Fed Chair Jerome Powell says he is very worried about the deficit. “Large deficits at a time of full employment” are not sustainable. A bipartisan effort is needed.
Powell speaks at the Economic Club of Washington D.C.
Starting at the 35:50 mark the interview got interesting.
David Rubenstein: If you worry about inflation as you obviously are, what about the debt the united states has. We have $35 trillion of outstanding government indebtedness, and we are adding about $1.6 to $2.0 trillion more or less every year, aren’t you worried about that, on the impact to the economy of inflation?
Jerome Powell: I am very worried over time about the deficits that we are running. It’s not the Fed’s job. We don’t give Congress advice. But let me just say, that we are on an unsustainable path. That doesn’t mean that the level of debt we have is unsustainable. It’s not. But the path we are on, we are running large deficits at a time of full employment and healthy growth is not a sustainable one over time. And we really need to get to work on that. I would hope that this is a topline issue for elected people whose job it is. It’s not our job. And I believe, and I do talk to quite a few elected officials in Congress and I think there is a rising sense that it is time to do something about that. It will take bipartisan action to address.
The Truly Delusional
Biden: “All the programs I’ve initiated have saved the government money.”
Returning to Powell: “There is a rising sense that it is time to do something about that [the deficit].”
Is that a joke?
Show of Hands
Can I have a show of hands of those who think either party will do anything about the deficit?
Hmm. I see no hands.
Meanwhile what happens in a recession?
Recession Has Already Started
On July 8, I commented Weak Data Says a Recession Has Already Started, Let’s Now Discuss When
There is weakness in housing (new home sales, existing home sales, and starts at the lowest in 4 years), consumer spending, manufacturing (both durable and nondurable good), jobs data (constant negative revisions, QCEW, major survey discrepancies, quits, and a rising unemployment rate), and finally we have major unexpected ISM Services in Contraction.
All of the above items are hard data other than the services ISM.
There is no savior on the horizon this time. The Fed rates to be inactive until it panics in September and that will be much too late to stop a recession that started in May or June.
And guess what happens to deficits in a recession?
Both parties will want to do something and the Fed will want both parties to do something. On top of that, the Fed will want money to save the banks.
That’s what’s going to happen.
But don’t worry. It will be temporary, all the way up to six months before the next recession when we can can have a similar conversation.
Fix the deficit Isn’t that gubmint job? Powell is disingenuous as usual
Hopefully, Trump will default on the dollar. He promised that once. Default on the dollar and pay Congressional pensions at 5 cents on the dollar. That should do it.
I heard both Trump and Vance were supportive of a weaker dollar to strengthen exporters. I think that’s a bad idea!
There is no painless solution. There are only bad ones and worse ones. As someone that lives on a fixed income I don’t like inflation but high interest rates with this amount of public debt is asking for a quicker collapse. I’d like to see everyone take a hit but we all know that’s probably not going to happen. I’d say diversify into strong companies with dividends, hold some hard assets, and have some cash for what’s coming. Next year will be ugly. Bitcoin may a good bet but I don’t invest in what I don’t understand.
– Fed Chair Jerome Powell says he is very worried about the deficit, but states that “It’s Not My Job”
> Powell’s Main Function, as the Chair of the Fed, is to tame what has become soaring Inflation. He Must Do This without jeopardizing the economic recovery. The consequences of getting it wrong could be catastrophic and result in even higher inflation!!! It Literally “IS His Job”
– Powell must not allow a return to a Recession.
> What’s worse, is that the Fed might have to deal with Stagflation, in which you get both rising prices and a sluggish economy. We are heading there now!
– Powell laughingly states: “Large deficits at a time of full employment” are not.
sustainable. A bipartisan effort is needed.
> Then please explain to America, while we had Full Employment, according to Biden and Yourself, why it wasn’t sustainable! Was it Over Borrowing that did it?
– Progressive Democrats are pushing Biden to Replace Powell with Lael Brainard.
> She is aa Harvard economist who is currently serving as the only registered Democrat on the board of governors of the Federal Reserve System. Progressives prefer her in part because she appears to be more sympathetic to More Financial Regulation and More Fed Action On Climate Change!
