What Gulf War?

 Financial FAQs

“From the preceding month, the PCE price index for January increased 0.3 percent. Excluding food and energy, the PCE price index increased 0.4 percent. Excluding food and energy, the PCE price index increased 3.1 percent from one year ago.” BEA.gov

FREDBrentcrude

Oil prices spiked again on Thursday morning (to $94.35 per barrel) per the above graph on Brent crude oil prices, after Iran’s new leader said the crucial Strait of Hormuz should remain closed and that Iran will continue attacks on its Gulf neighbors,.

And the Fed’s favored inflation index, the Personal Consumption Expenditures core rate of inflation, which omits food and energy, rose by 0.4%. The core rate rose 3.1% in the 12 months ended in January, up from 3.0% in the prior month. It’s the highest rate in almost two years and decidedly not what the Fed wanted to see.

So, this is causing all the financial market indexes to plunge once again as it’s becoming increasingly obvious that Trump has no good reason for attacking Iran that is now morphing into another Gulf War.

“The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” said the IEA in its March report released on Thursday that was cited by MarketWatch. Disruptions in the Strait of Hormuz have caused Gulf countries to cut total oil production by at least 10 million barrels per day, the energy body added.

So why shouldn’t President Trump’s new Gulf War repeat the 1970’s Arab Oil Embargo (OPEC) stagflation—slowing economic growth + higher inflation—that caused several recessions and resulted in the double-digit inflation of the era, I said last week.

I’m not the only one bringing up the similarities to 1970’s stagflation. Nobel economist Joseph Stigliz, a Clinton economic advisor who won the Nobel prize for economics in 2001, said in a podcast interview with Jack Farley of “Monetary Matters” released on Wednesday, that “We are facing a risk of stagflation with prices going up because of tariffs and war while growth is slowing.” The 92,000 nonfarm payrolls contraction in February was evidence for the slump in economic activity, he said.

And it’s beginning to show up in slower GDP growth. Real gross domestic product (GDP) barely increased at an annual rate of 0.7 percent in the fourth quarter of 2025, revised downward from 1.4 percent, according to the second estimate released today by the U.S. Bureau of Economic Analysis. In the third quarter, real GDP increased 4.4 percent.

BEA.gov

Oil prices had spiked earlier in June 2025 to $80 per barrel because of the short-lived Israel-U.S. strikes on Iran’s military and nuclear facilities. That should have been a warning of the potential economic damage from a longer war.

The other shoe to drop will be job creation. We are already in a stagnant job market with the loss of -92,000 jobs in February that basically erased the +126,000 job gain in January. Further losses are being hinted at by other indicators, such as the government’s JOLTS report that has shown no net growth in new hires for months.

It’s becoming more obvious that President Trump’s seeming incoherence over the reasons for his new Gulf war is hiding the real reason he started another Gulf War that he blurted out recently:

“The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money,” Trump said in a post on Truth Social.

The sad truth is that Trump and his oil buddies are profiteering from a war that Americans, and much of the world, will end up paying for.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Housing Recovery?

 The Mortgage Corner

“Existing-home sales increased by 1.7% month-over-month in February, according to the National Association of REALTORS® Existing-Home Sales report. The report provides the real estate ecosystem—including agents, homebuyers and sellers—with data on the level of home sales, price, and inventory.” NAR

FRED30yrmortgage

It’s been months since I last wrote about the housing market, and why it’s had such a slow recovery. FRED’s 30-year fixed mortgage graph tells us why, which is the reason we have a housing shortage.

The 30-year average fixed rate mortgage was a level 3% until 2022 during the COVID-19 pandemic until the Fed raised interest rates to combat rising inflation. It’s 6.0% today, after dipping very briefly to 5.98% last month.

It's this high today because Trump’s Iran war is costing $1 billion per day on borrowed money due to his Big Beautiful Tax Bill, which will add to the current $39 trillion in federal debt.

