Premium Analysis: Spooky Parallels Between the 1970’s and Now
Arthur F. Burns, was Chairman of the Board of Governors of the Federal Reserve System from 1970 to 1978. The paper referenced and included at bottom is a reprint of the address Dr Burns gave as the sixteenth Per Jacobsson Lecture, at Belgrade, Yugoslavia, on September 30, 1979.
In October 1979, Fed Chairman Paul Volcker announced new measures by the Federal Open Market Committee aimed at reining in the inflation that had afflicted the US economy for several years.
In his lecture, Dr. Burns goes through some of the reasons, drivers, and likely explanations why things got out of hand.
Burns in 1979:
Central Banks can’t stop politically driven inflation. They have the tools, but not the will.
Fed had tools to stop the inflation, but chose not to use them because it had been caught up in the social movements of the day
Desire for a more interventionist govt
Unevenly spread prosperity
Overwhelming goal of full employment
Not understanding what the appropriate level of "full employment” was
Environmental policies added to the inflation
Entitlements diminished the work ethic
Inflation was fed by high unemployment, deficits, money creation
Ultimately led to a conservative political movement
The day started with gold sideways and choppy; silver strong, up about $20, and copper absolutely ballistic up 4%. Then Silver proceeded to blow sky high.
US equities rallied on Tuesday, with the S&P 500 and Dow Jones Industrial Average closing at record highs. Large caps and small caps advanced: S&P 500 (+0.25%) vs. Russell 2000 (+0.17%). MSCI Emerging Markets (EEM) and MSCI EAFE (EFA) rose 3.41% and 0.59% respectively.
Market News: More Cuts and More Inflation Coming
"Consumers’ view on the economy tumbled in September, falling by the largest level in more than three years as fears grew about jobs and business conditions, the Conference Board reported Tuesday.CNBC
"The Justice Department sued Visa on Tuesday on allegations that it illegally monopolized the market for consumers’ payments worth trillions of dollars every year WSJ
"China has unleashed a swath of stimulus measures including cuts to its benchmark interest rate as Beijing battles a slowdown in the world’s second-largest economy FT
"Anthropic, OpenAI's largest startup competitor, has started talking to investors about raising capitalThe Information
"Buyers and sellers in US commercial real estate are increasingly convinced that the beleaguered market is reaching a bottom. Bloomberg
Politics/Geopolitics: Not Until Oil Spikes
Hezbollah confirmed its senior commander Ibrahim Qubaisi was killed in an Israeli strike on Beirut, while it was separately reported that Hezbollah said it targeted Israel's Atlit navy base south of Haifa with drones.
Hezbollah urged Iran in recent days to launch an attack against Israel as fighting between the Lebanese militant group and the Israeli military dramatically escalated, but Iran has so far refrained, according to Axios.
China's PLA rocket force successfully launched an intercontinental ballistic missile with a simulated warhead in international waters in the Pacific Ocean with the launch said to be routine and part of the rocket force's annual training, according to Xinhua.
Data on Deck: More cuts expected
Now that the cuts are in and the recession debate will become academic as stocks have their restored liquidity, focus will again return to inflation risks
MONDAY, SEPT. 23 PMI Sept
TUESDAY, SEPT. 24 Case-Shiller home price index/ Consumer confidence
