David Stockman

The fact is, Tuesday’s CPI report destroyed the idea that the Fed will pause soon. In fact, excluding volatile food and energy prices, the so-called core CPI rose 0.6%, which if sustained would be an annual rate above 7%.

Approximately 43 million student loan borrowers in the United States owe a collective nearly $1.75 trillion in federal and private student loan debt as of August 2022, according to the Federal Reserve Bank of St. Louis. But when you look at the average amounts owed, the case is crystal clear: Student debt is overwhelmingly an investment in professional credentialization that should never have been a obligation of the taxpayers in the first place.

It’s the reason why the real economy is faltering and stagflation has become embedded: To wit, the gains in nominal income are being more than eaten up by soaring prices, paving the way for the worst bout of high inflation and falling real growth since the 1970s.

Once upon a time there was a joke about “I’m from Washington and I’m here to help you”. That’s now a reality and it’s no joke.

The business sector is flying blind: It can’t forecast what’s coming down the pike in the normal manner based on tried and true rules of cause and effect. In many cases, the normal market signals have gone kerflooey as exemplified by the recent big box retailers’ warnings that they are loaded with the wrong inventory and will be taking painful discounts to clear the decks.

Food inflation coming down the pipeline of producer and consumer prices still has a huge head of steam. So as the “runaway inflation” issue takes front-and- center in the fall Congressional campaigns, the Fed won’t have any political leeway to pause, either.

In short, both the Wall Street and main street economies have been so badly roiled and distorted by lockdowns, the Fed’s money-printing spree, and Washington’s stimmy paloozas that a lot of stuff is going to “snap” as the Fed is forced into a desperate inflation-fighting mode.

At the commodity level, the global food index is still up by 28% versus prior year—a figure which may well accelerate substantially over the balance of the year if the soaring price of fertilizers leads to the predicted cutbacks of farmer applications and therefore materially reduced yields this fall.

There is no chance of staunching inflation if real yields remain mired deep in negative territory. Yet if the nominal yield on the UST should rise to 5-7%, and thereby marginally enter positive real yield territory, there would be carnage on Wall Street like never before.

Neither the American economy nor economists’ models are built to handle fluctuations of such gigantic magnitudes. Accordingly, the American economy is now flying blind into a direction which includes soaring inflation and an abrupt reversal of the massive monetary and fiscal stimulus that drastically distorted economic activity during the past two years.

In a word, the combination of government induced “supply-side” contraction and ultra-stimulated merchandise “demand” has no parallel for folly in the annals of Washington economic policy. It was a destructive eruption in a class all by itself, and the foundation for the runaway inflation now plaguing the American public.

The utter economic waste and injustice to employees, shareholders, and various other stakeholders brought on by the new corporate virtue signaling is now starkly evident in the global data that prove beyond a shadow of doubt that the whole Virus Patrol-dictated anti-Covid regime was completely wrong from the very beginning.