Inflation Out of Control?

 

Jobs Picture Improving?

 Financial FAQs 

“Total nonfarm payroll employment increased by 162,000 in August, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in food services and drinking places and in local government education. The information industry lost jobs.” BLS.gov

FREDpayrolls

Total nonfarm payroll employment rose by 162,000 in August, higher than the average monthly gain of 31,000 over the prior 12 months, said the Bureau of Labor Services.The new payroll jobs tallied in August look to be a temporary blip after miniscule job gains the prior three months.

Why the sudden rise? These are largely service sector jobs, which means summertime travel and leisure activities pick up, and schools will soon begin.

Employment in food services and drinking places increased by 59,000 in August, well above the average monthly gain of 12,000 over the prior 12 months. Local government education added 42,000 jobs in August, offsetting a decrease in the prior month.

Will this reverse the severe job decline since early 2024, the start of the second Trump administration, that is portrayed in the Federal Reserve Bank of St. Louis (FRED) graph above?

Only if Trump will cease finding ways to illegally raise tariffs, begin to honor existing tariff agreements, and settle the Iran war that he is mired in. Oh yes, also stop the immigration policies that have depleted the number of working adults.

Otherwise, the one million fewer working adults who have stopped looking for work, thus shrinking the labor force, will also shrink economic growth.

The FRED graph is an accurate depiction of what a gutted labor market looks like since 2024. There is no consistency, because it reflects the moment-to-moment thoughts, or lack of thoughts, of a President who rules by distraction to shield the damage to economic growth he and Republicans are causing.

It’s a huge damage list—+300,000 federal jobs cuts by DOGE, downsizing or eliminating whole departments in Health and Human Services, the EPA, Medicare and Medicaid that hurts worker productivity by creating a sicker working population.

The bond rout (NYTimes) that is raising longer term interest rates has scared our allies. Both the Dutch and French governments have elected to remove their $billions in gold assets out of U.S. territory, where they have been traditionally held because they no longer trust the U.S. to keep international agreements.

Will other countries begin to sell off their U.S. holding of Treasury bonds as well? That would be a major red flag, as it means other countries are turning away from using the U.S. Dollar that supports most world trade.

Nobel Laureate Paul Krugman doesn’t think it’s a danger just yet.

“I’m not saying that Democrats should be like Trump, and blithely ignore debt and deficits. They should by all means push for tax hikes on high incomes, close loopholes exploited by multinational corporations, strengthen IRS enforcement, and more.”

The economic uncertainty could also be a result of Trump’s own deteriorating mental state and three more years of endless military wars. We will need our allies.

Harlan Green © 2026

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

Not A Merry Christmas?

 Financial FAQs

“Personal income increased $115.1 billion (0.4 percent at a monthly rate) in July, according to estimates released today by the U.S. Bureau of Economic Analysis (BEA). Disposable personal income (DPI)—personal income less personal current taxes—increased $125.9 billion (0.5 percent), and personal consumption expenditures (PCE) increased $36.3 billion (0.2 percent).” BEA.gov

 

BEA.gov

We are fast approaching the shopping season and there are growing worries about consumers ability to soldier on the rest of year with the sudden drop (-0.6%)in July retail sales. They seem to be running out of money. And we know what that means, since consumer spending powers most economic activity

The picture of declining consumer incomes in the BEA’s Personal Consumption Expenditures graph is disheartening, to say the least, and could precipitate a recession sooner rather than later. It’s not only because the job market is shrinking, but our working population as well.

The U.S. economy lost -23,000 payroll jobs this July after gaining just +20,000 jobs in July. It’s the picture of a labor market stuck in neutral; most employers are neither hiring nor firing.

Yet the unemployment rate has been stuck at a fairly low 4.2 percent for months. Why wouldn’t employers hire more workers? Because there’s not as much demand for consumer products, which powers most economic growth. And demand is declining, not only because of the soaring inflation—3.7 percent in the PCE report above—but fewer shoppers.

Population growth in the United States has slowed significantly with an increase of only 1.8 million, or 0.5%, between July 1, 2024, and July 1, 2025, according to the new Vintage 2025 population estimates released today by the U.S. CensusBureau.

