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now that so-called strong jobs report actually sent the stock market aching and the dollar soaring because it was perceived as being a catalyst for the FED to be more aggressive in its fight against inflation because after all so many people think the way you win a war against inflation is by putting people out of work and with more people getting jobs the FED is moving backwards and is further away from its goal so it has to fight harder to destroy those jobs but in reality you don't reduce inflation by putting people out of work in fact you accomplished the opposite because when people aren't working they're not productive so you have less Supply and they still have demand because they get unemployment benefits and welfare and food stamps and things like that so you get less Supply you still have demand and therefore you have Rising prices what the FED really needs to do is to keep people employed we need more people being more more productive but what those employed people have to do is reduce their spending so we don't want them to stop working they got to keep working they got to make stuff they just got to not spend everything they earn they got to take some of that money and save it that's how you reduce inflation with higher interest rates is that you discourage people from spending and so you reduce demand and you encourage them to save and that helps increase Supply because the savings lead to investment which increases Supply you don't just try to put people out of work now the reason people are losing jobs is because Rising interest rates are impacting the economy because it's so levered up and consumers are so levered up when interest rates go up that immediately diminishes their capacity to spend because now they're spending more on interest but the problem is credit card debt is still at record highs savings are at record lows so despite the fact that the FED has increased interest rates it hasn't changed the behavior of Americans they're still borrowing and spending like there's no tomorrow and they're not saving anything for tomorrow that's why the FED is really making no Headway in its feign fight against inflation it needs to raise interest rates up far more than it has not to put people out of work but to get people who are working to reduce their spending and increase their savings but because all these jobs are a function of the bubble people are losing jobs as a result of it except they're not unemployed they're losing good jobs and they're replacing them with crappy jobs and I will get to that in a minute the point I'm making here is you don't raise interest rates to create unemployment or slow the economy you raise interest rates to slow spending and increase savings which actually leads to Greater economic growth as the savings of those who were under consuming gets invested to expand plant equipment and leads to Greater production of goods which leads to lower prices of those goods and the fact that fewer people are spending reduces demand in the present for those goods that's what needs to be done but none of that is happening yet so we know the FED is losing its battle against inflation now some people think it's winning because they've looked at a temporary decline in commodity prices and they think that means the worst is over no that is a transitory decline we are just consolidating for the next leg up in commodity prices and some people are looking at housing prices yes they're going down in fact they have a long way to fall but that does not mean inflation is coming down because people don't buy houses they buy monthly payments and those are going up and it's not just mortgage payments that are going up it's taxes it's insurance it's utilities its maintenance everything about home ownership is getting a lot more expensive so the inflation problem is getting worse
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