No Hard Feelings

Executive Summary: Is the strength of the economy a double-edged sword that means higher-for-longer inflation, further monetary tightening, and a recession? Or will the tightening that’s already occurred fell the economy still? Or is the mounting federal budget deficit the economy’s Achilles’ Heel? While we remain in the light-side camp, we do share the deficit concerns of dark-side prognosticators: Profligate government spending combined with falling revenues as a percent of GDP points to nowhere good. The bond market is concerned too. Fed Chairman Powell will have a chance to calm the bond market at Jackson Hole on Friday. Much depends on whether he does. … And: Dr. Ed reviews “Breaking” (+ +).