And we know why.

“The slowdown in U.S. population growth is largely due to a historic decline in net international migration, which dropped from 2.7 million to 1.3 million in the period from July 2024 through June 2025,” said Christine Hartley, assistant division chief for Estimates and Projections at the Census Bureau.

Low population growth = slow economic growth = fewer jobs, in other words. The decline in “net international migration” is the culprit, to no one’s surprise. Trump is bragging about the tens of thousands of deportations in his single-minded assault on undocumented immigrants; many who have worked long enough in the U.S. to raise children who are citizens now serving in the military.

Those believing that inflation will decline as more companies adopt A.I. software to replace those workers and improve labor productivity will be sadly disappointed. The bond market selloff is the first warning that higher interest rates are here to stay—as long as higher tariffs and ongoing wars raise the risk factors that govern economic activity.

“Government bond yields are hitting multi-decade highs, reflecting anxiety about debt levels, deficits and inflation. The effects will extend to mortgages, business loans and other types of credit,” said the NYTimes at this writing.

Who will buy the products if there are fewer shoppers? That is Silicon Valley’s A.I. miscalculation. Consumers already know this, and their declining personal savings rate to 3 percent (in graph) highlights this fact. They have less to spend, period.

Harlan Green © 2026

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

Not Another Greenspan?

 Popular Economics

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent on a seasonally adjusted basis in July after falling 0.4 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.4 percent before seasonal adjustment.” BLS.gov

FREDcpi

Kevin Warsh, the new Federal Reserve Chairman sounded hawkish in his first speech at the Fed’s annual Jackson Hole conference, as if an interest rate hike was needed soon to fight rising inflation.

"While the PCE and CPI (inflation) readings were better than expected, they do not tell me that underlying trends have meaningfully improved, and we must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do."

But Warsh is a true-red Republican appointed by President Trump and we know that Trump wants to keep interest rates as low as possible to pay for the tariffs and war he has started and will go at any lengths to make it happen, including attempting to fire Fed Governors (Lisa Cook).

Good luck is all I can say. Warsh confronts a scenario that is frighteningly similar to that of Alan Greenspan’s tenure as Fed Chairman in early 2000. President GW Bush needed ultra-low interest rates to pay for his wars on terror after 9/11. But he also passed huge tax cuts that Republicans didn’t want to pay for.

And Greenspan worked to assist him in financing the invasions of Iraq and Afghanistan by convincing his Fed Governors to hold down interest rates for as long as possible—too long it turned out. The Fed Funds rate was held at 1 percent while CPI inflation was ultimately rising to 5.3 percent by 2008, igniting the housing bubble that ultimately burst, thus creating the Great Recession.

Maybe Greenspan was at heart an inflation dove, because the Fed got behind the inflation curve and didn’t raise its Fed Funds rate to 5.25 percent until 2006, which was too late to stop the housing bubble and soaring inflation.

So does Chairman Warsh’s pronouncement that inflation will be tackled, no matter the consequences, to be believed? The Fed Governors have been sounding equally hawkish on the need to fight inflation. And "short-term interest rates are predominant tool to achieve the dual mandate," said Warsh (i.e., stable prices and maximum employment).

Yet U.S. debt is growing faster than the economy, and the job market is barely growing. A.I. won’t be the savior if consumers run out of money because they no longer have a job. The BLS’s latest benchmark revision of payroll jobs estimate implied that non-seasonally adjusted nonfarm payroll gains averaged about 11,000 per month through March over the preceding 12 months instead of 18,000, reports Reuters.

So will Warsh and the Fed be able to withstand the merciless vituperation sure to come from the child-like brain of Donald Trump and maintain the inflation fight when the going gets tough?

We don’t want another bubble to burst with A.I.’s investment bubble growing every larger on top of the tariffs and endless wars.

Harlan Green © 2026

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

Why So Much Pessimism?

Financial FAQs

“The Conference Board Consumer Confidence Index^® decreased by 0.8 points to 89.4 (1985=100) in August, down from 90.2 in July. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell by 5.8 points to 68.2. The survey period for this month’s preliminary results was August 3–16.”

