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230 Economists Warn the US Government’s Proposed Inflation Reduction Act Will Fuel Inflation

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230 Economists Warn the US Government's Proposed Inflation Reduction Act Will Fuel Inflation

Last week, Democrats unveiled climate and health care legislation called the “Inflation Reduction Act,” and there’s a lot of debate over the name of the proposed public policy measures. After the legislation was revealed, 230 economists sent a letter to the country’s House and Senate leaders warning that the proposed policies will actually fuel inflation. The letter stresses that there is an urgent need to curb America’s inflationary pressures, ​​but further notes the “‘Inflation Reduction Act of 2022’ is a misleading label applied to a bill that would likely achieve the exact opposite effect.”

230 Economists Tell House and Senate Leaders That the Proposed Climate and Health Care Legislation Is Not a Good Idea While the US Faces ‘Dangerous Crossroads’

Inflation has been high in 2022 and the Federal Reserve has been trying to curb the problem by raising the federal funds rate. There’s been a lot of debate over whether or not the U.S. is in a recession after two consecutive quarters of negative gross domestic product (GDP) growth. On Friday, there was some positive news, as the latest U.S. jobs report indicated that 528,000 jobs were added in July and unemployment data slid to pre-pandemic levels.

Amid the Ukraine-Russia war, tensions between China and Taiwan, and a gloomy global economy, U.S. Democrats have introduced new legislation to address climate change and health care called the Inflation Reduction Act. Democrats claim that the legislation will “make a historic down payment on deficit reduction to fight inflation.” The $739 billion Inflation Reduction Act package recently got the green light from U.S. politicians Joe Manchin and Chuck Schumer. The Arizona Democratic Senator Kyrsten Sinema was the last to show support for the proposed climate and health care legislation.

The politicians sponsoring the initiative also insist the policies will “invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030.” The act will be voted on Saturday and many people believe the legislation’s label is inaccurate and misleading. In fact, 230 economists wrote a letter to Chuck Schumer, Mitch McConnell, Nancy Pelosi, and Kevin McCarthy to tell them that the bill would increase inflation.

“At a time when the economy already faces supply/demand imbalances, the residual effects of stimulus, labor shortages, and supply chain disruptions, this bill would compound rather than alleviate many of these problems,” the letter states. The economists’ letter to the House and Senate leaders adds:

In particular, its $433 billion in proposed government spending would create immediate inflation pressures by boosting demand, which the supply-side tax hikes would constrain supply by discouraging investment draining the private sector of much-need resources.

Redditors From r/Economy Subreddit Openly Mock Analysis by the Global Warming Advocacy Group That Claims Inflation Reduction Act Will Help Americans Save Money

Of course, Democrats, left-leaning media publications, and non-profit think tanks have stated that the Inflation Reduction Act would reduce inflation and allegedly lead to savings. A Yahoo Finance article written by Akiko Fujita attempts to prove the bill will help Americans save money by citing a new analysis published by the non-profit group Rewiring America.

The 501(c)(3) Rewiring America is a global warming advocacy group managed by Arabella Advisors. The Washington, D.C.-based for-profit consulting company Arabella controls the Sixteen Thirty Fund, the New Venture Fund, the Hopewell Fund, and the Windward Fund. Arabella itself was founded by the former Clinton administration appointee Eric Kessler.

While the analysis asserts the Inflation Reduction Act could lead to $1,800 in savings for the average household, a significant majority of Redditors from the subreddit r/economy did not agree with Rewiring America’s claims. One person quoted Rewiring America’s modern home installation requirements, and stressed: “How the f*** can a low-income household afford these?” The person who posted the article to r/economy replied to the individual by saying it was “typical government idiocy.” The Redditor added:

The entire green movement is a money grab for this generation.

