by Peter Schiff
Euro Pacific Capital
What exactly is “transitory?” You and your wife may disagree on its meaning when your old friend asks if he can stay with you while he “Sorts things out.” The term is virtually worthless without some guiding context, as in “Honey, he’ll be out of here by Monday. Tuesday the latest.”
Last week, Federal Reserve Chairman Jerome Powell was asked to provide much needed clarity as to how this term applies to our current bout of much higher than forecast inflation. Given that much of the economic outlook rests on how quickly the surge subsides, his definition is hardly semantic. Based on his years of experience, and the mountains of data the Fed has collected, the Chairman offered this direct response when asked about the practical meaning of transitory: “It depends.” That’s about as much detail as he was prepared to offer.
Although Chair Powell has only had his job for a few years, he may be well advised to familiarize himself with the Fed’s checkered history with the term “transitory.” Back in 2006 and 2007, Powell’s predecessor’s asserted countless times that the troubles then arising in the mortgage market were “transitory.” As it turns out they were horribly wrong. More recently, the Fed has been similarly wrong in their predictions about inflation.