Powell Will Win The Battle But Lose The Inflation War.

Times of incredible crisis lie ahead. You see, inflation is dropping from roughly 6 percent to 5 and below, but that's temporary in nature. And it doesn't reflect inflation reality: I go with how consumer inflation was calculated in the 1980s and as such, inflation has actually dropped from around 16 percent to about 14. 

Everyone who's sentient knows that to really break the back of inflation, à la Volcker, you have to raise rates above the inflation rate: let's call rates 5 percent with some actually predicting either a pause, a pivot or an actual reduction due to "political" considerations.

Remember that Volcker took rates almost to 18 percent before inflation finally started to steadily go down in good measure. Does that mean that Powell in his heart of hearts wants to do the same? You bet he does, but he can't. He would have to take rates above 14 percent and that will never, ever, happen. So...expect far more incremental increases of 25 basis points, but along the way, a recession -- and not a mild one -- will force a pivot and probably immediate rate reductions, plural. 

That increases the odds of eventual hyperinflation, and that seems to be what gold is beginning to forecast, not as a definite but as a highly likely outcome. Maybe, we'll even see 2200-2300 gold.

It's fashionable these days in and out of Fed circles to shit on Arthur Burns. Wait until we get into the mother of all recessions. Once that happens, Powell might as well change his name to Mudd. Won't be pretty, especially for him, but also for the rest of us.