Many other Redditors discussed how politicians have a “higher than the average” point of view when it comes to what is perceived as “low income” in the United States. “Just skimming through the article shows that the ‘$1,800’ in savings the average household would ‘get’ is actually tax breaks for low-income families to install more efficient electrical equipment. Is this a joke?” another Redditor asked.

“Unfortunately for us, it isn’t a joke,” the thread’s author wrote in response to the joke question.

Republican Senators have made it clear that Joe Manchin’s and Chuck Schumer’s Inflation Reduction Act reforms deal will not get traction from the right-leaning party. “Senator Manchin, if you think you’re gonna get 60 votes to get the sweeteners that can’t be done in reconciliation, you need to think long and hard about what you’re doing,” Senator Lindsey Graham (R-S.C.) wrote on Friday.

What do you think about the letter 230 economists sent to House and Senate leaders about the proposed Inflation Reduction Act? Let us know your thoughts about this subject in the comments section below.

What Is The Definition Of Recession?

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The danger of letting political interests control supposedly neutral data and science is obvious when terms are made subjective to fit the current narrative.

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Listen To The Episode Here:

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“Fed Watch” is a macro podcast with a true and rebellious Bitcoin nature. Each episode, we question mainstream and Bitcoin narratives by examining current events in macro from across the globe with an emphasis on central banks and currencies.

In this episode, I’m joined by Q and Chris Alaimo of the Bitcoin Magazine livestream crew to talk about the “recession” versus “not a recession” versus “depression” debate. I also dive into understanding the temporary effects of fiscal spending by governments and the brick wall facing the global economy, demonstrated through yield curves. We finish up with a Q and Ansel (question and answer) from the guys and community.

You can find the slide deck for this episode here.

Recession Debate

In recent days, many people have started to notice the National Bureau of Economic Research (NBER) has changed the definition of what constitutes a recession. Outrage at the blatant sleight of hand has come to a fever pitch. Common sentiment is, “How dare they change the definition to save the reputation of an unpopular president?”

Few people realize that the definition had already changed back in 2020 with the COVID-19 recession. It was the shortest recession on record, only lasting from March to April 2020. The definition changed to be more subjective in order to narrow what a recession is and to place one on the previous president’s record. Now, this more subjective measure is being used to broaden the definition to keep a recession off this president’s record.

Once again, the danger of letting political interests control supposedly neutral data and science is plainly obvious.

Leading us into a discussion about the U.S. consumer and the weak state of the economy, I read from a Walmart financial release, which is important because they are the largest retailer in the world by a long margin.

“Operating income for the second-quarter and full-year is expected to decline 13 to 14% and 11 to 13%, respectively.”

Lance Roberts put together some excellent charts to refute the apparatchiks’ new party line: that there is no recession. First is deficit spending. On the podcast, I used this chart to show how fiscal spending is not money printing, it simply pulls demand forward. If it is not sustained, there is a gaping hole of demand coming behind it.

(Source)

We can see the economy racing toward this gaping hole in the yield curves. The first chart below goes all the way back to the 1981-1982 recession, showing many selected yield curves. Notice the steady cascade toward inversion (negative on the chart) that usually characterizes the march into recession. However, this chart shows an almost immediate dive into inversion as if hitting a brick wall.

(Source)

Below is a zoomed-in chart that we looked at on the podcast. I selected a few yield curves for the 10-year and five-year Treasurys. Again, the abrupt nature of the current crash is like hitting a brick wall.

(Source)

At this point in the podcast, I felt like I was being a little bit alarmist, and I did just write a blog post condemning the “fear hustlers and alarmist pimps,” so I used the following chart from Jeff Snider, in which he shows we haven’t returned back to previous growth trends and possible outcomes of this recession. I expect the outcome of this recession in the U.S. to be generally light, similar to the dot-com-type recession.

Behind all this controversy about the word “recession,” we are left with the realization that it doesn’t matter anyway. We are going to have a slight downturn and return to the post-Global Financial Crisis normal of low growth and low inflation.

