The stagflation label is BS and Powell knows it. He is just using it to subtly invoke Volcker and justify his repeated refusal to cut rates. (The real reason for his refusal to cut rates is TDS.)
Perversely, stagflation is what has been misguided about Powell's interest rate squeeze on inflation strategy since the 2022 hyperinflation cycle.
While Volcker is widely credited with taming inflation in the US, what gets overlooked is that his interest rate strategy was couched in a context of stagflation, not merely inflation.
The misery index (% change in unemployment + % change in CPI year on year) peaked in 1980, shortly after he institute draconian rate hikes.
Volcker was able to get away with draconian rate hikes because unemployment had already tanked. It is my current thinking that Volcker's interest rate hikes acted as a sort of system reset which allowed rational behaviors to return and for equilibrium to be reached. Even at that, official unemployment rose another 2pp before peaking in 1982. That gets overlooked in part because when Volcker started his interest rate shock therapy unemployment was already at 8%
If we expand my "real" unemployment metric back as far as the data goes, and then extend the graph back to the Volcker era, we see that even the "real" unemployment metric in 2022 was a full percentage point below the official rate in in 1979, and the current "real" rate is about where the 1979 rate was when Volcker started to raise rates.
Powell has gotten the exact same response on unemployment from rate hikes that Volcker did, but Volcker started with a much worse unemployment situation.
That difference is what contributes to the misconception that Volcker "tamed" inflation. He didn't, he just exploited the politics of the moment to do something no earlier Fed chair would have contemplated.
Powell applied the wrong medicine because he thought he was dealing with the same situation Volcker faced, and he wasn't. As per usual, Powell simply did not know how to read the data in front of him.
I don’t think he wants to read the data correctly. If he did, he would have to admit that Golden Man is right. That would be a cardinal sin in the church of TDS.
What Jerome "Too Late" Powell failed to realize in 2022 was that, by the time the Federal Reserve acted on inflation, it had already peaked. The damage had been done.
The distinction between defense and nondefense spending is crucial, because nondefense spending is largely spending on the same goods and services as regular consumers, whereas defense-related goods are not generally purchased by regular consumers, and so the inflationary impact of defense spending is more diffuse.
As the tail end of the second graph shows, President Trump has for nowat least succeeded in corraling nondefense spending, and this is a likely reason the inflation increase the "experts" were sure would happen under Trump didn't happen.
I’ve always found it admirable, Peter, that you have such good economic foresight yet you refrain from most speculation. What wise restraint! Not many analysts or pundits can do this. The result is you have long term credibility, and they don’t. Kudos!
A little off topic: the French Navy is also stopping unflagged Russian tankers. The U.S. is not alone.
https://news.usni.org/2026/03/23/french-navy-intercepts-suspected-russian-tanker-in-western-mediterranean
Against the shadow fleet, no, the US is not alone.
France, Belgium, and Sweden have all detained shadow fleet ships in recent weeks.
That will make harder for Russia to sell its oil, no matter what the price does.
The stagflation label is BS and Powell knows it. He is just using it to subtly invoke Volcker and justify his repeated refusal to cut rates. (The real reason for his refusal to cut rates is TDS.)
Perversely, stagflation is what has been misguided about Powell's interest rate squeeze on inflation strategy since the 2022 hyperinflation cycle.
While Volcker is widely credited with taming inflation in the US, what gets overlooked is that his interest rate strategy was couched in a context of stagflation, not merely inflation.
The misery index (% change in unemployment + % change in CPI year on year) peaked in 1980, shortly after he institute draconian rate hikes.
https://fred.stlouisfed.org/graph/?g=1TUur
By comparison, the misery index for the post COVID era was never more than half that of its 1980s peak.
https://fred.stlouisfed.org/graph/?g=1TUvd
Volcker was able to get away with draconian rate hikes because unemployment had already tanked. It is my current thinking that Volcker's interest rate hikes acted as a sort of system reset which allowed rational behaviors to return and for equilibrium to be reached. Even at that, official unemployment rose another 2pp before peaking in 1982. That gets overlooked in part because when Volcker started his interest rate shock therapy unemployment was already at 8%
If we expand my "real" unemployment metric back as far as the data goes, and then extend the graph back to the Volcker era, we see that even the "real" unemployment metric in 2022 was a full percentage point below the official rate in in 1979, and the current "real" rate is about where the 1979 rate was when Volcker started to raise rates.
https://fred.stlouisfed.org/graph/?g=1TUwk
Powell has gotten the exact same response on unemployment from rate hikes that Volcker did, but Volcker started with a much worse unemployment situation.
That difference is what contributes to the misconception that Volcker "tamed" inflation. He didn't, he just exploited the politics of the moment to do something no earlier Fed chair would have contemplated.
Powell applied the wrong medicine because he thought he was dealing with the same situation Volcker faced, and he wasn't. As per usual, Powell simply did not know how to read the data in front of him.
I don’t think he wants to read the data correctly. If he did, he would have to admit that Golden Man is right. That would be a cardinal sin in the church of TDS.
What Jerome "Too Late" Powell failed to realize in 2022 was that, by the time the Federal Reserve acted on inflation, it had already peaked. The damage had been done.
https://fred.stlouisfed.org/graph/?g=1TVev
What Powell has not acknowledged since 2022 is that the Biden Reign of Error failed completely to corral nondefense spending.
https://fred.stlouisfed.org/graph/?g=1TVc2
The distinction between defense and nondefense spending is crucial, because nondefense spending is largely spending on the same goods and services as regular consumers, whereas defense-related goods are not generally purchased by regular consumers, and so the inflationary impact of defense spending is more diffuse.
As the tail end of the second graph shows, President Trump has for nowat least succeeded in corraling nondefense spending, and this is a likely reason the inflation increase the "experts" were sure would happen under Trump didn't happen.
At this point if Powell were to read the data correctly he would have to admit he was completely wrong in 2021 and 2022.
I’ve always found it admirable, Peter, that you have such good economic foresight yet you refrain from most speculation. What wise restraint! Not many analysts or pundits can do this. The result is you have long term credibility, and they don’t. Kudos!