Today's Post - https://bahnsen.co/3N5Vy0n

So the month of May CPI report came out this morning, and xxxxxxx

Those who continue to be “frustrated” by the reasonable resilience of the economy in the face of the Fed’s desire to break it are up against a few different things.

(1) The utter weirdness of believing an economy must be broken to beat inflation. It is not true, and it has never been true.

(2) The extent to which many corporate borrowers (both high yield and investment grade) extended the maturities of their borrowings during the COVID zero-interest rate period. This means companies are not impacted by higher rates where they don’t have loans resetting at higher rates. Of course, this is not true for all but it has been true for many.

(3) How incredibly unnecessary it is to use high rates to defeat inflation when monetary policy was not the primary cause of the inflation to begin with. The issues that primarily caused the inflation of 2021/22 were rectified in the natural course of events (supply chain, labor shortage, reopening, etc.) and no the cause and effect mechanisms are all off in the way the Fed is approaching this.

Links mentioned in this episode: