How is the U.S. Doing?

Jul 27, 2023 | Bubble Monitor, No Bull Economics

Weekly Dashboards

2Q23 GDP was up +2.4% y/y after a +2% 1Q increase, so it looks like the Fed’s most recent 0.25 rate hike was warranted – right? Anything to get us to 2% inflation… Wait, the 2Q23 PCE price index rose just +2.6% y/y, down from +4.1% 1Q’s results. So we are basically at your inflation target, but still hiking interest rates? Mr. Powell, how come the monetary authorities in China & India are not pushing their economies into recessions in order to combat this dangerous disinflation? We wish the Fed would read our posts this week to better understand why it needs to layoff for the sake of the country’s global positioning and, in particular, our very important labor & real estate markets!   

Bubble Monitor Chart
Consumer Stock Monitor

Commentary

If you agree with us that one primary reason the Fed has been raising interest rates is to defend the US$ (as opposed to fighting inflation driven by supply constraints), then we propose a much better method to achieve that end without wrecking domestic economic growth.

  • It seems like all the headlines captivate with controversies surrounding media, politics, culture, climate, and threats of WW3. However serious these challenges may be, it is important to recognize that they distract us from a very serious, and quantifiable threat to our immediate well-being: economic annihilation.
  • While we are not endorsing the accuracy of the IMF’s projections below, it is important to consider their directional trends and orders of magnitude. Using this framework, it is easy to see that the U.S. is in serious trouble as it relates to our global competitive positioning.
  • It is high time for U.S. business leaders to ask why our already underperforming domestic growth is trending down. It’s not OK for U.S. companies to become content to drive growth overseas and we must stop looking for political solutions to a domestic private market problem.
  • The U.S. must prioritize domestic growth ASAP with a goal of becoming at least as competitive as China & India. If we do, the US$ will remain strong & resilient and the Fed will not be forced to support the greenback with financial engineering that always comes with dangerous side effects.
World Economic Outlook Growth Projections Chart

Source: World Economic Outlook Update, July 2023: Near-Term Resilience, Persistent Challenges (imf.org)

Weekly Publications

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