Hedge fund manager Michael Burry, famed for forecasting the 2008 financial crisis, says that the Federal Reserve “has no intention of fighting inflation.” I have added that the Fed’s “Serial half-point hikes are for getting elevation before stocks and the consumer tap out.”
Michael Burry on Inflation and Fed’s Rate Hikes
Famous investor and founder of investment firm Scion Asset Management, Michael Burry, shared his thoughts Thursday on the US economy, inflation, and interest rate hikes.
He is best known for being the first investor to foresee and profit from the US subprime mortgage crisis that occurred between 2007 and 2010. He is profiled in “The Big Short,” a book by Michael Lewis about the mortgage crisis, which was made into a movie starring Christian Bale.
Burry tweeted Thursday:
The Fed has no intention of fighting inflation. Serial half-point hikes are for getting elevation before stocks and the consumer tap out.
“Same with rapid-fire QT [quantitative tightening]. The Fed’s all about reloading the monetary bazooka. So it can ride to the rescue & finance the fiscal put,” Burry added.
At the time of writing, his tweet has been liked 13.8K times and retweeted over 2.2K times. Many people on Twitter agreed with Burry.
One user wrote, “It is correct that the Fed would like room to ease again.” Another noted: “Not just the Fed. Look at all the central bankers around the world raising rates at similar times and similar basis points. Canada and China around the 24th of this month by 50bps. This is coordinated and they think it will work without any major collapse.” A third user opined, “Anyone who doesn’t blame the Fed for out-of-control housing inflation is gaslighting you.”
The rate of US inflation jumped to a 40-year high of 8.5% in March and showed little sign of quickly reversing, according to data released this week. However, many people believe that inflation is much worse than the reported number.
Gold bug Peter Schiff commented Thursday: “According to the government March consumer prices rose by 8.5% YoY. Consumer prices are composed of the prices we pay for the stuff we import and the stuff we produce ourselves. But March YoY import prices rose 12.5% and export prices rose 18.8%. That’s an average rise of 15.65%!”
The president of the Federal Reserve Bank of St. Louis, James Bullard, has repeatedly warned that the Fed needs to raise rates much faster to fight inflation. He told the Financial Times this week that it is “fantasy” to think the Fed can bring inflation down sufficiently without raising rates to a level that constrains the economy.
Meanwhile, Federal Reserve Governor Christopher Waller believes that inflation peaked in March. He said Thursday: “I’m forecasting that this is pretty much the peak. It is going to start to come back down.”
Do you agree with Michael Burry? Let us know in the comments section below.
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