The Priesthood of Perpetual Growth Is Losing Credibility

Fish & eggs up 10% & rent rises 15%

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The Priesthood of Perpetual Growth Is Losing Credibility

November 2, 2021

“Yellen is convinced that not only can the government spend well and spend carefully, but that $1.75 trillion will have no inflationary effect. I don’t know if this is the inmates running the asylum or we’re talking about some mystical knowledge that you and I simply cannot appreciate or understand. The depth is too far beyond our simple minds. But we’re waiting for the evidence. Ignore what you want. Keep what supports your narrative. That’s where we are today. The facts are convenient at best.” — David McAlvany

Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany. 

I’ll never forget Tomáš Sedláček, who wrote The Economics of Good and Evil. It really hit home when he was talking about how we have a new religion in this period of time, and that religion is the belief and almost the worship of perpetual growth. And the people who seem to provide that perpetual growth are the central bankers. No inflation, there’s no consequences to printing money, don’t worry about it, your assets will continue to grow. And we’ll be able to keep interest rates very, very low and continue to borrow further. That seems to be catching up. They talk about the king who had no clothes on, it seems at this point, we’re starting to see that the central bankers have no clothes on.

David: You know it’s perception management. The work of a central banker, when they start talking about needing to give “forward guidance,” and basically lead you to where they want to go. What they’re going to do next, it is perception management. And what they are operating on the basis of is a presumption of control, but also the projection of control, which is really how you experience them.

Kevin: You remember when Powell was saying we don’t really see inflation, and then he started saying it was transitory. Now, he’s starting to say, “Well, we are seeing inflation, but we’re not going to raise rates.”

David: It was fascinating. He said, “We will not raise interest rates preemptively because we fear the possible onset of inflation. We will wait for evidence of actual inflation or other imbalances.”

Kevin: So as long as you can control perception, you think you can control the market, but actually, there’s this thing called the market, Dave. Some people call it the bond vigilantes who are like, No, if inflation is high, I’m going to demand high interest if I’m going to give a loan.

David: Yeah. So we are waiting for evidence of actual inflation. And we’re waiting, and we’re waiting, and we’re waiting, and now the bond market will wait no longer.

Kevin: Right. So vigilantes, they’re like, “Wait? No.”

David: This last week we had the PCE up 4.4% year on year, that is the preferred measure of inflation by the Federal Reserve.

Kevin: They like it better when it’s low. They’ll use PCE when it’s lower than everything, but now it’s 4.4.

David: And we’re used to the CPI, which is up 5.4 year over a year with a cost of living adjustment, which we’ve spoken of earlier, 5.9.

Kevin: That’s for Social Security, they use the COLA for that.

David: And in the PPI, Producer Price Index, which is for wholesale prices, up 8.6. I mean, just look at any small thing. Fish, eggs, they’re up 10.5%. Rents, up 15. Home prices up 20, used cars up 24, Gasoline up 122%, heating oil up 123%. And again, look at the genius view from our Treasury Chief, this is Janet Yellen, that trillions more in federal spending will drive inflation rates down.

Kevin: That’s a quote. That’s a quote. She said,