Monday, July 14
The tariff pause has pushed stocks up, pleasing investors. However, President Trump’s tariffs did nothing but stoke a flame that was already burning.
We’re seemingly already in the early stages of a recession, and tariffs will only make things worse. Zombie companies are starting to fail. It’s resembling the stagflation era of the 1970s.
While tariffs bring government revenue, they’re nothing more than an added cost for businesses and consumers, which were already hurting from years of high inflation. The U.S. economy shrank to start 2025. The tariffs, no matter what final form they end up taking, will increase inflation and cause the economy to shrink further.
High inflation and a slowing economy is textbook stagflation.
The rapid increase in the money supply is the culprit. It’s why inflation soared to over 9% after the Federal Reserve printed more than $6 trillion following the pandemic.
But here’s the kicker: it takes up to two years for money supply increases to show up in inflation data. And after declining in 2022 and 2023, the money supply is once again on the rise.
It has increased every month since November 2023. And now the increases in the money supply are accelerating. April’s M2 money supply reading increased 4.4% year-over-year and 0.7% from March. These are the largest jumps since December 2021.
These rises will show up soon in inflation numbers. The Fed knows this, which is why it’s hesitant to cut interest rates.
So, inflation is set to spike higher, and tariffs will make it worse. The increasing money supply is fueling the fire, meaning investors are missing the real impacts of tariffs.