Conference Board

The Conference Board’s Consumer Confidence survey is the clearest picture of public sentiments about the direction of our economy. Confidence in the American economy has been in a continuous decline since 2022, as the economy was recovering from the COVID-19 pandemics (see graph).

Their decline in confidence has been for a number of reasons, but mainly because the bipartisanship that prevailed during President Biden’s term disappeared once Republicans were no longer seriously interested in being a partner in the recovery. The predictable result has been almost no new job creation and sky-high inflation that has hurt everyone.

In fact, Trump’s Republicans have done everything possible to trash the recovery, to go back to the era of trickle-down economics of the 1980’s ‘borrow now and repay later’, if at all.

The Biden administration started the pandemic recovery working with Republicans to cause the fastest recovery of developed countries from COVID-19, thanks to the $billions invested in infrastructure, environment, inflation reduction and the CHIPS Acts.

So, it was unfortunate that Republicans took the reins in 2025 and enacted another huge tax cut package with no Democrat votes. There was no more bipartisanship, in other words.

They attempted to pay for the tax cuts with higher tariffs levied on every country in the world and severely cutting or eliminating many of the government investments in rebuilding the American economy enacted during Biden’s term, creating today’s record $40 trillion national debt and stagnant growth.

The result of their outright reverse ‘Robin Hood’ piracy (i.e. robbing from the poor to give to the rich) was that just 584,000 jobs were created in 2025, as opposed to Biden’s 135 million jobs added in 2024 and more than 15 million jobs created during President Biden’s four years.

It’s no wonder consumers are in the dumps, per the Conference Board’s Chief Economist Dana M Peterson, Chief Economist:

“While the share of consumers who said a US recession over the next 12 months is “very likely” ticked up, consumers still perceived a low likelihood of a recession in 12 months.”

Add to the fact that consumers are the ones paying for those tariffs with inflation

stuck in the high 3 percent range, and we wonder why consumer spending is shrinking, the main engine of growth.

The Conference Board said that the three oldest generations—Generation X, Baby Boomer, and Silent Generation—trailed in confidence; i.e., those with predominately fixed incomes.

And who have Republicans’ lack of bipartisanship hurt the most? Their own voters. Confidence among Independents and Republicans softened while Democrats were somewhat more positive in August, per the Conference Board.

Harlan Green © 2026

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

 

Poor Retail Sales

Popular Economics

“Advance estimates of U.S. retail and food services sales for July 2026, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $763.6 billion, down 0.6 percent (±0.4 percent) from the previous month, but up 5.0 percent (±0.5 percent) from July 2025.” Census.gov

FREDretailsales

The alarming FRED retail sales graph above showed sales had plunged in August after a spending surge earlier in the year. Consumers had already spent the tax perks from Trump’s Big Beautiful Tax Bill. 

The U.S. economy is shrinking. Does this signal a breaking point, are consumers shopping less to preserve some of their declining savings? It is already happening, shown in part by consumer sentiment surveys.

The University of Michigan survey showed a sharp decline in their finances.

“Consumer sentiment fell about 8% this August, ending two consecutive months of improvement,” said Survey Director Joanne Hsu. “While views of personal finances saw only minor declines, expected business conditions sank 11% for the short run and 17% for the long run. Decreases in sentiment were seen across the political spectrum, with Republicans exhibiting the strongest month-to-month decline in August.”

If so, it’s a major danger signal that consumers, who account for two-thirds of economic activity, can no longer support as much economic growth. That leaves investment activity from the record corporate profits the sole leg propping up the financial markets’ record levels.

The retail sales decline is also another sign the U.S. population is no longer growing, and the immigration deportations will only make it worse because immigrants, legal or illegal, are shoppers.

The U.S. Census Bureau reports our population grew at a much slower rate between July 2024 and July 2025 than from 2023 to 2024 (when it increased by 1.0%, or 3.2 million people). “The slowdown is largely due to lower levels of net international migration.”

Consumers’ incomes are not keeping up with inflation as well. Wages rose 3.2 percent per annum whereas retail inflation rose 3.5 percent in the latest month. So, shoppers must now borrow more to keep up their standard of living, which takes a bigger slice of their incomes.

