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'Big Short' investor Michael Burry warns of looming consumer recession (US). And will rising interest rates slow inflation?
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'Big Short' investor Michael Burry warns of looming consumer recession (US). And will rising interest rates slow inflation?

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“For women taking control of their financial future”

-Jana Hlistova


From The Purse


In this week’s newsletter, we focus on investor Michael Burry’s warning that a consumer recession in the US is looming.

And will the recent rate hikes slow the rate of inflation?

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And you can review the news in brief so you stay on top of global financial, economic and investing trends.

I hope you enjoy this week’s newsletter.

Until next week,

Jana


'Big Short' investor Michael Burry warns of looming consumer recession (US)

Will raising interest rates slow inflation?


In 2008, Michael Burry, a hedge fund manager famed for forecasting the financial crisis, has warned of a consumer recession and more earnings trouble (US), as reported by Bitcoin.com.

Investor and founder of investment firm Scion Asset Management, warned on Twitter:

‘US Personal Savings fell to 2013 levels, the savings rate to 2008 levels – while revolving credit card debt grew at a record-setting pace back to the pre-Covid peak despite all those trillions of cash dropped in their laps. Looming: a consumer recession and more earnings trouble’.

Michael Burry is profiled in ‘The Big Short,’ a book by Michael Lewis about the mortgage crisis. He is best known for being able to foresee and profit from the U.S. subprime mortgage crisis (2007-2010).

He shared two tweets: the first shows a sharp decline in U.S. personal savings. The other shows a steep rise in consumer credit outstanding.

Contrary to what is being reported in mainstream media, inflation (arguably) is not the problem, but consumer debt is.

Morever, the recent interest rate hikes (demand-side monetary policy) is unlikely to slow inflation.

In a recent Bloomberg interview, Larry Finks, CEO of BlackRock, said that he does not believe the US Federal Reserve has the tools to fight inflation.

Why? Because inflation is being driven by supply shocks not consumer demand.

Due to the constraints in global supply chains, production costs have gone up, which in turn drives up consumer prices.

Interest rate hikes, therefore do not impact supply chains.

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