On Friday, Don Ma interviewed Peter on NTD's Business Matters. Their conversation is about decline in consumer confidence. With GDP and unemployment figures also signal recessionA deterioration in the consumption outlook bodes ill for the economy.
Peter points out that consumers are not pessimistic enough:
“If consumers only knew how bad things were going to get, their confidence would be even lower. They are actually a little too optimistic about the future. What they're really worried about is rising inflation and high interest rates, and the problem is that interest rates aren't really high yet. And unless the Fed raises rates even more, inflation will go much higher! The Fed therefore finds itself in a difficult situation if it tries to strengthen consumer confidence.
The Federal Reserve is constrained by the absurd amount of debt that consumers and the government carry:
“The Fed is considering cutting rates despite the fact that they are still too low. But the problem is that Americans are so in debt that even these low rates are too high! This is the main reason why the Fed stopped raising rates: because we began to see another financial crisis as banks began to fail. And the US government is in a budget impasse. You know, every time the Fed raises rates, the budget deficit widens.
Average Americans are not doing well:
“He is currently on life support. The consumer has a lot of problems. He has a record amount of debt – credit card debt, household debt. Savings are completely exhausted. The cost of living has skyrocketed and is going higher, and many Americans now work multiple jobs just to make ends meet. …It now takes two or three jobs to pay what one job paid just a few years ago.
To top it all off, establishment economists and politicians have their heads firmly planted in the sand:
“They are blind. We are probably already in a recession. Many of the numbers we're getting indicate that the opposite is likely to be revised downward, probably after the election. …Powell just said at the last press conference that he doesn't see any signs of stagnation or inflation, and he's wrong on both counts!”
The Fed is in a difficult situation: does it fight inflation at all costs, even at the expense of particular financial interests, or does it sacrifice the consumer to avoid a catastrophic banking crisis? Neither choice is pleasant, but the Fed will be forced to choose when recessionary pressures finally catch up with the U.S. economy.
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