So the job market is shrinking, to no one’s surprise. But July’s catastrophic unemployment report tells us the loss of -23,000 payroll jobs was particularly alarming. Will the $trillions in AI investment replace those jobs and keep inflation from rising more?

I doubt it, since most of the inflation is due to the Trump administration’s tariffs and two wars still raging. It’s the stagflation scenario of the 1970s all other again—energy shortages + higher inflation = stagnant economic growth for years to come.

Harlan Green © 2026

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

 

Inflation is Here to Stay

Financial FAQs

“The Producer Price Index for final demand was unchanged in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. On an unadjusted basis, the index for final demand increased 4.7 percent for the 12 months ended in July”. BLS

FREDppi

The wholesale PPI is a sign that inflation is too high to raise hopes for any decrease in interest rates anytime soon. And because the PPI measures the cost of raw materials that go into retail products, it foretells how consumer prices will behave in the coming months.

In fact, August PPI also tells us why interest rates are soaring in the bond markets as well that set mortgage rates. It’s why 30-year fixed mortgage rates have risen to 6.67 percent at this writing.

So why are interest rates so high at this time? It’s not only the ongoing wars creating shortages in everything (mainly Iran and Ukraine) but the huge demand for money to build out the AI data centers. Elom Musk’s SpaceX IPO got ahead of the crowd by netting $75 billion, which delayed IPOs for Open A and Anthropic among others.

The IEEE Technology Society predicts that the AI build out will cost $363 to $400 billion. And the investments are mostly borrowed money which is driving up bond yields even higher, crowding out funding for much-needed government programs.

The 10-year Treasury yield is 4.70 percent today, up from its low of 4.1 percent April 3, 2025 (tariff liberation again).

And that’s not all. Once up and running, the amount of water and electrical power needed to operate the data centers drives up electricity prices as well. And global warming will be exacerbated from the excess amounts of heat generated.

Lawrence Berkeley National Laboratory projects U.S. data center electricity demand will grow from 176 TWh in 2023 (about 4.4% of total U.S. electricity) to 325–580 TWh by 2028 (6.7–12% of total U.S. electricity)

Tech financial analysts worry that enthusiasm for AI has turned into a bubble that is reminiscent of the mania around the  Internet’s infrastructure build-out boom from 1998-2000, I have also been saying.  During that time period, telecom network providers spent over $100 billion blanketing the country with fiber optic cables based on the belief that the Internet’s growth would be so explosive that such massive investments were justified.  The “talk of the town” during those years was the “All Optical Network,” with ultra-long haul optical transceiver, photonic switches and optical add/drop multiplexers.  27 years later, it still has not been realized anywhere in the world.

The annual PPI held at 4.7 percent for the past two months, down from 5.5 percent, which is the stratosphere as far as inflation is concerned. The last time it even approached the Fed’s 2 percent target was April 2025, the month Trump began his illegal liberation day tariffs that is now refunding, per the courts.

That’s probably why Q1 2026 GDP growth was just 2.1 percent, and the advance Q2 estimate was 1.5 percent, as I’ve said.

The real lesson(s) from the self-induced geopolitical uncertainty by the Trump administration is that many safeguards are being reduced or eliminated that protect the American economy and American citizens.   

These safeguards include paying down the national debt instead of tax cuts that increase it, funding scientific research instead of reducing it, and expanding public health care. 

Without those safeguards it's just a matter of time before another recession.

Harlan Green © 2026

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

"The only thing we have to fear is fear itself." Roosevelt

 Popular Economics

FREDpayrolljobs

The job market is shrinking, to no one’s surprise. But July’s catastrophic unemployment report tells us the loss of -23,000 payroll was particularly horrific. Yet +214,000 jobs were created in March, and the economy was perhaps on its way to decent growth this year.

It’s been downhill ever since. More workers are leaving the workforce than are being hired—and 234,000 left the workforce in July—because companies are leery of Trump’s anti-growth policies.

In fact, the sharp drop in payroll hiring began with Trump’s start of the Iran War, as can be seen in the FRED chart. There may have been other factors, such as higher tariffs and threats to invade other countries as well.

