The headline numbers are looking good for Joe Biden lately. He’s recently won a big legislative victory, and his approvals are ticking higher, which means maybe the manifold failures of his presidency are a thing of the past. With Biden appearing less sleepy, the Dems might not get blown out in the upcoming midterms as was predicted just a few weeks ago.
Yes, that is what the White House wants you to believe. Most of my colleagues in the mainstream media believe it as well. But the spin oozing about the Biden-renaissance narrative obscures, at least for now, some really nasty bits of economic reality that the president’s feckless policies have created.
If you don’t believe me, listen to some of the comments recently made by Larry Fink, the CEO of money manager BlackRock. No one will ever confuse Fink with a GOP talking head. He runs the world’s largest investment firm (some $8.5 trillion in assets under management). He has strong ties to the Democratic Party and is a perennial contender for Treasury secretary under a Democratic president.
We’ve had our differences with Fink in the past over BlackRock’s embrace of Environmental Social Governance investing. Fink points out he’s a moderate on the woke-investing fad, advocating a transition to a green economy while BlackRock continues to invest in energy infrastructure.
That’s one reason we could do far worse than Fink steering the US economy. Another: He’s among the best risk managers on Wall Street.
Now he’s sounding the alarm on the potential economic harm being done in DC — much of it by his own party — that will make the Fed’s job of fighting inflation while attempting to engineer a so-called “soft landing” nearly impossible. Fink calls it an “irreconcilable disconnect” between what the White House is doing and Fed Chair Jerome Powell’s inflation-fighting mandate.
Inflation is a nasty tax on the working class. If left unchecked, it leads to economic hardships that history shows creates social unrest. To tame inflation, our central bank, the Federal Reserve, engages in a balancing act. It tries to raise rates and tighten credit on businesses to achieve a soft landing of the economy, in which GDP declines just enough to subdue inflation but the economy avoids a full-on recession, or at least a severe one.
‘Soft landing’ difficult
Not easy to do, though the Fed has pulled it off in the past by coordinating its monetary policy (control of the money supply) with the fiscal policy (spending) of the White House and Congress.
In a series of wide-ranging interviews, including one with me on Fox Business, Fink explained how that coordination is sorely missing in our current economic environment — something he hasn’t seen much in his 40-year career at the top of the financial industry. On one hand we have the White House and Congress spending like crazy and inflating the economy. As inflation rages, the Fed is seeking to reverse the damage to meet its customary 2% inflation target.
To understand the spot the Fed is in, consider that the last inflation print was 8.5%. That number was hit before the latest spending blowouts (student-loan forgiveness, etc.).
To hear Fink explain it, the White House is baking into the equation a pretty deep recession since it is forcing the Fed to raise rates even more than it should have to — 75 basis points at its next meeting and maybe several more times after that — because the administration doesn’t want to stop the inflationary cycle it helped create through spending. In the short-term, Fink says, inflation might abate a bit with lower energy prices that we’re seeing (that happens…
Read More: Biden’s reality bites! Uglier downturn seen