The Pomp Podcast
#1003 Charlie Bilello On Why Fed Is Crashing Stocks
- The Federal Reserve is tightening into a bear market for the first time in 40 years, prioritizing inflation control over market support and breaking from its historical pattern of easing into downturns.
- Housing inflation is significantly understated in CPI calculations because the Fed uses "owner's equivalent rent" surveys instead of actual market prices; true housing inflation would push reported CPI well above 10%.
- Real wage growth has turned negative for 14 consecutive months when adjusted for inflation, undermining earlier claims that inflation would benefit lower-income workers.
- Stock valuations are mean-reverting from dot-com bubble levels, and bear markets typically see bigger declines during recessions than non-recessionary downturns.
- The U.S. can grow its way out of rising debt-to-GDP ratios through innovation and productivity gains, but only if policymakers make hard choices and resist the incentive to resume money printing.
- Money supply declined for the first time in 12 years in one recent month, suggesting a potential shift in monetary policy trajectory after 40 years of consecutive monthly increases.