But economies don’t like wars begun with no advance notice or preparation, nor does congress, or employers, or most Americans. Tolerating such an ongoing war tells us that many Americans are now living in a country ruled by almost constant fear, under a president who is a convicted felon acting like a mob boss who is ignoring laws and the congress while making decisions through threats and intimidation.

Why did this happen? President Roosevelt faced much larger fears that he addressed in his famous 1933 inauguration speech when 25 percent of Americans were unemployed. And because of such conditions, created the modern social safety net—including social security, union protections, and unemployment insurance—to recover from the Great Depression.

But many of those guarantees have been watered down or eliminated for many Americans since then. We are the only developed country without universal health care, tuition free public college, mandated paid vacations and paid child leave, among other benefits, all major indicators of social well-being.

And Americans suffer from the greatest income inequality in the developed world, engineered by successive conservative governments who have made a concerted effort to roll back President Roosevelt’s New Deal.

They have been so effective, particularly since 1980 and Ronald Reagan’s trickle-down economic policies, that many Americans no longer feel safe, have lost faith in democratic government, and have elected to live in an autocracy—particularly in red states ruled by Republicans—in desperate fear of not only losing their vocations, but their health care and retirement pensions, including social security.

Fear is contagious, but as President Roosevelt knew, was faced down when our government reclaimed its role as a public service that protected all Americans, not just the privileged few.

Harlan Green © 2026

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

Where are the Jobs?

 Financial FAQs

“The number of job openings was little changed at 7.4 million in June, the U.S. Bureau of Labor Statistics reported today. Hires were unchanged at 5.3 million, while total separations changed little at 5.4 million.” BLS

FREDjolts

The job market is shrinking, contributing to the slower economic growth we are seeing this year. For instance, fewer job vacancies are being reported by the Job Openings and Labor Turnover (JOLTS) report, a survey that measures the monthly number of available jobs.

And fewer workers means less will be produced. The JOLTS report also tells us there are more separations–workers leaving the workforce for a variety of reasons than hires.

That’s probably why Q1 2026 GDP growth was just 2.1 percent, and the advance Q2 estimate was 1.5 percent. But there are indications that the AI construction may cause third quarter GDP growth to be higher, as much as 3 per cent with the huge surge in AI spending.

The number of job openings increased in transportation, warehousing, and utilities (+97,000) and in federal government (+39,000). Job openings decreased in wholesale trade (-74,000), nondurable goods manufacturing (-55,000), and mining and logging (-9,000), per the JOLTS report.

The question will be why the reluctance to hire more workers in other sectors? Is it AI? We know that as much as $800 billion is being invested in AI infrastructure and might replace a lot of jobs. So companies may have frozen the number of new hires until they know more about AI’s potential.

What are employers still looking for? The upcoming ‘official’ U.S. unemployment report out in days will also show a shrinking labor force. It’s a huge debate. Firstly, companies have no way yet of measuring what AI may earn on their investments.

“It’s a currency where you have no instinct to know what you are using, and the accounting practices aren’t even there,” said an economist cited by the NYTimes. “The AI stuff is being treated as an investment right now, but it’s a risky investment in case it has no returns.”

It’s not all bad news. The larger, lower paying, service sector economy is still growing. Service companies such as banks, retailers and restaurants expanded last month at an accelerated rate for the sixth month in a row. An index produced by the Institute for Supply Management inched up to 54.1% from 54.0% in the prior month, said MarketWatch’s Jeffry Bartash.

The manufacturing sector is also growing because of the AI buildout. “In July, U.S. manufacturing activity remained in expansion territory, growing at its fastest rate in more than four years,” reports Susan Spence, MBA, Chair of the Institute for Supply Management^® (ISM^®) Manufacturing Business Survey Committee.

But AI is still muddying the job creation picture. It is the sixth year of this expansion, so AI will determine if this is an ongoing boom, or a bust economy. The record DOW and S&P indexes are predicting boom times ahead, but that’s in part because Wall Street and financial markets are counting on the Mideast wars to be settled, Trump to stop levying illegal tariffs, and there are no prolonged energy shortages.

Will that happen? Or do we need a few more election cycles to determine what laws and regulations will govern this emerging economy?

Harlan Green © 2026

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

Why Our Record Inequality?