(Source)

Bitcoin, The Dollar And Rate Hikes

Next, we talk about bitcoin and rate hikes. I think it is very interesting that, at the June 2022 Federal Open Market Committee (FOMC) policy announcement of a hike of 75 basis points, bitcoin is at very nearly the same level as today.

To be exact, at 2 p.m. ET on June 15, 2022, the bitcoin price was $21,505. As I wrote this at 11 a.m. ET on July 27, 2022, the price was $21,440. Very interesting that despite the negative news around Bitcoin, and the hawkishness from the Federal Reserve, the bitcoin price remains extremely strong.

(Source)

The last image for this week was the Chicago Mercantile Exchange’s FedWatch Tool (which took our podcast’s name!). At the time of recording, it was showing a 75% chance of a 75 bps hike and a 25% chance of a 100 bps hike.

(Source)

That does it for this week. Thanks to the readers and listeners. Don’t forget to check out the Fed Watch Clips channel on YouTube. If you enjoy this content, please subscribe, review and share!

This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

Bitcoin Rises Above $22,000 As Fed Raises Interest Rates By 0.75%

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The FOMC increased interest rates by 0.75 percentage point while indicating ‘unusually large’ hikes may be appropriate in future meetings; Bitcoin’s price jumps.

  • The FOMC raised target rates for the federal funds rate by 75 basis points.
  • Federal Reserve Chairman Jerome Powell indicated “unusually large” increases could be appropriate in future meetings.
  • Powell also stated a period of economic slowdown will be necessary to restore price stability.

The Federal Open Markets Committee (FOMC) raised its target interest rate for the federal funds rate by 75 basis points, or 0.75%, on Wednesday marking the highest back-to-back rate increase since the 1980’s.

The Chairman of the FOMC and Federal Reserve, Jerome Powell, addressed the rate increase during the customary follow-up press conference.

Powell began by noting that indicators for spending and production have both slowed, but attested that labor market conditions were still strong.

Additionally, Powell discussed a myriad of subjects including continued supply chain constraints, fears of recession, continued quantitative tightening, the Ukrainian war, and gave insight to future possible FOMC action as it relates to the rising pressures of inflation.

“Another unusually large increase could be appropriate at our next meeting,” Powell warned.

During last month’s FOMC meeting, Powell explained that the committee’s intention is not to induce a recession. However, hints at this meeting towards continued obstacles facing the borrowers of the economy via rising rates leave little room for positive economic growth. In fact, the chairman explained that a recession is more than a probability –– it’s likely to happen due to continued rate increases.

Powell made it clear that further increases are likely to come, and the FOMC believes the economy needs to slow down for the U.S. to reclaim any hope of price stability.

“This process is likely to involve a period of below trend economic growth and a softening of labor market conditions,” he explained. “We think it’s necessary to have growth slow down.”

Ahead of the press conference and news of the rate increase, bitcoin’s price rose above $22,000, briefly touching $23,000. The peer-to-peer digital cash was exchanging hands at $22,800 at the time of reporting.

IMF: Global Economic Outlook Has ‘Darkened Significantly’ — Global Recession Cannot Be Ruled Out

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IMF: Global Economic Outlook Has 'Darkened Significantly' — Global Recession Cannot Be Ruled Out

The head of the International Monetary Fund (IMF), Kristalina Georgieva, has warned that the global economic outlook “has darkened significantly,” emphasizing that, regarding a global recession, “we cannot rule it out.”

IMF Says Global Economic Outlook ‘Has Darkened Significantly’

Kristalina Georgieva, the managing director of the International Monetary Fund (IMF), discussed the global economic outlook and the prospect of a global recession in an interview with Reuters Wednesday.

Commenting on the global economy, the IMF managing director said:

The outlook since our last update in April has darkened significantly.

She cited several factors, including a more universal spread of inflation, more substantial interest rate hikes, China’s economic growth slowdown, and mounting sanctions related to the Russia-Ukraine war.