Are we seeing a housing revival with the slight uptick in existing home sales? Hope springs eternal, as the saying goes. Sales have hovered around 4 million residential units since the busted housing bubble and 2008-09 Great Recession. There has never been enough to satisfy the demand since then, because the housing bubble created an over spply of unsold housing, and 30-year fixed rate mortgages have hovered above 6% ever since, per the FRED graph.

But, “Housing affordability is improving, and consumers are responding,” said NAR Chief Economist Dr. Lawrence Yun. “Still, there is a long way to go to return to pre-pandemic levels of transaction activity. There are more than 6 million more jobs than in 2019, yet home sales per year are down by one million.”

There isn’t much of a housing supply inventory, and builders aren’t cooperating now with less than a four-month supply of existing home inventory on the market at the current slow sales rate.

This is while privately-owned housing starts in October were punk, at just a seasonally adjusted annual rate of 1,246,000. It is 4.6 percent below the revised September estimate of 1,306,000 and is 7.8 percent below the October 2024 rate of 1,352,000, says Calculated Risk.

Unaffordably high mortgage rates are one reason for the construction shortage, but Trump’s tariffs on building materials are also adding to construction costs.

Higher import taxes on steel, copper, lumber and other materials are lifting construction prices and interrupting some jobs. Immigration enforcement is worsening worker shortages and delaying projects.

“We get so many things thrown at us in the construction industry,” said Tony Rader, the chief relationship officer at National Roofing Partners, a commercial roofing company in Coppell, Texas. “It just seems like every time we turn around, we’ve got something else to fight.”

So, we must throw in the costs of empire building because Republicans are so fond of waging wars. It’s not only the Federal Reserve keeping rates high, but also the huge federal debt has been boosting bond yields. It is the reason we still have a housing shortage of 2-5 million units, depending on who you ask, since the Great Recession and housing bubble.

Harlan Green © 2025

Follow Harlan Green on: https://twitter.com/HarlanGreen

Very Weak Employment Report

Popular Economics Weekly

“Total nonfarm payroll employment edged down by 92,000 in February, and the unemployment rate changed little at 4.4 percent, the U.S. Bureau of Labor Statistics reported today. Employment in health care decreased, reflecting strike activity. Employment in information and federal government continued to trend down.” BLS.gov

FREDpayrolls

The U.S. economy lost a total of -92,000 payroll jobs in February and the unemployment rate edged up to 4.4 percent occurred just when President Trump began his Middle East war.

What timing! It will be an unmitigated disaster, not only because it will be so badly done, but because of its timing. We will soon have soaring inflation, the likes of which we haven’t seen since the 1970’s decade of stagflation, and the American public doesn’t want it, per the latest PEW Research poll:

· Trump’s approval rating stands at 37%, down from 40% in the fall.

· By more than two-to-one, Americans say the administration’s actions have been worse than they expected (50%) rather than better (21%).

· Only about a quarter of Americans today (27%) say they support all or most of Trump’s policies and plans, down from 35% when he returned to office last year. That change has come entirely among Republicans.

The Bureau of Labor Statistics report basically cancelled out the +126,000 job gain in January, which may be a predictor of what’s to come this year with a looming economic stagnation.

Included was the loss of -69,000 healthcare workers employed in December and January, currently the highest job growth sector, because of a Kaiser Health employee strike which has since been settled.

It’s not a pretty picture. Every other sector lost jobs except for social assistance workers in February. So why would President Trump go to war when the U.S. economy is losing so many jobs?

Crude oil prices have risen the fastest on record, according to DOW Jones Market Data, and are at $100 per barrel at this writing and still rising.

The U.S. economy is frozen in place because American businesses also want to see what will happen with the tariffs as Trump’s attempts to use another trade statute that may also be illegal without doing the required analysis that justifies the higher levies.

And the Fed can’t move either. With fewer jobs being created it should be dropping interest rates further to stimulate hiring, but oil prices are driving up inflation so it might have to raise interest rates instead to slow rising inflation.

But he would rather rule by fiat, even start a war because Isreal’s Netanyahu is said to have told him Khomeini and his staff would be in one place above ground last Saturday where they could be bombed to oblivion; and they were. What if it had been a meeting to discuss Trump’s latest proposals for peace?

