This is a monologue, but I'm interested to see reactions. I've been mulling over a number of high level things, and think that economic reality in 2022 is very different than people (media, left, right, etc.) perceive it. I'm sure my opinions will anger folks on the left, right, center, and those who are libertarian. This should be fun.

Here are some thoughts:

1) Wage Growth is strong, has been strong, and we are nearing all-time REAL wage highs (adjusted for inflation): Real median wages have been increasing on average over the past 10 years. People who say that wages haven't been keeping up with inflation over the 10 years are just dead wrong. They are supporting (intentionally or inadvertently) a narrative that is patently false. Median American quality of life has been improving, not regressing, over the past 10 years and through both the Obama and Trump administrations.

Now, in the past year, it's harder to make sense of the noise around real wages with stimulus, COVID, and inflation offering puts and takes. It's just hard to interpret the data right now in the immediate past.

 Either way, we are in the midst of a ten year bull market for the American worker's wages and real wages are up. No, this hasn't benefitted everyone, but it's benefitted the median wage earner in this country. The narrative that wages haven't kept up with inflation over the past 10 years is a myth. They have. And then some. They are at the highest point in the last 50 years. It's probably safe to say that there are no Americans currently working today who have experienced a period of higher median wages than exist today in this country.

While this isn't true for all Americans, again, it is true at the median level - meaning it is true for most.

2) Current Inflation and Fed Policy is hurting everyone, but it is hurting the wealthy more than the little guy right now. Everyone hurts when interest rates rise, asset prices fall, and inflation kicks in. In the current scenario, the poor and middle class are seeing their wages go less far - that's definitely pain. However, the wealthy are seeing less cash flow, their assets decreasing substantially in value, and their purchasing power decrease due to inflation. It's still better to be wealthy than poor. The rich are still better off than the poor. But, the current economic environment is hurting the rich more than the poor. As it should, frankly. We have a long way to go to undo the inequality created over the past decade, but the process for that undoing has begun:

3) Income and Wealth Inequality are decreasing, RIGHT NOW (this is healthy and needed!): Income and wealth inequality exploded over the past 10 years, with the wealthiest getting way richer, as low interest rates and easy money substantially increased asset values. However, current policy is actively reducing this wealth gap for the first time in a long time. Reducing income inequality has to come with this pain, all around (wealthy, middle class, and poor), as I stated earlier. The middle class are losing 10% of their purchasing power, offset by whatever raises they are getting. The rich are are experiencing the same, but with asset prices cratering. That's pain all around, but disproportionate pain at the top, with the wealthy.

4) Yes, The Fed Screwed up over the past 10 years with baffling easy money policy long after the economy had recovered: Everyone was baffled by the easy money that persisted way longer than it seemed was necessary. This was uncalled for, clearly seemed stupid, and persisted for about 5 years more than it needed to. It has to be undone. And the work to undo it has begun in earnest.

5) But, The Fed (and Jerome Powell specifically) are and will be less political than you think: I'm not talking about Janet Yellen or Bernanke. They might well have been stimulating the economy to support some political agenda or the other. I'm talking about Jerome Powell. Jay Powell has no reason to support the Biden administration. He has no reason to save the economy. He has no reason to keep your home's price stable. He has no reason to support the stock market. He has one job (I'll explain why it's not two jobs in a second): Beat Inflation. His job is not to care about the federal deficit or debt balance. It has nothing to do with those things. Not his problem. Everyone already thinks he was wrong to not go after inflation last year (he was). He has no political support. He has no political allegiance. He is completely free to pursue the Fed's charter without any real distraction.

6) The REAL Federal minimum wage is nearing historical lows. Adjusting for inflation, the real minimum wage hasn't been as low as $7.25 since the 1940s. 

7) The minimum wage matters, because the Dual Charter of the Fed (Keep both Inflation and Unemployment low) is BS in 2022's context - they can go after inflation exclusively without worrying about jobs: The Fed is technically supposed to target both low unemployment and low inflation. But, the minimum wage is so low (in REAL dollar terms) and inflation is so high, that they can push interest rates to the moon and people will still be able to get jobs. This means that they will be able to go to town combatting inflation without having to worry about unemployment for a looooonnngggg time. 

8) Most Importantly, I believe Jerome Powell will do what he says... now: It was obvious to most that the Fed was full of it last year when they were talking about "transitory inflation". That was crap. Now, however, Jerome Powell has acknowledged inflation and is saying that he is 100% committed to beating inflation. I believe him. I don't know how long we will see inflation for, but I believe that the Fed will attack with rising interest rates until they beat inflation. 

