Great (Inflation) Expectations

Today’s inflation numbers will impact Fed policy. [The Rude Awakening] May 10, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Great (Inflation) Expectations - The S&P 500 seems to have stalled again below the 4,200 level. - The market may be waiting to see if the Fed still controls the inflation narrative. - Fiscally speaking, the debt ceiling mess threatens a fragile world economy. [External Advertisement] [The #1 Energy Passive Income Investment for 2023]( It's not a stock, bond or private company... But this little-known alternative investment could hand you BIG MONTHLY INCOME from the oil and gas surge in 2023. [CLICK HERE TO FIND OUT WHAT IT IS]( [Click Here To Learn More]( [Sean Ring] SEAN RING Dear Reader, Good morning from a gray and cloudy Piedmont! Sometimes we spend so much time staring at one thing and lose sight of all the other essential variables we ought to consider. For example, I’ve been ranting about the Fed for over a year. Chairman Pow is doing his level best to get inflation numbers down by raising unemployment. In short, crashing the economy to control the inflation he and his confederates unleashed. Sure, inflation is of paramount importance. But the Fed isn’t the only generator of it. Take the government, for instance. Congress and the Executive left the fiscal spigot open so long that we only just started to notice we’re standing knee-deep in fiscally-driven inflationary waters. You may not remember, but the first piece of legislation Barack “Insane” Obama signed into law in 2009 was the $787 billion stimulus package to resuscitate the economy after the 2008 Great Financial Crisis. As Uncle Miltie Friedman once said, “Nothing is so permanent as a temporary government program.” That $787 billion has never been pulled out of the budget. I’ll look at the market, inflation, and this idiotic debt ceiling debate in today's Rude. Where Are We Market-Wise? Let’s revisit our SPX chart: [chart] We’re still at magenta point 10. It seems the market can’t quite breach 4,200. Every time we get to 4,160 or so, the SPX tends to turn down. There certainly is a bunch of overhead supply at that level. But above that, there’s not much at all. That’s why I was so optimistic a few months ago. I thought we’d easily breach 4,200, and it’d be clear sailing above. That scenario has yet to materialize. But even if we turn down from here, we’ve had higher lows since the beginning of the year. So there’s no reason to expect a significant sell-off from the charts alone. We’ll revisit the market later via a history lesson. For now, let’s turn to the macro picture. What Expected of Today’s CPI? Today’s a big day for macro, as last month’s CPI numbers come in. To refresh your memory, the Consumer Price Index (CPI) measures the average price of a basket of consumer goods and services, such as transportation, food, and medical care. It’s calculated by taking price changes for each item in the predetermined basket of goods and averaging them. CPI changes are used to assess price changes associated with the cost of living. PERIOD ACTUAL PREVIOUS 8:30 am Consumer price index April 0.1 0.1% 8:30 am Core CPI April 0.4 0.4% 8:30 am CPI year over year April 5.0% 5.0% 8:30 am Core CPI year over year April 5.5% 5.6% Prices are still rising month-on-month. That means the Fed must still have a hiking bias. It’s Chairman Pow’s job to kick inflation to the curb, and he hasn’t done a good enough job yet, according to these numbers. Only Core CPI year-on-year is cooling off a bit. But it’s still rising. Disinflation is not deflation. But I’m not sure this is the big story, as I mentioned earlier. [New Biden Bucks Follow-Up Available Now]( Hey, it’s Jim Rickards. Since posting my original Biden Bucks presentation online, millions of people have viewed it. Snopes and the Associated Press have even attempted to “fact check” me and claim my warnings are false: Point being, my message has raised a storm and caused a lot of controversy. But in the time between my message and now, a lot of new developments have come to light. That’s why I’ve just released an update to my original prediction… one which will likely be even more controversial. [>> Click here now to access my new 2023 Biden Bucks follow-up](. [Click Here To Learn More]( What’s the Debt Ceiling Is and Why It Matters. You’ve probably been reading about the negotiations between Speaker of the House Kevin McCarthy and President Biden over the debt ceiling. It’s an important matter that will ultimately get settled by raising it. The reason why it’s a big deal that time around is because McCarthy isn’t in control of the House. If you remember, it took 15 ballots to make McCarthy Speaker. But before I go on, let’s