In April, the IMF slashed its global growth forecast from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. This was “0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January,” the Fund noted at the time.

The IMF will be cutting its global growth forecast further late this month, Georgieva noted, adding that it will be the third downgrade this year.

Global Recession Cannot Be Ruled Out

When asked about the prospect of a global recession, the IMF managing director said:

The risk has gone up so we cannot rule it out.

“We are in very choppy waters,” she continued. Investors are becoming increasingly concerned about recession risks.

Georgieva noted that recent economic data showed that some large economies, including those of China and Russia, had contracted in the second quarter. She cautioned that the risks were even higher in 2023.

The IMF boss said:

It’s going to be a tough ’22, but maybe even a tougher 2023 … Recession risks increased in 2023.

Georgieva believes that slower economic growth may be a “necessary price to pay,” citing the urgent and pressing need to restore price stability.

She opined: “We need to create the same strong level of coordination between central banks and finance ministries so they provide support in a very targeted way … and don’t weaken what monetary policies are aiming to achieve.”

In June, World Bank President David Malpass warned about a possible global recession. “For many countries, a recession will be hard to avoid … This is the sharpest slowdown in 80 years,” he said.

What do you think about the comments by IMF Managing Director Kristalina Georgieva? Let us know in the comments section below.

Rich Dad Poor Dad’s Robert Kiyosaki Says He’s Waiting for Bitcoin to Test $1,100 to Buy More

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Rich Dad Poor Dad's Robert Kiyosaki Is Waiting for Bitcoin to Test $1,100 to Buy More

The famous author of the best-selling book Rich Dad Poor Dad, Robert Kiyosaki, says he’s waiting for the price of bitcoin to test $1,100. He added that he will buy more if the cryptocurrency recovers from that price level.

Robert Kiyosaki on Bitcoin Testing $1,100

The author of Rich Dad Poor Dad, Robert Kiyosaki, has returned with a new bitcoin outlook. Rich Dad Poor Dad is a 1997 book co-authored by Kiyosaki and Sharon Lechter. It has been on the New York Times Best Seller List for over six years. More than 32 million copies of the book have been sold in over 51 languages across more than 109 countries.

The famous author tweeted a “Rich Dad lesson” Monday night. He explained that “losers quit when they lose,” but “winners learn from their losses.” Asserting that “Bitcoin losers are quitting,” he said he is waiting for BTC to test $1,100, adding that he will buy more if the crypto recovers. “If it does not, I will wait for losers to ‘capitulate’ quit then buy more,” he further stated.

Many people on Twitter disagreed with Kiyosaki that bitcoin will ever see $1,100. Some suspected that the Rich Dad Poor Dad author made a typo and he actually meant $11K.

The famed investor has been saying for several months that he will buy more bitcoin when its price bottoms out. When BTC began declining heavily in recent months, he started saying that the crypto could bottom out at $20K. When BTC continued to fall, he revised his bottom price forecast several times.

In May, Kiyosaki indicated that BTC could bottom out at $9,000. The price of bitcoin was hovering around $30,000 at the time.

He explained that he was still bullish on bitcoin because he sees the Federal Reserve and the Treasury Department as corrupt organizations. He also said that once he knows that the bottom is in, he will “back up the truck,” noting that “Crashes are the best times to get rich.”

Kiyosaki also made some dire predictions about the U.S. economy. Last month, he said the stock and bond markets are crashing, predicting a depression and civil unrest. In April, he claimed that hyperinflation is here. In March, he warned that the U.S. dollar is about to implode, advising investors to buy bitcoin, ethereum, and solana.

At the time of writing, bitcoin is trading at $20,277, down almost 3% over the past 24 hours and 30% over the last 30 days.

What do you think about the comments by Rich Dad Poor Dad author Robert Kiyosaki? Let us know in the comments section below.