I believe the fed will cut rates, maybe by September or earlier. I don’t think they will have a choice. I think this is about funding. There’s a disconnect in the economy that has only come up a few other times in history. I think theyre trying to finance AI infrastructure and energy. Expect an acceleration in AI and energy stocks. If this doesn’t work the market will crash. This will be the other to get funding and consolidation. There are holes in this maybe you can help. Trump signaled in a speech today that we are all in on AI and energy. Who’s all in if 60% of the us can’t invest?
You make a compelling case that the Fed is reacting to fiscal-driven price shocks with the wrong set of tools. But here’s what I’m wondering: if the Fed’s mistake is so fundamental—confusing one-off price adjustments for inflation—why hasn’t this distinction been internalized after decades of economic cycles? Is this institutional incompetence… or is there a deeper political or structural incentive that keeps the Fed clinging to this flawed playbook?
This is excellent, something I've also been arguing!
"Economic growth slows when liquidity remains stagnant, leading to deflationary pressures as constrained consumer spending forces businesses to limit price increases. Rising costs from factors like tariffs or supply chain disruptions can shrink profit margins, further reducing investment and hiring, which weakens demand and exacerbates deflation. Conversely, inflation arises when liquidity increases—through wage growth, credit expansion, or monetary policy—allowing consumers to spend more and businesses to raise prices without losing customers. Ultimately, sustained inflation depends on increasing liquidity, not inflation, to drive demand."
I believe the fed will cut rates, maybe by September or earlier. I don’t think they will have a choice. I think this is about funding. There’s a disconnect in the economy that has only come up a few other times in history. I think theyre trying to finance AI infrastructure and energy. Expect an acceleration in AI and energy stocks. If this doesn’t work the market will crash. This will be the other to get funding and consolidation. There are holes in this maybe you can help. Trump signaled in a speech today that we are all in on AI and energy. Who’s all in if 60% of the us can’t invest?
You make a compelling case that the Fed is reacting to fiscal-driven price shocks with the wrong set of tools. But here’s what I’m wondering: if the Fed’s mistake is so fundamental—confusing one-off price adjustments for inflation—why hasn’t this distinction been internalized after decades of economic cycles? Is this institutional incompetence… or is there a deeper political or structural incentive that keeps the Fed clinging to this flawed playbook?
This is excellent, something I've also been arguing!
"Economic growth slows when liquidity remains stagnant, leading to deflationary pressures as constrained consumer spending forces businesses to limit price increases. Rising costs from factors like tariffs or supply chain disruptions can shrink profit margins, further reducing investment and hiring, which weakens demand and exacerbates deflation. Conversely, inflation arises when liquidity increases—through wage growth, credit expansion, or monetary policy—allowing consumers to spend more and businesses to raise prices without losing customers. Ultimately, sustained inflation depends on increasing liquidity, not inflation, to drive demand."
https://open.substack.com/pub/johnsonfk/p/my-fellow-americans?r=5rltog&utm_medium=ios