Postcards: People Named Neel...

What on earth is the Federal Reserve Bank of Minnesota head talking about? ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: People Named Neel...]( What on earth is the Federal Reserve Bank of Minnesota head talking about? [Garrett {NAME}]( Jun 6   [READ IN APP](   Market Update: Another day of just staring at NVIDIA (NVDA) stock. Markets now await the May jobs report tomorrow… and there is no point speculating on whether good news is good news… or bad news is bad news. We’re still in the Green, and the S&P 500 is 1.5% above its 20-day moving average on VERY LOW volume (0.47X for the SPY today). This is still a good time to be defensive. --------------------------------------------------------------- Dear Fellow Expat: I’m not going to take a lot of your time here today. I would like to get back to reading this research project that’s taking up most of my time. During one of the very few times that I check Twitter these days… I saw this. His quote: “I don't understand. How can inflation be worse than a recession? In a recession, you lose your job. Inflation is paying higher prices, but you still have a job.” He describes Americans’ objection to inflation as “visceral.” Oh? Well, I guess I’ll have to explain this to my financial betters… It’s not like I didn’t have 15 other things to do before the end of the business day. On Neel Kashkari If you don’t know Kashkari, he’s the one who left Goldman Sachs (GS) to advise former Treasury Secretary Hank Paulson (who was the head of Goldman at one point) during the Great Financial Crisis. He’s a big fan of bailouts. He somehow leveraged all that into running the Federal Reserve’s circuits. And yet, he doesn’t understand behavioral finance and why inflation is much worse than a recession for the ordinary person... I don’t know why this is so complicated for Kashkari to understand… Let’s start with the easy part… Recessions are part of natural business cycles. But we really don’t have those anymore. Instead of allowing the economy to heal, we’ve kept the money printer on for 15 years. This has led to massive devaluation of the dollar and hammered retirees and pensioners. We’re currently borrowing $2.50 for every $1 of growth in this economy. Why? Because of Quantative Support, Monetary Inflation, and Fiscal Stimulus… All this has made the wealthiest 1% even richer - because they own lots of stock and pay lower taxes through capital gains. But an ordinary guy? Living off fixed income? Take a guy who worked for 30 years… and is living off his pension. He definitely endured recessions, but he’s now retired. This guy’s purchasing power has dropped roughly 20% in four years. It’s easy to say: “Why don’t you just buy stocks…” or “We have cost of living adjustments” for social security. But the average person isn’t a Goldman alum. Regardless of what he things, the road that Kashkari is taking us down will lead to a recession. If we look at our current financial situation, we have leading indicators cratering at rates we haven’t seen since recent crises… all while we still have sticky services inflation north of 5%. A recession is bad. Inflation is worse. Stagflation… is a horror show. We already have a dismal private sector, but we’re spending and borrowing so much money at the Federal level that we’re basically printing growth for political purposes. Why Else? This Isn’t Hard. This guy indirectly worked for NASA and has an MBA from Wharton, and he can’t understand the importance of business cycles and wiping out inflation. It’s like he’s never talked to anyone who hasn’t worked in banking… The guy could drive 10 minutes north of Minneapolis and talk to farmers about credit cycles and inventory. But let me offer just a little more basic economic insight. - A recession tends to impact different socioeconomic groups proportionately. Inflation definitely impacts lower-income Americans much more. That’s because the price of housing, food, energy, and other essentials are GOING UP because of this insane monetary policy. - A recession might impact stocks and real estate, and people might lose their jobs. However, lower interest rates can support asset prices over the long term. High inflation - which could be averaging more than 12% a year [in Manhattan according to Chapwood Index]( - can lead to a loss of confidence in the damn currency. How… do he not… AGHH!! - Fiscal stimulus and monetary easing (which we’ve been doing a lot of even when we aren’t in a recession) can combat recessions. That’s part of the cycle. But inflation requires tight monetary policy, which impacts rates and can trigger unemployment and, ultimately… a recession! A recession is less likely to lead to high inflation… but high inflation can lead to STAGNATION… - Why else do Americans have a “visceral” reaction to inflation over a recession? This is behavioral finance 101. Recessions are visible… they’re tangible. You can see the impact of the slowdown and know what policies are the right response. Inflation is a silent killer. Prices rise weekly, if not daily. And they promote a constant state of fiscal stress. And by the way… does he understand that people constantly ask, “Why is everything so expensive now.” They don’t understand the sources of inflation. This is why I hear some people barking about corporate greed, when we know they are based on monetary experimentation. We’ve printed too much money, Neel. They can understand recessions. - Finally. Savings… when you are in a recession, you know that you might lose your job. But you can go try to find something else. You know what’s in your bank account, what your purchasing power is… and how much you need to make to keep meeting ends. When inflation is recharging, that puts even more psychological pressure on you. Now if you’ll excuse me… I have to get back to work. Thanks for coming to my Ted Talk. Stay positive, Garrett {NAME} Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. 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