Our Current Administration?:
1. Anything for More Financial Regulation
2. Anything for More Climate Change
3. Never Admit we are In A Recession and have been for Years
4. Raise Borrowing
5. Lower Interest Rates
6. Anything for the Public Unions
7. Open Borders
8. Abortions After Birth
Trumps Administration?:
1. Anything for Less Financial Regulation
2. Anything for Less Climate Change
3. Admit we are In A Recession and have been for Years
4. Lower Borrowing
5. Raise Interest Rates
6. Disband All Public Unions Immediately
7. Closed Borders
8. Abortion until time of Viability (another word for: Sustainably Alive)
It gets so damn sad, shameful, and demented quite frankly, so when does the Administration: DO WHAT THE MAJORITY OF CITIZENS WOULD LIKE TO SEE HAPPEN? It used to be called: “Representation”
The Fed is already monetizing the private sector via supporting corporate bonds ans junk bonds ans real estate . Why not go all in like Japan and just be the backstop for the entire federal debt.
That’s coming
Hasn’t EVERY FED chairman said something similar at one point or another?
Our deficit is impossible to pay down and never will be. All that can be done is to try and inflate it away.
Deficits are income to the private sector. The problem is not public “debt” but rather ever increasing private individual and commercial debt.
Solve all of this with a 50% Discount/Rebate at retail sale and a continuous debt jubilee policy at point of loan sighning.
In other news, Americans are fat and need to lose weight. We’ll all get right on that.
Seriously Powell? It’s called Interest Rates you dummy, as in DON’T LOWER THEM during Inflation, EVER!!! Making access to $$$ by lowering Borrowing Cost is quite often the worst thing you can do, during inflationary periods…
I had the opportunity to have breakfast with a US senator a few years ago. I mentioned to him that federal spending divided by the US population was $18,000 per person. State spending divided by our state population was $5,200 per person. County spending divided by our county population was $2,400 per person and our city spending divided by our city population was $1,600. All in, government spending by federal, state, county and city was $27,200 per person. What’s worse, it is approximately $73,500 per taxpayer. I asked the senator; how is this sustainable? When will the federal government address unsustainable deficit spending. His response, “The deficit has no constituency.” I said, “So you’re saying there are no votes in addressing the deficit.” He muttered a yes.
This exposes one of the great flaws in our government, the difference between a politician and a leader. A politician will poll his constituents, see what they want and represent that. I consider that “following.” A leader will poll his constituents, see what they want, use his staff and elevated position to get solid and fact-based information and projections, identify what policies are in the best interest of the greater good and lead his constituents to it.
He defended himself with a diatribe about you can’t get anything done if you can’t get elected, blah, blah, blah. He made a great case for term limits.
Let them eat cake is what politicians effectively always say.
Does anyone else find this timing to be suspicious?
4 years of Democrat led spending and no one raises any real objection.
Days after Trump is shot at and now seems to be a dead cert to be the next president and VOILA, now J. Powell becomes concerned about the debt. Coincidence?
The congress has spent us into the poor house and now they are poised to insist Trump fix it. And the recession is timed perfectly to make Trump the fall guy.
Nothing suspicious here. Move along.
Trump likes writing checks with his signature. He will not be the fall guy. He will ask for lower rates and a booming economy inflation be damned.
Gee Like Powell will ever stop mouse-clicking trillions out of thin air. That’s his job.
Powell: “There is a rising sense that it is time to do something about that [the deficit].”
Powell is the lender. Seems to me he could say no. Greenspan could have not cut the lending standard to ZERO, leading to the banking crisis. Bernanke could have referred bankers for prosecution, instead of lamenting that he didn’t, once he was out of office. The public is being played.
Deficit road has been traveled down for so long.
There is never going to be Bipartisan support for deficits to get reigned in.
Every time an effort was made starting in the House out comes the news articles that grandmas Social Security check was going to bounce. Those Evil conservatives want to shut down the government.
The only way this is ever going to get changed is by changing the approach in how Government gets financed.