Trump ran his many failed businesses by declaring bankruptcy when they went under, but he can’t do the same with the U.S. economy because it must pay its bills by law. But there are other effects of such mismanagement—U.S. Dollar devaluation, higher interest rates and investors fleeing U.S. financial markets, which they are already doing.

Reuters reports U.S. investors are pulling money out of their own stock market at the fastest pace in at least 16 years “as Big Tech returns fade and better-performing overseas markets look more attractive.”

“In the last six months, U.S.-domiciled investors have pulled some $75 billion from U.S. equity products, with $52 billion flowing out since the start of 2026 alone, the most in the first eight weeks of the year since at least 2010, according to LSEG/Lipper data.”

He won’t be able hide the signs of his mismanagement style in a slowing economy, in other words. If not congress, it will really be a very unhappy consumer who determines what happens next; at the ballot box or elsewhere.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Stagflation --II?

 Financial FAQs

“The Producer Price Index for final demand increased 0.5 percent in January. Prices for final demand services advanced 0.8 percent, and the index for final demand goods declined 0.3 percent. On an unadjusted basis, the index for final demand rose 2.9 percent for the 12 months ended in January.” BLS.gov

FREDbls

Why shouldn’t President Trump’s new Gulf War repeat the 1970’s Arab Oil Embargo (OPEC) stagflation—slowing economic growth + higher inflation—that caused several recessions and resulted in the double-digit inflation of the era?

Iran has said it is closing the Gulf of Hormuz. It has been producing three million barrels of oil daily, has 24 percent of Middle East oil reserves and 12 percent of world reserves, and 30 percent of the world’s oil supply goes through the Gulf, according to the U.S. Energy Information Administration.

Though oil is not as important and energy source now as it was then, says Paul Krugman in Substack, it will still cause higher energy prices—maybe 10 percent higher or more, according to the experts—and oil and gas prices are still a major factor in the inflation equation.

The Producer Price Index measures wholesale prices for products and services that go into finished products have been rising throughout last year. So it is the first place economists look to see the direction of inflation.

Wholesale inflation is surging in large part because it measures the import prices of the raw materials, such as auto parts, that have been boosted by Trump’s tariffs.

Defense Department Secretary Hegseth was quick to say in the first press conference that the Iran war wouldn’t be a repeat of the Iraq war that would mire US in another long war.

But the 1970’s era of stagflation was caused by more than scarce oil. Labor unions were stronger then and could lobby for higher wages to pay for the higher prices, which in turn kept inflation rising in a wage-price spiral until it reached an eye-watering 14 percent

And we have a similar labor problem today. Workers can lobby for higher wages today because there are fewer of them in the workforce. Trump is deporting many of the undocumented workers that work in construction and agriculture, and many of the rest of the estimated 11 million are hiding rather than going to work. Also AI, CHAT GBT, and the like are causing more layoffs at major employers such as Amazon, for starters, further shrinking our workforce.

The irony is that the massive investments in building out the AI energy centers is already making electricity more expensive as well as putting more white-collar employees out of work.

This means fewer consumers are shopping when 70 percent of GDP growth is generated by American consumers! So, I see slowing economic growth as well.

A declining workforce pushing for higher wages that faces higher oil, gas and electricity prices will put more pressure on inflation, and could lead to the classic wage-price spiral that was the ultimate cause of 1970’s stagflation. This is while Trump is saying the Iran war could last just weeks?

The DOW Index has plunged more than -1100 points at this writing on fears the war will spread throughout the Middle East and beyond.

So, our stock market’s behavior will probably determine how long our TACO President will want to prolong this war.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Inflation Is Contagious

 Popular Economics Weekly

“From the preceding month, the PCE price index for December increased 0.4 percent. Excluding food and energy, the PCE price index also increased 0.4 percent.

From the same month one year ago, the PCE price index for December increased 2.9 percent. Excluding food and energy, the PCE price index increased 3.0 percent from one year ago.” BEA.gov

FREDpceindex

The inflation contagion is preceding unabated, per the FRED graph of the Personal Consumption Expenditure Index, the favored Federal Reserve inflation indicator.

