Biden’s reality bites! Uglier downturn seen

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Headline numbers have been looking good for Joe Biden lately. He recently won a major legislative victory, and his approval is more ticking, meaning that perhaps the manifold failures of his presidency are a thing of the past. With Biden appearing to be less sleepy, the Dems may not be blown away in the upcoming midterm as predicted a few weeks ago.

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Yes, that’s what the White House wants you to believe. Most of my peers in the mainstream media hold the same view. But the Biden-renaissance narrative spins about, at least for now, some really bad bits of economic reality that the president’s reckless policies have created.

If you don’t believe me, listen to some comments recently made by Larry Fink, CEO of money manager BlackRock. No one will ever confuse Fink with a GOP speaking head. He runs the world’s largest investment firm (about $8.5 trillion in assets under management). He has strong ties with the Democratic Party and is a perennial contender for Treasury secretary under a Democratic presidency.

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We have had differences with Fink in the past over BlackRock’s embrace of environmental social governance investing. Fink explains that he is a moderate on the wake-investment craze, advocating a transition to a green economy while BlackRock continues to invest in energy infrastructure.

That’s one reason we can do much worse than the fink running the American economy. Second: He is one of the best risk managers on Wall Street.

Fink runs the largest investment firm in the world.
Larry Fink said there is a disconnect between the actions of the White House and the Fed’s inflation-fighting mandate.
Getty Images
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Now he’s sounding the alarm over the potential economic damage in D.C. — much of it by his own party — that will make the Fed’s job of fighting inflation nearly impossible, while attempting to engineer a so-called “soft landing.” Fink calls this an “irreparable disconnect” between what the White House is doing and Fed Chair Jerome Powell’s inflation-fighting mandate.

Inflation is a bad tax on the working class. If left unchecked, it leads to economic hardships which history shows creates social unrest. To control inflation, our central bank, the Federal Reserve, engages in a balancing act. It seeks to raise rates and tighten credit on businesses to achieve a soft landing of the economy, in which GDP declines enough to contain inflation but the economy is in full-recession, or at least a severe recession. Avoids recession.

‘Soft landing’ difficult

This is not easy to do, although the Fed has backed this in the past by coordinating its monetary policy (control of the money supply) with the fiscal policy (spending) of the White House and Congress.

In a series of extensive interviews, including one with me on Fox Business, Fink explained how coordination is missing in our current economic climate – something he hasn’t seen in his 40-year career at the top of the financial industry. On one hand we have the White House and Congress spending like crazy and growing the economy. As inflation rises, the Fed is trying to reverse the damage to meet its customary 2% inflation target.

To get a sense of where the Fed is, consider that the final inflation print was 8.5%. That number was hit before the latest spending (student-loan forgiveness, etc.).

Powell has reiterated that the Fed is determined to reduce inflation by raising its short-term rate.
Jerome Powell’s Federal Reserve is trying to match its customary 2% inflation target.
AP

To explain this to Fink, the White House is baking a much deeper recession into the equation as it is forcing the Fed to raise rates by more than 75 basis points at its next meeting and probably several times thereafter. – Because the administration does not want to stop the inflationary cycle it helped create through spending. In the short term, Fink says, inflation could be a little bit lower with lower energy prices than we’re seeing (that’s when people can’t afford commodities, FYI), but to meet the Fed’s 2% target. Not enough because food and other staples remain stubbornly high.

“We are seeing this in governments in Europe, in the UK, and now in the United States. We are seeing huge fiscal stimulus at a time when we have a lot of inflation . . . and that’s just in Europe and the United States. Makes the job of central banks very difficult,” he told me.

Fink also scoffed at a White House spin that the economy is experiencing a “growth slowdown” because negative GDP growth (the official definition of recession) over the past two quarters coincides with strong employment. “I heard that too,” he said.

Like most Wall Street professionals, he knows that employment is a lagging indicator as the gears of the economy begin to grind to a slow pace. All the spending, he says, “simply makes it harder for our central banks and other central banks to move the dial”. [on inflation], They have to be more aggressive. So could it cause a slowdown? Yes.”

Fink insists that any fiscal spending we’ve seen in recent years is a “bilateral” problem, and he follows the dem party line that other factors, such as the Ukraine war, are contributing to the inflation mess. It was necessary to spend some during the COVID lockdown. At the same time the Fed continued to print money until inflation proved “non-transient”.

no cost

Still, it’s also hard for Fink to escape the fact that Sleepy Joe and his ministers haven’t given up despite their recovery from the pandemic. And the Fed, according to Fink, has no choice but to slam the brakes or inflation will rage like it did back in the 1970s.

Again, Fink is no GOP operative, and the former BlackRock official holds a lot of top positions in the Biden administration. They should focus on how they’re making Powell’s job more difficult than necessary, because when you lose Larry Fink, you know you’re in trouble.

Credit: nypost.com /

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