I ordinarily disregard everything I hear on Bubblevision (CNBC) unless it comes from one of the market experts I trust and/or respect.
Among those who match that description are Dr. Mohamed El-Erian of Allianz, Prof. Jeremy Siegel of Wharton, Prof. Larry Summers of Harvard, Jeffrey Gundlach of Doubleline, and Jamie Dimon of JP Morgan.
One knowledgeable voice I rarely hear and hardly understand (due to his heavy Hungarian accent) is that of Thomas Peterffy, multibillionaire founder and chairman of Interactive Brokers. He certainly has access to some of the most important market data in existence, by virtual of his Interactive Brokers (IB) trading platform and the market-moving participants who use the IB platform for their purchase and sale of everything from bonds and equities to options and currencies.
In a brief interview after Chair Powell’s comments, Peterffy suggested that the Fed’s efforts are unlikely to bring inflation under control (or to reduce inflation to 2%), because of the following “DEEP, LONG-TERM, INFLATIONARY TRENDS” and influences:
2. ESG (Environmental, Social, and Governance trends)
3. Shortage of Skilled Labor
4. Continuous Deficit Spending
5. Rise in the Cost of Debt Service
Upon review of the factors highlighted by Peterffy, I must admit that he has crystallized the very influences that will make it nearly impossible for the Fed to bring infation under control anytime soon.
Neither an increase of interest rates or efforts to stimulate the supply of goods and services to meet current “excess demand” created by profligate money-printing will be likely to nullify the inflationary affects of the above-listed combination of circumstances.
In the end, I think we will find that the extraordinary amount of cash poured into the economy by the Fed and by the government, along with the inability of monetary policy to overcome the productivity-killing effects of the above-listed factors will together make excessive inflation more intransigent than transitory over the next several years.
After hearing from Jerome Powell today, I hope that the Federal Reserve finally is serious about tackling inflation. However, I still am not convinced that the Fed will succeed and/or persist in raising rates until the overall inflation rate falls to 2% because of what Peterffy described.