lay it out simply. What’s the debt ceiling? The debt ceiling is a legal limit the U.S. Congress sets on how much money the federal government can borrow. This limit applies to the total national debt, which includes both the debt held by the public and the debt held by government accounts. The concept behind the debt ceiling is to control the debt level and maintain fiscal responsibility. Deficits versus the national debt When the U.S. government spends more than it collects in revenue, it must borrow money to cover the deficit. This is done by issuing government bonds that investors, including foreign governments, can purchase. Over time, if the government continues to run deficits, the total debt will increase. Why does it suddenly matter? Congress has traditionally raised the debt ceiling as needed, but it has become a contentious political issue. Raising the debt ceiling is effectively an acknowledgment that the government is increasing its debt. It's important to note that the decision to raise the debt ceiling is separate from the decision to approve the spending that creates the debt; those spending decisions are made through separate legislation. If these decisions were made together, it’d put a leash on spending, something neither party wants to do. Of course, the US has defaulted before, just not as a superpower! If the debt ceiling is not raised and the government exhausts all available funds, it would lead to a default on its obligations, something Biden claims has never happened before. That’s a load of malarkey, as the US defaulted four times in its history. And that’s not even counting the Continental dollar, which inflation killed. [The Hill]( noted the four times the US has defaulted: - The default on the U.S. government’s demand notes in early 1862 was caused by the Treasury’s financial difficulties trying to pay for the Civil War. - The overt default by the U.S. government on its gold bonds in 1933. The United States had, in clear and entirely unambiguous terms, promised the bondholders to redeem these bonds in gold coins. Then it refused to do so, offering depreciated paper currency instead. - Then the U.S. government defaulted in 1968 by refusing to honor its explicit promise to redeem its silver certificate paper dollars for silver dollars. - The fourth default was the 1971 breaking of the U.S. government’s commitment to redeem dollars held by foreign governments for gold under the Bretton Woods Agreement. Treasury Secretary Connally notoriously told his upset international counterparts, “The dollar is our currency, but it’s your problem.” A U.S. default would have dire consequences, both domestically and internationally. It would decrease the credit rating of the U.S., increase borrowing costs, and initiate a significant economic downturn. So what happens now? The debate over the debt ceiling often involves broader disagreements over government spending and taxation. Critics of raising the debt ceiling argue it enables unsustainable spending patterns, while proponents say it's necessary to cover obligations the government has already agreed to. But the big issue is that the more you raise the debt ceiling, the more government spends. And the more government spends, the more money gets pumped into the system. And the more money pumped into the system, the more price inflation it creates and exacerbates. If McCarthy and Biden fail to raise the debt ceiling, a US default would be catastrophic for a dollar-centric world. But if they succeed, the higher inflation will go, weakening the dollar. Slow death or fast seem to be the choices here. In the meantime, look at how stocks traded the last time we had a bit of drama around the debt ceiling, courtesy of my friend and colleague Alan Knuckman: [chart] Wrap Up. Jay Powell isn’t just fighting the market. He’s fighting his fiscal foes in McCarthy and Biden. The USG’s prolifigate spending overrides Powell’s contractionary policies. The market isn’t sure who will win, so it’s now trading in a tight range. But history tells us it can get dicey. Let the chips fall where they may. But my bet is on the ceiling getting raised (after a decent amount of hullabaloo). Have a great day. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening In Case You Missed It… Kissinger at 100 [Sean Ring] SEAN RING Good morning from a cool, overcast Northern Italy! A CBS Sunday Morning video popped up as I was flipping through YouTube. This is standard, as I happen to like Jane Pauley’s fluffy hosting of journalistic puff pieces for familiar faces. Yes, sometimes I want nothing of importance massaging my brain. But this time, the contrast was jarring. There was Jane’s smiling face, as always, scrunching the scaffolding of her plastic surgery, juxtaposed with a picture of Henry Kissinger! Credit: [CBS]( Yikes! The reason for this aesthetic dichotomy is that old Hank turns 100 in two weeks. As I mull that over, I can hear Bruce Dickinson of Iron Maiden singing, “Only the good die young/all the evil seem to live forever.” Well, I won’t mark my calendar for his actual birthday in two weeks. Since everyone else jumped the gun, so will I. Below is [a piece I wrote last year for the Rude]( in case you missed it. An Old Man Desperate to Get Into Heaven Henry Kissinger, Warmonger Extraordinaire, wants Ukraine to pay an arm and a leg for peace, so to speak. When I think of Kissinger, I’m reminded of Gene Hackman’s Lex Luthor proclaiming himself, “The greatest criminal mind of our time!” Philosopher-Truck Driver John Ring never had a kind word for him. “Goddamn Kissinger…” he’d murmur, sotto voce, whenever he saw the statesman on television. By the time I could remember anything, Kissinger was no longer Nixon’s and Ford’s National Security Advisor and Secretary of State. He’d already lined up a queue of questionable clients for his firm, Kissinger and Associates. Kissinger was - and is - paid handsomely to make the right phone calls. From his time as a Harvard professor, through his DC career, to playing private concierge to the world’s tyrants, Kissinger had burnished his reputation as the most powerful statesman of his era. Along with Machiavelli, Jay, Castlereagh, Talleyrand, and Metternich, perhaps Kissinger is one of the most famous diplomats of all time. I don’t mind Kissinger’s insistence on realpolitik. But his means didn’t justify the ends. I'm sure the man has more blood on his hands than he’d care to remember. Kissinger is a State-Sanctioned Butcher The late, great Christopher Hitchens wrote a book titled, [The Trial of Henry Kissinger](. It’s a scathing review of Kissinger’s career and echoes many criticisms of previous Kissinger biographers like Seymour Hersh. Niall Ferguson, a historian and author I greatly admire, disagrees with Hitchens and Hersh. But as Ferguson’s biography of Kissinger doesn’t cover his DC years, I’ll have to go with Hitch’s interpretation. Let’s get through some of Hitch’s extensive laundry list of Kissinger’s questionable - my word, not his - actions. Vietnam In 1968, Kissinger was working as an expert on Vietnam for the US negotiation team during the Paris peace talks. During the talks, Hitchens alleges Kissinger was feeding Republican Presidential hopeful Richard Nixon inside information on the progress of the deals, even though he was working for President Lyndon Johnson. Kissinger hoped that, if the talks failed, Nixon would stand a strong chance of winning the next election. Although Kissinger was guaranteed a job in the next Democratic administration - Johnson wouldn’t seek re-election - he thought he could get a better position in a Nixon administration. As a result, the war raged on for many more years. Then, as National Security Advisor, Kissinger was involved in Operation Speedy Express and Operation Menu. Operation Speedy Express deliberately targeted civilians, making it a war crime. Operation Menu bombarded targets in Cambodia and Laos, two countries with which the US wasn’t at war. This breached international law and hence, should be considered a war crime as well. Nearly 1 million people died in Cambodia and Laos due to Operation Menu. China I’ve written before in this newsletter about [The Hundred Year Marathon]( by Michael Pillsbury. In it, Pillsbury alleges that Nixon didn’t so much go to China as dupe Kissinger into gifting the Chinese loads of tech in exchange for an alliance with the Soviet Union. From an earlier [Rude]( To get China away from the Soviet Union, Henry Kissinger gifted them a ton of US technology. China would probably still be in mud huts right now if Henry Kissinger didn’t give him a 50-year leap forward, thanks to the tech he passed them on behalf of the American people. Kissinger did this, ostensibly, because he wanted to get China away from the Soviet Union to split the Maoists and the Marxists. Fast forward to 2020. You can see just how well that strategy worked. Hitchens alleges (at the time of his book’s publication) that helping American companies to get a hold of China’s market is one of Kissinger Associates' primary sources of income. Kissinger Associates Kissinger Associates, Inc. is a New York City-based international geopolitical consulting firm founded and run by Henry Kissinger in 1982. The firm advises clients on government relations. If you work for Kissinger, you’re never allowed to divulge clients' names. And if you’re one of Kissinger’s clients, you’re never allowed to acknowledge the relationship. This secrecy