 Financial FAQs

“Why are we the only developed country without universal health care, tuition free public college, mandated paid vacations and paid child leave, among other benefits, all major indicators of social well-being? We should not need a Michael Moore documentary, such as his latest Where To Invade Next, to tell us what we either no longer provide to our citizens or that cost more?” H Green/Huffington Post

CIA World Factbook

I first wrote a version of this column in 2016, on seeing what I consider to be Michael Moore’s best documentary, Where to Invade Next, a portrait of what other countries have taken from us that we no longer provide for our own citizens, a better standard of living

Nobelist Robert Shiller lamented this fact in a recent New York Times Upshot column. "Economic inequality is already a concern, but it could become a nightmare in the decades ahead, and I fear that we are not well equipped to deal with it."

In fact, the latest CIA World Factbook statistics have told Americans for years that we have a very unequal society; in fact the greatest income inequality in the developed world.

The US is ranked 102nd in the Gini inequality index of 145 countries that the CIA measures for income distribution. Only China of major countries is lower. Even Russia has less income inequality.

And it is this statistic that best highlights the social benefits that all Americans no longer enjoy. For instance, US residents going to public colleges and universities paid no tuition until the 1970s, making a university education prohibitively expensive. 

Another measure that helps to smooth out income inequality is an adequate national minimum wage, which is still $7.25 per hour in many states that did not enact a higher minimum wage of their own, whereas Australia’s national minimum wage, a country with similar demographics, is $16 per hour for a full time working adult.

Why aren't we equipped to deal with it? Dr. Shiller and even Angus Deaton co-discoverer with wife Ann Case of the exploding drug and suicide rates of non-college educated white adults, commenting on what he called the "grotesque expansions in inequality of the past 30 years," gave a pessimistic prediction: "Those who are doing well will organize to protect what they have, including in ways that benefit them at the expense of the majority."

And that has happened since the 1970s and the dominance of free market, so-called Laissez Faire ideologies that strove to cut taxes and government regulations for the sole purpose of protecting the wealth “at the expense of the majority” which has resulted in the election of Donald Trump twice.

Yet we do know how to level the playing field. We should reenact the labor laws of earlier years that allowed collective bargaining and disallowed the right to work laws in 25 states where a mass exodus from unions occurred with the loss of manufacturing jobs that paid higher wages and salaries. Then raise the income tax rate that prevailed before President Reagan succeeded in lowering taxes of the wealthiest 70 percent of Americans.

We could also pass real universal health coverage that all other countries enjoy. It would lower health costs--maybe to what it is in other developed countries, which is 50 percent less than Americans currently pay.

So, we do know how to enact economic programs that create a more equal society. European countries have succeeded via higher tax rates but provide many more services and at much cheaper costs than so-called private enterprise.

Private enterprise has been allowed to decimate the public good to such a degree that the CIA World Factbook showed an unpleasant fact; we are in danger of becoming a developing country in the company of other Third World, developed countries once again.

And because of it, the CIA announced this year the Trump administration is no longer allowing its publication, in a vain attempt to hide the damage over the last 30 years that such income inequality has done to our democracy.

Harlan Green © 2026

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

Where's the Inflation?

Financial FAQs

“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East…Inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy.” FOMC

MarketWatch

New Fed Chair Kevin Warsh wouldn’t say when the Fed would join the chorus calling for a rate hike at his June press conference. He was waiting to hear from task forces studying problem! When have we heard this before?

The U.S. and Iran keep bombing each other, and Iran has just said they are in no hurry to negotiate another ceasefire, while Trump just found another way to keep tariffs high.

And the bond market and inflation indicators are showing higher inflation ahead. Is there any doubt that the Fed’s Fed Funds rate is going higher, as well, with the Fed’s FOMC statement mentioning “elevated uncertainty” re the Middle East conflict?

The financial markets didn’t like the Fed’s inaction, which is why the market indexes plunged after the FOMC statement—the DOW ended the day down by -1150 pts.

Yet economic disaster is staring Americans in the face, if Trump keeps raising tariffs and can’t stop his Gulf war. It cuts into consumer spending, raising the cost of everything when debt at all levels—national, corporate, and consumers are already at record levels.