Why? Because little to nothing has been done about inflation, although that may change with the Supreme Court’s decision to outlaw Trump’s executive orders allowing retaliatory tariffs. The evidence is that tariffs have raised prices and done nothing to lower the trade deficit that Trump has railed about, per Paul Krugman’s Substack blog.

Paul Krugman

The Fed uses the PCE index because it most broadly measures the change in goods and services prices of goods consumed “by all households, and nonprofit institutions serving households”, says the Bureau of Labor Statistics (BLS).

It is a virus-like contagion indicator because consumers can’t do much about it over the short term other than shop for more bargains. It’s caused by product shortages and Trump’s tariffs, disruptions due to Trump’s continuous changes to tariffs that percolate through the general economy.

The FRED above graph also shows that President Biden had already brought PCE inflation down to 3% in October 2023. It has remained there ever since, only beginning to creep up after Trump’s April 2025 Liberation Day tariff announcements.

And it continues its creep, which will make the Fed’s decision about when to lower interest rates more difficult. Consumers are also becoming increasingly anxious about inflation.

And minutes of the Federal Reserve’s first meeting of the new year showed that several officials wanted the central bank to report there was a chance its next move might be to raise interest rates because of the stubborn inflation data.

The Conference Board’s Confidence Index also measures such attitudes: “Consumers’ write-in responses on factors affecting the economy continued to skew towards pessimism. Comments about prices, inflation, and the cost of goods remained at the top of consumer’s minds.”

Why is inflation so contagious, to use the virus analogy? Because price changes are connected, they ‘infect’ each other as every consumer and business knows. For instance a rise in import prices raises the price of the final product, whatever it is.

Economists call the phenomenon inflation expectations. Research has shown if businesses expect high inflation, they may raise prices immediately; if workers expect it, they will demand higher wages, creating a self-fulfilling prophecy.

It’s all about attempting to predict future behavior, in other words. Consumer confidence surveys, such as the Conference Board’s Consumer Confidence Index attempt to measure inflation expectations, for instance:

“Consumers’ average and median 12-month inflation expectations were little changed but remained elevated. Consumers also believed that interest rates will persist at higher levels over the next 12 months.

The good news is that even Independent voters are seeing through the propaganda and blatant lies that lay behind President Trump’s “Day One” promises.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Is U.S. Growth Slowing?

 Financial FAQs

“Real gross domestic product (GDP) increased at an annual rate of 1.4 percent in the fourth quarter of 2025 (October, November, and December), according to the advance estimate released today by the U.S. Bureau of Economic Analysis. In the third quarter, real GDP increased 4.4 percent.” BEA.gov

 

BEAgdp

The economic chaos that President Trump has sown by using the tariffs as a tool to coerce trading partners is a major cause of the sudden drop in fourth quarter (Q4) GDP growth from Q2 and Q3 growth (see graph).

So it’s great news the Supreme Court ruling that most of President Trump’s tariffs by executive order are illegal. It will create more certainty over the instability that has bedeviled consumers and businesses alike, which encourages future economic growth.

It’s also a huge victory for the rule of law over a president who routinely disobeys the law since only congress has the power to tax.

Businesses had rushed to counter the chaos created by the tariffs by stockpiling imports before Trump announced more tariffs. And import costs are subtracted from export prices to calculate GDP (Because imported goods aren’t produced domestically.), So higher imports, when all else is equal, tends to slow GDP growth, which measures what is produced domestically.

The furlough of hundreds of thousands of workers without pay during the 43-day government shutdown also slowed consumer spending that had already been affected by the tariff uncertainty.

So we are now beginning to see the damage Trump’s imagined cure for our trade deficits has done. He said other countries should have to eat the higher import costs from the tariffs but they passed on most of the higher costs.

Rump’s tariffs didn’t correct the trade imbalance between imports and exports either because importers then found ways to time their purchases between price swings and/or transfer their business to other countries that had lower tariffs.

In fact, the trade deficit—created by the amount imports exceeded exports— barely changed after all Trump’s planned chaos. It was $901 billion in 2025 vs. $903 billion in 2024.