forced Kissinger to step down from his position as chairman of the National Commission on Terrorist Attacks Upon the United States (9/11 Commission). Congressional Democrats insisted that Kissinger disclose the names of clients. Kissinger and President Bush claimed that such disclosures were unnecessary, but Kissinger stepped down anyway, citing conflicts of interest. It’s frightening that his conflicts prohibited him from looking into terrorist attacks on his home turf. So successful is the Kissinger Associates model former UK Prime Minister Tony Blair tried to copy it. Though “45 Minutes” Tony is also a warmongering liar, he’s made a ton of money - though probably not as much as the big man himself. [Download My New Survival Guide Today!]( I’ve created a BRAND-NEW “2023 Crisis Survival Guide” that I’m making available to all of my Strategic Intelligence readers today. This short 54-page document has everything you need to know to protect yourself and your family in times of crisis. Things like what foods to stock up on now, staying safe during periods of rioting and looting and more. Inside I break down all of the coming threats you face and how to prepare. [>> To see how to download your copy, click here now](. [Click Here To Learn More]( Kissinger Wants to Go to Heaven I could talk about Kissinger’s further misdeeds in Bangladesh, Chile, and East Timor, but I’m running out of road. Or how he is [the brains behind the World Economic Forum](. But it was with a rye smile I discovered Kissinger is doing an Oscar Wilde. Like Wilde and his deathbed conversion to Catholicism, the 98-year-old Kissinger is starting to worry about the next world. For the first time in his 98 years slithering on this planet, Henry A. Kissinger calls for peace! Kissinger Thinks the West Has Gone Too Far In a speech that nearly floored me, [Kissinger said]( Negotiations need to begin in the next two months before it creates upheavals and tensions that will not be easily overcome. Ideally, the dividing line should be a return to the status quo ante. Pursuing the war beyond that point would not be about the freedom of Ukraine, but a new war against Russia itself. Doubtless, ace neocon Victoria Nuland hit the roof. He [continued]( Parties should be brought to peace talks within the next two months. Ukraine should've been a bridge between Europe and Russia, but now, as the relationships are reshaped, we may enter a space where the dividing line is redrawn and Russia is entirely isolated. We are facing a situation now where Russia could alienate itself completely from Europe and seek a permanent alliance elsewhere. This may lead to Cold War-like diplomatic distances, which will set us back decades. We should strive for long-term peace. Considering this, here are my questions: Thirty years ago, why didn’t we either shut down NATO or integrate Russia into it? Why wasn’t Russia ever considered for EU membership? Why wasn’t the West clear with Ukraine on how far its integration could go? If Kissinger contradicts every Western leader, does this signal a policy change? How can Western leaders backtrack without completely losing face? Wrap Up Realpolitik has reared its head once again. Was Kissinger asked to make this speech to encourage cooler heads to prevail? Did he realize his proteges have completely screwed up? Or was this an old man genuinely trying to do the right thing? It’s not for me to decide who gets through the Pearly Gates. Only St Peter gets to do that. But if old Henry ever approaches the Great Bouncer in the Sky, I’m not sure an old-fashioned backhander will do. If I were him, I’d back up the Brinks truck. Have a great day ahead! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening P.S. [Kissinger reversed this call in January this year.]( But if you listen to the CBS Sunday Morning interview with Ted Koppel, Kissinger states he thinks peace negotiations will start near the end of this year. Kissinger also looks wonderfully uncomfortable when Koppel presses him on the Cambodia bombings. ‘Secrets of Jekyll Island’ A LIVESTREAM Broadcast with Jim Rickards & Danielle DiMartino Booth [Jekyll Island] On Wednesday May 17th at 1pm EDT you can watch live, exclusively through your access link from the comfort of your own home, as two of the world’s foremost thought leaders deliver world class economic insight. [Click Here Now to Reserve Your Seat]( Clicking the button above automatically registers you for ‘Secrets of Jekyll Island’ but does not obligate you in any way to attend the event. By reserving your spot, you will receive event updates. We will not share your email address with anyone. And you can opt out at any time. [Privacy Policy](. 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