Bonds, Currencies, Stocks

Is The Fed Doomed To Repeat The Mistake Of 1937?

By Phoenix Capital Research

Fed-flickr-Alex

It’s literally 1937 all over again.

Many analysts have called for the Fed not to repeat its mistake of 1937.

That mistake?

Raising rates when the economy was already weak. Doing this prolonged the Great Depression.

However, few commentators point out WHY the Fed raised rates in 1937.

The reason?

CPI hit 3.7%.

Year Annual Average Annual Percent Change
(rate of inflation)
1932 13.6 -10.30%
1933 12.9 -5.20%
1934 13.4 3.50%
1935 13.7 2.60%
1936 13.9 1.00%
1937 14.4 3.70%
1938 14.1 -2.00%

Notice that by raising rates the Fed kicked off another terrible round of deflation with CPI falling from 3.7% to -2.0% in JUST ONE YEAR.

Fast forward to today. The US’s inflation rate is moving vertical…

united-states-inflation-cpi

Core inflation is already ABOVE 2%.

united-states-core-inflation-rate-1

The Fed is cornered. If core inflation continues to rise the Fed will be forced to raise rates, kicking off another Depression.

Buckle up, it’s coming.


Courtesy of Gains Pains & CapitalPhoenix Capital Research

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