Raising the Fed’s interest rate will slow rising inflation by slowing economic growth. The Fed FOMC conclusion that economic activity is “expanding at a solid case” was because of over investment in the AI build out of data centers, almost all of it borrowed money. And many of the AI investors are borrowing from and investing in each other, like Japan’s keiretsu system of interlocking ownerships that impeded them from writing off bad debts when their decades long economic stagnation occurred.

One ‘tell’ of the possibility of a US. recession is that huge new orders for computers and related products jumped 3.1% in June, the government said Monday in its monthly report on durable goods.

The last time there was such a surge in goods investment was during the dot-com era, according to MarketWatch’s Jeffry Bartash. “Over the past year, orders for the AI-related hardware have surged 17%, a level last sustained during the dot-com era more than a quarter of a century ago,” he said.

But the dot-com investments didn’t begin to show enough profit for decades to pay for the investments, hence the 2000 dot-com recession that Alan Greenspan and Nobel Laureate Robert Shiller predicted with their warning that irrational exuberance was blinding investors from reality.

Yet the Fed must act to raise rates sooner or later, since higher inflation is already embedded in consumer surveys, according to the University of Michigan’s sentiment survey:

“Year-ahead inflation expectations ticked down from 4.6% in June to a still-elevated 4.2% this month. The current reading substantially exceeds the 3.4% seen in February before the Iran conflict began, (my bold) along with all 2024 readings. Long-run inflation expectations held steady from last month at 3.3%, remaining a bit higher than the 2.8% to 3.2% range seen in 2024.”

The advance second quarter GDP growth estimate was just 1.5 percent, another casualty of the tariffs and Mideast wars despite the AI investment surge. It’s no wonder the Fed’s Governors are avoiding the obvious; when to begin to restrict credit before inflation becomes entrenched longer term, as it did in the 1970s.

What were the conditions then? Energy supplies were restricted, inflation soared, and economic growth stagnated. Hence the decade of stagflation. Is this a repeat?

Harlan Green © 2026

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

 

Defeating The Greater Lawlessness

 Popular Economics Weekly

“The Republicans’ hunger for power has now reached such a point that they have selected and continue to support a president who has lied and cheated his whole adult life; from Trump Casinos to Trump Towers, from stiffing bankers and his workers to cooking the books.” H Green/Huffington Post

NYTimes

We knew as long ago as Nixon’s Watergate that the Republican Party harbored a lawless tendency when it suited them. Why else would President Reagan engineer the illicit Iran contra arms deal with Khomeini, or President GW Bush invade Iraq when UN inspectors already knew Saddam Hussein had destroyed his weapons of mass destruction a decade earlier, I said in 2017?

Now we have illegal tariffs and an unpopular war with Iran, one that will drive inflation even higher and might take years to return to the Federal Reserve’s 2 percent target to fulfill its mandate of full employment with stable prices.

The result? Another recession, sooner or later, as happened during Presidents Reagan (2) and GW Bush terms. In Bush’s case, he managed to turn four years of Clinton budget surpluses (1996-2000) that could have kept social security and Medicare solvent for decades into a worldwide Great Recession (2008-09), the worst since the Great Depression, according to most economists.

President Trump’s Republicans are following the same path with his huge tax cuts while borrowing $trillions to fight his wars, cutting public services to the bone and closing whole departments by firing more than 300,000 federal employees.

Republicans have doubled down on their lawlessness by allowing his illegal wars and tariffs, and maybe what could precipitate the next recession; their determination to deport as many undocumented immigrants as possible without allowing them due process or a legal pathway to citizenship.

Immigrants are taxpayers that add workers to our shrinking population, and their loss is depriving our economy of essential services—agricultural workers that supply our groceries, for starters, but also a large part of construction, healthcare, transportation and lower paying service workers in leisure and hospitality.

This can only be done because Trump’s Republicans either ignore or disregard the civil laws, as well as economic laws, and even the constitution in their hunger for power. This is impoverishing more Americans, not to speak of turning a blind eye to the illegal enrichment of the Trump family and their supporters.

What can be done to return the $trillions in wealth and power that Republicans have taken away from the American people via their massive tax cuts to corporations and wars that were never paid and ignore the most basic rules of capitalist enterprise, such as debts must be paid, contracts and treaties honored?

