84. Government Meddling: Fed Strikes Again, Housing Softens
Latest insights on Fed hiking target rate, elevated inflation, state-level jobs report, costs of national conservatism, need for classical liberalism, & more to let people prosper!
Hello Friend,
I hope you’re having a prosperous day!
There is much to discuss in this newsletter as we have a lot of new economic data available on inflation, interest rates, the housing market, state jobs report, and more.
Please read to the bottom as there are interviews of mine on the ensuing housing market correction and events coming up where I will be speaking on property taxes in Texas and more.
As always, please reach out with any improvements to this newsletter as it is a work in progress.
I’ll have my next Let People Prosper Show available on Wednesday next week on YouTube, Apple Podcasts, and Spotify, so be sure to subscribe to them so you won’t miss it there or here.
Let’s get to it!
HOT TAKE
The Federal Reserve raised its federal funds rate target this week by 75 basis points (0.75%) for the third meeting in a row to a range now of 3% to 3.25% with the expectation that more hikes will come this year.
Given past actions by the Fed, it should be substantially more aggressive than in recent periods to reduce the balance sheet thereby raising interest rates and reducing liquidity in the marketplace as the federal funds rate remains highly negative after adjusting for the 8.3% CPI inflation rate.
The Fed’s balance sheet is way too large and not falling fast enough as it has monetized much of Congress’ excessive deficit spending of $7 trillion in the last two years.
The massive quantitative easing by the Fed of increasing its balance sheet from about $4 trillion to $9 trillion since the shutdowns in 2020 was the reason for the persistent inflation and the dramatic quantitative tightening will be the cure.
And that is important because we must avoid falling for the “wage-price spiral” explanation for inflation.
The real economy contracted in the first two quarters of 2022 and the Fed now expects the economy to increase by just 0.2% in 2022. This might be too optimistic given that the Atlanta Fed’s latest GDP Now estimate for Q3 which ends after this month is just 0.3%.
But this correction in the marketplace was expected given the massive government failures from shutdowns, excessive deficit spending, excessive money printing, and excessive regulation since early 2020. And now the correction should be done quickly so the pain isn’t dragged along and made worse.
Of course, these market indicators have tanked the stock market, led to a flight to safety in the U.S. dollar, and a sell-off in Treasury securities.
This has contributed to soaring mortgage rates to the highest rates in more than a decade.
And most recessions see a hit to the housing market, especially given the boom that has taken place over the last couple of years so there is more room for a bust to correct the unaffordable housing market in many places across the country.
Things will get worse before they get better. We could have avoided this if those in power would have let freedom ring instead of imposing more control. This is a reason that the path forward should start with a classical liberal philosophy of limited government, more free enterprise, and more individual liberty.
TAKE ON STATE ECONOMIES & POLICIES
The latest on how policies influence our daily lives. Watch here.
Texas continues to lead the way in job creation in the latest BLS jobs report.
Inflation continues to hit people hard, watch my interview for more on this and what you can do about it.
States raising minimum wages and other factors contribute to substituting robots for workers.
TAKE ON U.S. ECONOMY & POLICIES
America needs more economic freedom and individual liberty from a classical liberal perspective instead of much of what is being discussed.
Americans continue to suffer from the Biden administration’s redistribution schemes, including the likely unconstitutional executive order to shift the costs of student loans to the haves from have nots.
President Biden keeps playing games with our wallets in the form of much higher gasoline prices in many ways because of his anti-fossil fuel nonsensical policies.
We need a good conversation about how parents should deal with social media, but I believe too many are overstepping when the blame on social issues goes to the private sector instead of the government. Here’s an example. What do you think?
By the way, there was a good discussion on the issues with “Big Tech” at the recent SPN meetings in Atlanta between my good friends Greg Sindelar (CEO at Texas Public Policy Foundation) and Daniel Erspamer (CEO at Pelican Institute).
A friendly reminder that government never has a tax revenue problem, especially now, but always has a spending problem. Need a fiscal rule with a spending limit based on population growth plus inflation in a Responsible American Budget.
PERSONAL TAKE
Living my dream! I’ve been president of Ginn Economic Consulting, LLC now for a couple of weeks and business is booming. I’m blessed to have been able to connect with so many great people. I look forward to more opportunities to serve others in my quest to let people prosper. Please reach out if you are in need of assistance from a free-market economist and keep me in your prayers.
Recently, I had the great opportunity to recently attend the Economic Freedom of North America meetings at Southern Methodist University to discuss the EFNA report published by the Fraser Institute and speak on the following:
The following points by Josh Hammer and national conservatism worry me about the direction of some on the Right. Don’t fall for it!
I had the pleasure of joining Austin Peterson on his show (starting at 1:38:00) to discuss the Fed’s recent decision to raise its target federal funds rate, its influence on the housing market, and more. Check it out here:
I had a great time in Atlanta at the State Policy Network’s 30th annual meeting with many wonderful people who are working to let people prosper.
If you’re in the Dallas area on the evening of October 12, 2022, please join me at this event (more info and registration here):
And finally, please register for this online event to hear more about property taxes in Texas.
CLOSING TAKE
Economist Thomas Sowell has wise words for us to remember.
I’m praying that we are patient with what God’s will is for our lives.