Inflation is caused by a mismatch between supply and demand. The Federal Reserve can’t increase the supply of goods and services. So, to control prices it must engineer “demand destruction.” That’s as nasty as it sounds. I’ve already explained how the Fed uses the “wealth effect” to make households with lots of stocks cut spending … and why that strategy won’t work with U.S. wealth concentrated in so few hands. I also explored how big changes in the U.S. and global economy since the 1970s will force the Fed to raise interest rates A LOT to bring inflation down. Today, we’re going to look at the impact of their demand destruction on U.S. households.
The professors respected the quality of my arguments. But because my conclusions were not “correct,” they invariably gave me one point below the top grade. You might think I would’ve eventually learned the error of my ways…I’m proud to say I never have. To this day, I embrace beliefs considered heretical in the mainstream economics profession … beliefs that will continue to make tremendous stock market gains for readers of The Bauman Letter into the next decade.
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