For starters an economy that is outgrowing the spenders would yield more revenue.
That means growth rates exceeding 4% on a long term timeline.
Second approach would be imposition of Tarriffs which would cut consumption and improve investment in productivity if accompanying regulatory reform were to be passed.
Both these are still in the pipe dream category as of now. With a true majority in both House and Senate GOP might try something along these lines. Forget the Dems if you think deficits matter.
As for Jay Powell, if I can make a post such as here, what is Jay Powells game. Because he dam well knows what the politics are and why Deficit spending has not gotten under control.
If we assume the Republicans are serious about cutting spending, we are delusional. They may talk a good game, but I doubt they will try anything substantial.
Bringing sanity back to the Budget is part of MAGA
.As Trumps now dismissed Florida case exposed, House does not even control spending any longer. Apparently Garland was able to conjur up unlimited funding for Smith without Congressional approval.
This was exposed by Cannon in the court decision. Even the funding sources for the case was unconstitutional as it violated separation of powers.
Do I have high hopes for spending to get under control? No I do not.
But for certainty there will be no attempts to bring spending down to levels matched by revenues if this Nation does not change the composition of Congress.
The federal reserve was/is unconstitutional! This is our government/country! We the people are required to fix OUR government! The 10th amendment was put into our bill of rights for this reason!
Secession was not put into the bill of rights, and it is sorely lacking.
More than a decade of ZIRP has led to the thinking that money is free, with inflation over interest, debt pays for itself. Now the third culprit in line of this massive misallocation in thinking is complaining that his policy was such a success.
Since when is Pow-boy ever sincere? Since when does anyone in upper levels of the federal or state governments have integrity? Talk about reality, not what clowns do.
Never, ever and yes it is
No president or congress is ever willingly going to implement the economic pain of austerity.
We will either hyperinflate or default. We’re way past the point of no return to fix this debt load problem.
Look at Argentina, and how many times it has done the circle dance.
The psychopaths in Washington DC believe that they can “create their own reality”, so I don’t think they are overly worried about the US federal government’s debt and deficits.
And besides, they have had the Fed itself acting as their de facto fiscal agent almost continuously for the past 15+ years.
In case you don’t get it, Powell is just kidding.
I’ve been thinking for quite some time that Powell privately has been muttering to himself or those around him that the cons in Congress need to stop spending so much damn money. So his remarks in the interview come as no surprise to me.
No president or congress is ever willingly going to implement the economic pain of austerity.
We will either hyperinflate or default. We’re way past the point of no return to fix this debt load problem.
Hmm, isn’t the House responsible for spending? Shouldn’t some of the responsibility belong there?
Finance reform hitting the brick wall of short-term self-serving political actions.
Reading between the lines: “I’m doing all the monetization I can do guys without kicking off hyperinflation, give me a hand here”
My energy co here in TX gives me no updates of value on my power being out 9 days but I would still rate them higher than Powell’s economic updates.
The other day you said the only job of the Secret Service is to protect the Pres. The main jobb is to protect the money supply. The protecting is just a minor ad on. Duh.
The SS was moved to its own department I believe
Catching counterfeits is now separate
The Fed is supposed to control money supply DUH
So you are more than a we bit confused
Their website states that they have investigative jurisdiction in certain financial crimes including counterfeiting, various types of electronic payment fraud and so forth so I’m not sure that’s changed.
“Duh”? Lasal, are you a child? Why have people allowed themselves to become so infantalized?
““Duh”? Lasal, are you a child? Why have people allowed themselves to become so infantalized?”
Corvinus, you beat me to it!!
He can say it’s not his job, but the Fed enables this deficit spending by buying Treasury bonds. They’re the #1 lender to the US government. They’re enablers.
The Fed was created by an Act of Congress. They’re beholden to Congress. Of course they’re going to do what Congress wants them to. The Fed is a convenient bogey man, but Congress could undo the federal reserve act at any time and if Congress didn’t approve the spending then the Fed would have nothing to monetize.
The house has been on fire forever (!!) and NOW he acts like it is a problem?
