It’s About the Economy Stupid

It’s been a rough couple of days for the economy. First, let’s talk about the issues concerning the controlling of inflation.

 

The Fed Raises the Interest Rate

According to the Daily Wire:

The Federal Reserve announced on Wednesday that it raised interest rates by 75 basis points for the second straight month in an effort to help slow inflation.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the Fed said in a press release. “In support of these goals, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate.”

The Fed also noted that “recent indicators of spending and production have softened” but added, “job gains have been robust in recent months, and the unemployment rate has remained low.”

Let’s be clear about a few things.

• The Fed is under control of the Biden administration. Why we are trusting the Biden administration to control anything is beyond me.
• The Fed (Janet Yellen is running it) has been wrong about everything. Remember, inflation was transitory.
• The administration keeps talking about the employment rate. We won’t know what is going to happen to the employment rate for another couple of months.
  • Employment problems happen after a recession starts. It is not the cause of the recession or an indicator of one.
  • Once companies see they are losing profits, they will stop producing and innovating, and then people will be laid off.
  • Notice, no one is talking about the increased wages? That’s because they have gone down by 5% because of inflation.
• Raising the interest rates makes loans more expensive because the government is trying to take money out of the economy. Loans businesses needs to innovate and hire people.
  • We are already seeing the effects of high interest rate. People aren’t buying houses or cars.
  • Houses have fallen in price as bad as they did in 2008.
  • The auto industry is taking a hit but from two directions:
    • High interest rates for loans.
    • The supply chain crisis not getting enough chips for the car’s computers. Something else the Biden administration hasn’t dealt with.
•  The interest rates probably aren’t going to be high enough.
  • A good inflation (demand) is 1.5-2%. A good GDP (supply) is between 2.5-3.5%.
  • There’s a balance. But production can always keep up and go beyond expectations of demand (innovation).
  • When demand is high, but supply is low, we need something to slow the demand. Make it harder for people to buy things (raise the interest rate).
  • Demand slows but businesses need loans too. For employees, for supplies, for innovation.
  • No one is buying anything. No on is innovating anything. We have the worst scenario, stagflation.
  • To cool inflation, it has been predicted we are need to go up to 5-6%. Right now, it is at about 2.25%.

That’s where we are right now. I may not have explained this well, but don’t take my word for this because I didn’t make this up.

How do we fix this?

• Interest rates will have to be high until supply and demand balance.
• Lower taxes.
• Lower corporate taxes.
• Cut regulations on all businesses.
• Allow drilling for oil and natural gas.
• Re-enable nuclear power.
• Bring back manufacturing.

 

 

We Are in a Recession

Here is a minute and a half of the Biden administration wavering on us entering a recession:

The GDP report is out and it was disappointing. There was a rather tepid expectation that GDP would rise to .5%, instead it dropped by.9%. That is the second quarter in a row of negative GDP (third if you add 0% GDP growth in the fourth quarter last year).

We are in a recession.

Biden said it was not surprising and the administration and media still maintain we really aren’t in a recession because the economy “is so complicated”. Like everything else, instead of dealing with the problem, they just change language and definitions.

I’m watching CNN and they are still saying we are not in a recession and are praising Biden for his big win in his Build Back Better program which they renamed and we’ll talk about in a second. They are even saying Biden is having a good week.

People aren’t going to believe this crap. Even the 18 people that watch CNN. CNN said all this right after they put a screen shot of people paying about $500 a month more because of inflation and high gas prices. People are simple. They only know what is happening to them. They don’t care about what people are telling them is happening.

We are in a recession. Everyone knows it and has known about it for the last six months because we have been feeling it. Nothing they can say is going to change that.

https://www.dailywire.com/news/federal-reserve-hikes-interest-rates-again-to-combat-bidenflation

 

But It Might Get Worse

According to the summary of the bill (the full bill is 725 pages) says:

The Inflation Reduction Act of 2022 will make a historic down payment on deficit reduction to
fight inflation, invest in domestic energy production and manufacturing, and reduce carbon
emissions by roughly 40 percent by 2030. The bill will also finally allow Medicare to negotiate
for prescription drug prices and extend the expanded Affordable Care Act program for three
years, through 2025.

The new proposal for the FY2022 Budget Reconciliation bill will invest approximately $300
billion in Deficit Reduction and $369 billion in Energy Security and Climate Change programs
over the next ten years.

Additionally, the agreement calls for comprehensive Permitting reform legislation to be passed
before the end of the fiscal year. Permitting reform is essential to unlocking domestic energy and
transmission projects, which will lower costs for consumers and help us meet our long-term
emissions goals.

Here’s some info on it:

• $369 billion will go for climate.
  • Extend over $7500 in subsidies for electric cars.
  • $60 billion for domestic clean energy manufacturing.
  • $30 billion for wind, solar battery storage tax credit.
• Raise the corporate tax by 15%.
  • This will raise $739 billion.
  • That’s where they get that $300 billion deficit reduction.
  • But hold on.
• The bill also adds another $451 billion to extend Obamacare for another three years. So much for deficit reduction.
• The bill is 725 pages long so one can imagine there is more pork in there.

Per the Democratic playbook, they changed the name of this modified Build Back Better bill and are calling it the Inflation Reduction Act. Spending money and raising taxes on corporations is not going to lower inflation. It’s going to:

• Raise inflation.
• Stagnate hiring.
• Stagnate innovation.
• Cause layoffs.

We know this. The America Rescue Plan and the Infrastructure bill caused inflation. This bill is the same thing.

Here’s the thing, this bill isn’t passed yet. It will get no support from Republicans. It needs to be voted in the House. Kyrsten Sinema still does not commit to it until she reads the bill, and I think she is also really shy about spending a ton of money. Especially living in a state that is as red as Arizona. In fact, I’m shocked Machin did this.

More on this one later.

https://www.dailywire.com/news/joe-manchin-revives-bidens-agenda-agrees-to-democrat-package-of-tax-increases-and-climate-spending



https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf