My dear impertinents, dear impertinents,
It’s an article from Le Figaro which comes back to the declarations of Powell, the president of the FED, the American Central Bank.
He admitted last Wednesday that “the strength of inflation surprised the monetary authorities and warned that “other surprises” could occur. In a speech he was to deliver to Congress, Jerome Powell also assured that the American economy was sufficiently “solid and well placed to face monetary tightening”. »
That said, he can’t say anything else.
Imagine a declaration of the type, the American economy is very badly placed to deal with a rise in rates due to the massive indebtedness of all economic agents who are, moreover, weakened in large proportions by inflation at most high for 40 years!
Admittedly, this summary of the situation is much closer to reality and economic truth, but an authority, whether political or monetary, cannot make this kind of “true” statement.
What I am trying to tell you once again and above all to show you is that official statements are not used to tell you the truth to allow you to make the best decisions, but to ensure the stability of the markets and the economic system.
It is obviously very different.
“Inflation has clearly surprised on the upside this year and more surprises may lie ahead”
That’s what Jerome Powell also said during his annual hearing before the Senate committee.
“The Monetary Committee “expects rate hikes to continue,” he warned, and the pace “will depend on economic data.” “We will make our decisions meeting by meeting,” said the boss of the Fed, assuring that the communication from the Central Bank would be “as clear as possible”. “We will strive to avoid adding uncertainty in what is already an extraordinarily difficult and uncertain time,” he pledged. But “in a rapidly changing economic environment, our policy has adapted and will continue to do so,” he explained.
So you have understood it, it is a bit like the counterpart of Christine Lagarde’s last speech from the ECB who said that basically we will decide what to do when we get there because it is impossible to really know what will happen, so we will react as we should but we don’t know how yet!
Beware of real estate risk!
“Indicators suggest that real gross domestic product growth accelerated this quarter, with consumer spending remaining strong,” he said, after a decline in GDP in the 1st quarter. On the other hand, he pointed to a slowdown in business investment and noted the cold snap that is gripping the real estate market “partly reflecting higher mortgage rates”. “The tightening of financial conditions (…) should continue to temper growth and help better balance demand and supply,” he said.
If you translate into intelligible language what Powell has just said, it is simple. Real estate is in the process of falling apart like in 2007/2008 before the subprime crisis because Americans all borrow at variable rates and when the rates go up, well, more and more of them are no longer able to repay their loans. And there… seized and poof outside in less than 2 months, the police officers, weapons in hand, coming to kick you out.
Officially, nobody in the United States wants to talk about a recession, but of course it is coming!
But it is Janet Yellen, the Secretary of the Treasury, who has a sublime formula to reassure the American housewife over or under 50 years old. She does not think a recession is “inevitable”, however conceding to expect “that the economy will slow down” as part of a transition to “slow and stable growth”.
Friends, this is not a recession or negative growth.
This time it will be slow and steady growth.
You are happy huh!
It is already too late, but all is not lost.
Prepare yourselves !
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