9) The Fed may have to push, hard, and for a long time, to beat inflation, because Americans have so much cash. Americans and corporations are sitting on $3T in cash more than what we would have expected without COVID ($18T total), stimulus, and the rest of it. Folks don't abandon their corporate strategies after a bad quarter. Folks don't downgrade their lifestyle after a bad couple of months. Many Americans and businesses are prepared for tought times, with plenty of access to liquidity. They will abandon ship only when forced to.

10) The Dollar, and US Monetary Policy is Still the Best financial system in the world. NO, another currency is not going to dethrone the dollar anytime soon (sorry bitcoin people): Yes, we have inflation. Yes, the Fed acted in a truly egregious manner over the past 10 years with easy money long after it made any sense to continue QE and historically low interest rates. But that doesn't change the fact that the dollar is a much better currency than gold, bitcoin, Ethereum, Yuan, Euros, Yen, Pesos, or Rupees. The dollar, a fiat currency, is indexed to a basket of goods and services, and when maintained by good central bankers, inflates at pretty close to 2% per year over the long-term. 

Look, both inflation and deflation are bad. But deflation is way, way, way worse than inflation. Moderate inflation encourages spending, growth, and investment. Moderate deflation creates spirals of hoarding wealth that results in lost jobs, lower production, and worse. We want to avoid deflationary spirals however we can. Gold, Bitcoin, and Ethereum remove the power to control the supply of currency from governments or central banks. They will result in deflationary spirals periodically that hurt economies and devastate lives, if they are adopted as a reserve currency. Bad Fiat currencies (like Argentina or Zimbabwe) can experience hyperinflation, true, which presents well publicized horrors for people and economies. But, ones run by good central banks can prevent runaway inflation. 

The dollar is in some ways a terrible currency (it can be printed at the will of the Fed, there's nothing backing it but trust), but in other ways it is a perfect currency (it is indexed to purchasing power against a basket of goods and services, and can be printed at will - yes this is both a plus and a minus for ordinary Americans). This means that the Fed can control inflation, and long-term, they do a pretty good job at this, the current period excluded. 

11) There is no serious challenger to the world reserve status of the dollar. It is preposterous to think that an asset like bitcoin, gold or ethereum will overtake the dollar. There is no serious international challenger to the dollar. The Chinese have a long history of manipulating the Yuan. The Euro is too volatile and subject to political risk. It's silly to think that a relatively small country like India, Japan, or Korea will see their currency ascend. Etc. 

The Fed won't let that happen. Because as bad as they handled parts of the late 2010s, they are still the best central bank in the world, by a lot. 

12) The US Government has a serious debt problem - but the Fed does not have ownership over this problem and won't come to the rescue. Separate and unrelated from Federal Reserve policy, the US has a big deficit (much of which is indexed to inflation, by the way, so we can't inflate our way out of the annual deficit), and a massive cumulative debt (this burden can be reduced with inflation). This will have to be addressed. However, this is not the Federal Reserve's problem. At some point, elected officials will have to stare this down and begin making hard choices. Who knows when this hand is forced? 

So what:

What this means to me is that: 

- There is a lot of reason to believe that inflation is here and here to stay for some time. 

- The Fed will respond, and respond aggressively, to inflation, and this may mean interest rates rise for months or years consistently and aggressively. Folks who say that they won't for fear of economic turmoil in my opinion seriously misunderstand the Fed's role, purpose, and leadership.

- This is not a good time to be speculative or to think "buy low, sell high", because interest rates rising will drive down asset prices on any business, real estate, or speculative asset that you can borrow against. 

- It's a fine time to buy assets that are likely to see cash flow increase with inflation, so long as you can live with the market prices of those assets falling in the short-term or medium term. 

- The US is still the best economy in the world, the dollar still the best currency. There's no serious threat to that. Panic is unwise. 

- Fundamentals and being conservative, with a long-term outlook, pay off in times like this. 

- Nothing changes for my long-term approach of consistently buying stocks and real estate, maintaining a very strong cash reserve, and spending much less than I earn each passing month.

- I probably made the liberals angry, the conservatives angry, the bitcoin people angry, and the libertarians angry. I still think this is an accurate representation of reality. Please yell at me in the comments and tell me where you think I'm wrong or need more nuance.