The sad fact is that the Iran war wasn’t necessary because President Obama had already negotiated a nuclear arms agreement with Iran and Trump’s tariffs have been mostly based on ignorance of foreign trade tradeoffs, not unfair trade practices.

The history of greater lawlessness and hunger for more power is leading to a massive disruption in foreign trade which is the life blood of the world’s economies. It is repeating the mistakes that choked off world trade in 1930 and led to the Great Depression.

The question is how much longer will consumers and voters tolerate the record of Republicans’ failures that have led to four recessions just since 1980 that were the result of their hunger for more power?

Polls are showing that ordinary Americans are beginning to understand what it means.

Harlan Green © 2026

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

Another Housing Bubble?

 The Mortgage Corner

“WASHINGTON (July 9, 2026) – Existing-home sales decreased by 2.4% month-over-month and increased 2.8% year-over-year, according to the National Association of REALTORS® Existing-Home Sales report. 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, and why we have a housing shortage.

And the 30-year fixed rate mortgage has hovered above 5 percent since 2023, its longest stretch above 5 percent since 2007 and the start of the Great Recession. Lower interest rates would certainly stimulate more housing construction, especially on the affordable end.

But new Fed Chair Kevin Warsh has been repeating that inflation is too high at his congressional hearings and the Fed may have to make some hard choices and become an inflation hawk to bring inflation back to its 2 percent target rate.

If only we still had Ayn Rand disciple and free market lover Alan Greenspan as the Fed Chair! In a similar situation during the GW Bush 2000 decade, Fed Governors resisted raising the Fed rates to help fund the Bush administration’s wars on terror, despite enacting the large Republican tax cuts that caused the first $trillion in federal debt.

A caveat is to be careful what you wish for, since the last such building surge inflated the housing bubble for mostly the wrong reasons.

And the busted housing bubble that led to the Great Recession of 2008-09 also led to the current housing shortage. Can we ever return to the ‘good old days’ when there was enough housing for those that want to own?

It fueled an earlier housing bubble It was the combination of interest rates being held below rising inflation that caused housing prices to increase by double digits for a couple of years and we were left when a massive oversupply of unsold homes.

Right now we have both a demand and supply problem—how to bring down mortgage rates to lure more home buyers, and kick start more housing construction.

The Trump administration is also attempting to talk down interest rates in the face of its massive tax cuts as it has been waging war on several fronts—from attacking Venezuela to Iran, while again ballooning the federal debt.

The 30-year average fixed mortgage was last at a much more affordable 3 percent rate during the COVID-19 pandemic. It is 6.58 percent at this writing and has remained above 6 percent since 2022 when the Fed last raised interest rates to combat inflation as world economies began to recover from COVID.

And we know both home buyers and mortgage lenders are incredibly sensitive to mortgage rates, in part because mortgage lenders have kept credit standards much higher than they were in the lead up to the housing bubble that caused so many defaults. Anyone remember the no-income verification, liar loans of that time?

The National Association of Realtors remain hopeful that the home buyer market will approve.

"The back-and-forth in monthly home sales activity, driven by mild fluctuations in mortgage rates, shows how sensitive home buyers are to affordability conditions,” said NAR Chief Economist Lawrence Yun. “However, job gains—more than half a million since the beginning of the year—will continue to provide support for the housing market.”

But so much is similar to the housing bubble and bust. Trump’s Big Beautiful Tax Bill and Iran war is raising the costs of everything as did Bush’s tax cuts and war on terror.

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 supply to satisfy the demand of an increasing population since then because the busted housing bubble restricted new home building for almost 10 years, and 30-year fixed rate mortgages have hovered above 6 percent ever since, per the FRED graph.

Higher interest rates are raising construction costs. Trump’s tariffs on steel, copper, lumber and other materials are lifting construction prices and interrupting some jobs. This is while immigration enforcement is worsening worker shortages and delaying projects.

I said last week,

“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.”

The bottom line is too many resources have been diverted to funding wars, not peaceful enterprises since then, leaving little room for more housing construction, or curing our homeless problem.

When will that change?

Harlan Green © 2026

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