“Had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly, as it consistently has in other tariff statutes,” said the Supreme Court opinion, which was supported by a 6-3 majority of the court. Justices Samuel Alito, Brett Kavanaugh and Clarence Thomas dissented.

In other words, President Trump can no longer govern by creating the chaos and uncertainty that has enabled him to accumulate so much power and wealth. So maybe “The times they are a changin?”

And sowing economic chaos by being unpredictable doesn’t work as a negotiating tactic either. Companies usually waited until Trump’s TACO bluster caused him to back down before agreeing to a rate. And SCOTUS ruled he now must do the research required by other laws to justify the tariffs.

Trump’s tariffs did not decrease the flow of imports or boost domestic manufacturing, as intended. Domestic manufacturing lost another 80,000 jobs last year, in large part because of the higher steel and aluminum prices that go into so much manufacturing output.

And the mostly illegal tariffs worsened inflation as well. A New York Fed bank study found U.S. businesses and consumers have paid most of the costs of the price increases on imported goods.

“Over the course of 2025, the average tariff rate on U.S. imports increased from 2.6 to 13 percent. In this blog post, we ask how much of the tariffs were paid by the U.S., using import data through November 2025. We find that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers” per the NY Federal Reserve.

The harm done by Trump’s tariffs by fiat makes a long list. China had stopped buying agricultural products as in Trump’s first term and higher tariffs have cost Ford and GM $billions in lost profits.

The Supreme Court ruling exposed the harm ignoring laws and our constitution has done to economic growth. Trump’s Republicans are no longer the party that stands for lower taxes, except among their wealthiest supporters. So much for increasing affordability!

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Republican Party's Bully Capitalism

 Popular Economics Weekly

“Twice as many Americans believe their financial security is getting worse than better, according to an exclusive new poll conducted for the Guardian, and they are increasingly blaming the White House.” The Guardian

Graph: Last Tech Age

President Trump gave himself “A plus plus-plus-plus-plus-plus” grade on the U.S. economy in a recent interview with Politico cited by The Guardian. That Trump can perpetuate such an obvious lie that contradicts what most Americans feel is an example of bully capitalism at large, my term for what economists have termed is ‘late-stage’ capitalism that has been adopted by the Republican Party, a phase of capitalism marked by extreme wealth inequality and corporate dominance in nearly all aspects of life.

Historian Heather Cox Richardson in her Substack blog Letters From an American states that such corporate dominance is the result of at least $50 trillion in income and assets that has been transferred from the bottom 90% to the top 1% of Americans between 1975 and 2020.

It was done via a succession of Republican administration tax cuts and recessions that grew U.S. federal debt to its current record $39 trillion.

Americans now have the worst income inequality in the developed world as measured by various sources, especially the CIA’s World Factbook. In fact, our income inequality is at the level of developing countries like Mozambique.

The recent Guardian/Harris poll makes clear Trump’s big lie attempts to deny what has really happened since the 1970s that most Americans are seeing with their own eyes.

Democrats are almost twice as likely as Republicans to say their financial security is getting worse – 52% versus 27%. Add in 54 percent of Independents believe the same, who are usually the swing voters that determine elections, said the poll.

And 69 percent of Democrats and 58 percent of Independents believe we are already in a recession.

Why when the stock indexes are at record highs? One hint is that bully capitalism has hit women particularly hard. Nearly two-thirds of women (62%) believe the U.S. is in a recession, +12% from February, says the Harris poll, and women, the primary caretakers of children, are the first to see their suffering from the cuts in social welfare benefits such as SNAP and childcare programs by Republicans.

Trump and Republicans have boosted bully capitalism to a new high by showing their blatant lawlessness and cruelty, such as the ICE agents shooting citizens and non-citizens alike. The good news is that Americans can now see with their own eyes the blatant disregard for human suffering, and it has begun to sway the American public in recent elections.

The biggest lie of all perpetuated by Republicans is that “Government is the problem”, that bully capitalism made things better for everyone. No, the American government was formed to protect all Americans, not just the privileged few.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen