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 Fed Chair Jerome Powell says he is very worried about the deficit. “Large deficits at a time of full employment” are not sustainable. A bipartisan effort is needed.Powell speaks at the Economic Club of Washington D.C.Video Length: 00:42:20Starting at the 35:50 mark the interview got interesting.David Rubenstein: If you worry about inflation as you obviously are, what about the debt the united states has. We have $35 trillion of outstanding government indebtedness, and we are adding about $1.6 to $2.0 trillion more or less every year, aren’t you worried about that, on the impact to the economy of inflation?Jerome Powell: I am very worried over time about the deficits that we are running. It’s not the Fed’s job. We don’t give Congress advice. But let me just say, that we are on an unsustainable path.  That doesn’t mean that the level of debt we have is unsustainable. It’s not. But the path we are on, we are running large deficits at a time of full employment and healthy growth is not a sustainable one over time. And we really need to get to work on that. I would hope that this is a topline issue for elected people whose job it is. It’s not our job. And I believe, and I do talk to quite a few elected officials in Congress and I think there is a rising sense that it is time to do something about that. It will take bipartisan action to address.The Truly Delusional

In the realm of the truly delusional

“All the programs I’ve initiated have saved the government money.”

Dear President Biden, In the just curious department: Please name two https://t.co/NI3e29bKEY

— Mike “Mish” Shedlock (@MishGEA) July 15, 2024
Biden: “All the programs I’ve initiated have saved the government money.”Returning to Powell: “There is a rising sense that it is time to do something about that [the deficit].”Is that a joke?Show of HandsCan I have a show of hands of those who think either party will do anything about the deficit?Hmm. I see no hands.Meanwhile, what happens in a recession?Recession Has Already StartedOn July 8, I commented Weak Data Says a Recession Has Already Started, Let’s Now Discuss When

There is weakness in housing (new home sales, existing home sales, and starts at the lowest in 4 years), consumer spending, manufacturing (both durable and nondurable good), jobs data (constant negative revisions, QCEW, major survey discrepancies, quits, and a rising unemployment rate), and finally we have major unexpected ISM Services in Contraction.

All of the above items are hard data other than the services ISM.

There is no savior on the horizon this time. The Fed rates to be inactive until it panics in September and that will be much too late to stop a recession that started in May or June.

And guess what happens to deficits in a recession?Both parties will want to do something and the Fed will want both parties to do something. On top of that, the Fed will want money to save the banks.That’s what’s going to happen.But don’t worry. It will be temporary, all the way up to six months before the next recession when we can can have a similar conversation.More By This Author:Congratulations, UK – Labour Confirms Brexit Reversal Is Dead And BuriedProducer Price Index Hotter Than Expected, Led By Services CPI Declines In June, Rent Finally Moderates, Food Away From Home Is A Problem