Biden’s reality bites! The most severe contraction was seen

The headline numbers have been looking good for Joe Biden lately. He recently won a major legislative victory, his victory Approvals ticked topWhich means that the multiple failures of his presidency may be a thing of the past. With Biden looking less sleepy, Democrats may not be blown away Next midterm elections As expected a few weeks ago.

Yes, that’s what the White House wants you to believe. So do most of my colleagues in the mainstream media. but the It revolves around Biden’s Renaissance novel It obscures, at least for now, some of the really bad parts of the economic reality that the president’s corrupt policies have created.

If you don’t believe me, listen to some of the comments he made recently Larry Fink, CEO of BlackRock Money Management. No one would ever confuse Fink with a talking GOP head. he runs The largest investment company in the world (About $8.5 trillion in assets under management). He has strong ties to the Democratic Party and is a frequent challenger to the Treasury Secretary under a Democratic president.

We’ve had our differences with Fink in the past about BlackRock’s adoption of environmental social governance investing. Fink notes that he is moderate in the fad of awakened investing, advocating a transition to a green economy while BlackRock continues to invest in energy infrastructure.

This is one reason why we can do so much worse than Fink’s leadership of the US economy. Other: it Among the best risk managers on Wall Street.

Fink operates the world's largest investment firm.
Larry Fink said there is a disconnect between the actions of the White House and the Fed’s mandate to combat inflation.
Getty Images

Now he is sounding the alarm about potential economic damage in the capital – mostly from his own party – that will make the Fed’s job of fighting inflation while trying to engineer a so-called “soft landing” nearly impossible. Fink describes it as an “irreconcilable separation” between what the White House does and what it does Fed Chairman Jerome Powell’s mandate to fight inflation.

Inflation is a bad tax on the working class. If left unchecked, It leads to economic hardship This history appears to create social unrest. To tame inflation, our central bank, the Federal Reserve, is engaging in a balancing act. It tries to raise interest rates and tighten corporate credit to bring about a soft landing of the economy, as GDP falls enough to subdue inflation, but the economy avoids a full-blown, or at least severe, recession.

Hard ‘soft landing’

It is not easy to do, although the Fed has succeeded in this in the past by coordinating its monetary policy (controlling the money supply) with the fiscal policy (spending) of the White House and Congress.

In a series of wide-ranging interviews, including one with me on Fox Business, Fink explained how this format is so sorely lacking in our current economic environment—something he hasn’t seen often in his 40-year career at the top of finance. industry. our hand The White House and Congress are spending crazy and inflating the economy. As inflation rages, the Fed seeks to reverse the damage to meet its usual 2% inflation target.

To understand where the Fed is, consider that the last inflation print was 8.5%. This number has already been multiplied The latest spending explosions (Student loan forgivenessetc.).

Powell reiterated that the Fed was determined to lower inflation by raising the interest rate in the short term.
Jerome Powell’s Fed is trying to match its usual 2% inflation target.
AP

To hear Fink explain it, the White House is in the equation a very deep recession because it is forcing the Fed to raise interest rates more than it should — 75 basis points at its next meeting and possibly several times after — because the administration doesn’t want to stop the inflationary cycle it helped create from during spending. In the short term, Fink says, inflation may ease a little bit with the lower energy prices we’re seeing (it happens when people can’t afford a commodity, FYI), but not enough to meet the Fed’s 2% target because of food. And other staples remain stubbornly high.

We are seeing this in governments in Europe and the UK and now in the US. We are seeing a very large fiscal stimulus at a time of very high inflation. . . This makes the jobs of central banks in Europe and the United States a much more difficult task,” he told me.

Fink also scoffed at White House talk that the economy is in a “stagnation of growth” since the past two quarters of negative GDP growth (the official definition of a recession) coincided with strong employment. “I heard that too,” he shouted.

Like most Wall Street professionals, he knows that employment is a lagging indicator as the gears of the economy begin to move more slowly. All the spending, he adds, “makes it difficult for our central banks and other central banks to move the dial in.” [on inflation]. They should be more aggressive. Then could it lead to a recession? yes.”

Fink stresses that all the fiscal spending we’ve seen in recent years is a “two-party” problem, and he’s following the line of the Democratic Party that other factors like the Ukraine war Contribute to the chaos of inflation. Some spending was necessary during the COVID lockdowns. In addition, the Fed continued to print money until inflation proved “not temporary”.

Don’t stop spending

However, it’s hard for even Fink to avoid the fact that Sleepy Joe and his followers haven’t calmed down despite recovering after the pandemic. According to Fink, the Fed has no choice but to criticize the commas or Inflation will rage Just like in the seventies.

Once again, Fink is not active in the Republican Party, and former BlackRock executives hold many of the top positions in the Biden administration. They should pay attention to what he says about how to make Powell’s job more difficult than it should be, because when you lose Larry Fink, you know you’re in for some trouble.

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