The kids are dead now, & Mom’s Apron has lit up, and the cars are both engulfed and DADDY WARBUCKS is suddenly screaming, “What the hell??”
fiscal discipline = congress
Fed/Powell can’t do anything but hold rates higher, which they’ve done.
“Fed/Powell can’t do anything but hold rates higher, which they’ve done.”
No they haven’t. Not in any meaningful way. Holding rates “higher” than negative 50%, is not “having done” anything meaningful at all.
Great analysis!
Good list. For #8 lets add: stop being in denial. And stop lying. And put the nation before personal political goals.
Re: tax all of social security as ordinary income.
You need to take into account the amount of FICA tax the individual has paid (since it’s already been taxed). If you’re going to get rid of the current formula, tax all benefits in excess of the amount paid in. To keep it simple, the amounts you receive are first allocated to the amount you paid in (i.e., tax free). Once you’ve received benefits equal to the amount of FICA tax you paid, any additional amounts received are taxable. The SSA has this information, so the individual wouldn’t have to keep track of it.
I read a recent article where the author said that the USA will crumble under its ever-escalating debt load. He makes mention of all of the current political infighting with regards to immigration, DEI, climate change, abortion, war funding, etc…He says that the politicians are missing the forest for the trees. The math regarding our deficits is bad…very bad…and only getting worse.
I think that politics attracts the type of personalities that are inherently narcissistic. The idea of being a “public servant” is wishful. Not to say that such folks cannot be effective, but too often their “guiding light” is personal gain rather than public service (or a solid moral code).
AOC is the poster child: from poor barista to millionaire, all the while insisting that she’s a committed socialist.
One built-in flaw in democracies is that politicians give people what they want. People want free/subsidized stuff and don’t like to pay taxes. Dishonest politicos get elected promising this.
Agree 3BM. And so it goes, until it can no longer…
Whom ever is in office when the recession “officially” hits will most likely call for stimulus…..further balloning deficits and the debt.
Mandatory spending (aka entitlements) cuts, much higher taxes, or some combination of both will have to occur to fix this mess.
Rest assured, none of that will happen until the 11th hour.
Debt doesn’t seem to matter much anymore to really anyone, but it will at some point. If you have alot of debt reduce or elimate it. Have a plan!!!!
Does anyone else have a problem with pop up ads blocking the article Mish writes. This just started,
Nope
started one or two days ago for me — the adds would block the actual article text but you couldn’t click them away
No pop-ups on my old MAC BOOK PRO.
I experienced the same issue in Firefox and posted about it a few days ago.
I was using Adblock Plus. I installed another ad blocker and then the problem went away.
Use Brave. Awesome browser.
Started for me too a couple days ago.
Here’s more on this – focusing on the hand with no blood… after touching his shot ear …. https://old.bitchute.com/video/srBPRGM3YkrQ/
Ubi est austeritas candidatus?
extincti.
Question – this video shows Trump touching his ear when he is first ‘shot’… we can clearly see his hand as he moves it from his ear…. there is NO blood on his hand…
Please explain .. https://www.bitchute.com/video/XyQfYhZO9mLT 12:30 mark…
Trump is SO courageous!
Clearly, President Trump was not shot and you have uncovered key evidence. You are brilliant and a scholar. Or you’re and idiot and a candidate for Mish to ban for using up readers time.
In the immortal words of Jesse Venture in Predator:
‘He ain’t got time to bleed’ 🙂
I would like to test your theory so you can judge yourself. From 130 yards away I will attempt to shoot off the top of your ear while you are talking to a crowd of people. My marksmanship is probably not much better than the assassin’s. Are you up for it? You will have to sign a waiver.
You can test this hypothesis without shooting yourself. Just try pricking your finger with a sterilized needle, and observe how quickly your pain reflex leads you to touch the wound, vs how long it takes to actually see blood come out…
Monetize and inflate the debt away. Its magic. Imperial subjects get bread and circus. Back in the real world, the first cut comes with the horsemen of recession galloping through the camp pillaging and plundering. Are you not entertained?