President Vladimir Putin for his invasion of Ukraine, boycotting Russian oil. But Biden’s threats of sanctions against China and India, both trading partners with Russia, has destabilized world energy markets, dragging down GDP around the globe. Yellen doesn’t have the temerity to tell Biden that his war-making policies are hurting the U.S. and global economy, needing to change gears.
Europe’s economy also suffers from high inflation and skyrockets energy prices. When it comes to China, they’re implemented strict lockdowns in Shanghai where millions of citizens have been locked down. We all know what happened in 2020 when Trump’s Covid-19 advisers urged former President Donald Trump to shut down parts of the U.S. economy. GDP dropped in the United States by some 30%. When it rebounded in 2021, Biden gladly took all the credit, knowing that the snap-back took place, not related to Biden’s massive economy give-a-ways, stimulus checks and extended unemployment benefits. With inflation running in the U.S. at 6.6%, Powell considers a 75 basis point hike at its next FOMC meetings in June. Prospects of more rate hikes sent shockwaves in Wall Street, where all major market averages continue to head south, with occasional re bounds.
Powell will likely hit markets with a 50 basis point hike in June, continuing to send Wall Street into a Bear Market. With no end in sight to the Ukraine War, Powell has limited tools to tame inflation while at the same time finding a way to stimulate growth. Powell and his FOMC committee must weigh carefully overdoing it on rate hikes, threatening to send the U.S. economy into recession. Powell planned at least two 50 basis point hikes at the FOMC meetings in June and July. “If things come in better that we expect, the we’re prepared to do less. If they come in worse that when we expect, they we’re prepared to do more,” Powell said, sending chills on Wall Street. Wall Streets finds a way to churn the market, buying on dips, selling on peaks, realizing that the Bull market is over for now. If Biden doesn’t come to his senses soon, his Ukraine War is going to tank the economy.
