2026-09-14 Best of Replay - A Recession Is Coming — But That’s Not the Biggest Risk

Well, at the Jackson Hole Symposium that recently concluded, the new chair of the Fed, Mr. Kevin Warr, stated that inflation is still running at a bit of a hot rate, noting that the personal consumption expenditure index is running at 3.7% on an annualized basis, and the Consumer Price Index at 3.4%.

Warsh noted that, quote, none of these measures are perfect, but they all tell a similar story.

Inflation is running above our 2% target, end quote.

Now, Warsh's comments were primarily focused on inflation, but he also commented that the U.S. economy is in pretty good shape, noting that the U.S. economy was, quote, resilient and strengthening, end quote.

So what about that statement? Is that really the case? Or is the Fed chair simply saying what he thinks need to be said? Now, when you dig into the data, which I'm going to do with you in this segment, it's hard to make the case that the U.S.

economy is strengthening.

If you start with inflation, as I just mentioned, the PCE rate is 3.7%.

The consumer price index measure of inflation, 3.4%.

Now, as I've discussed on this program in the past, both of these numbers are highly adjusted or highly manipulated to use that term.

Now, if you want to measure price inflation, a simple non-manipulated way to accomplish that task is to look at a static basket of goods and services at some prior point in time and compare the current cost of purchasing those goods and services to that past point in time.

Now, that's exactly what the Chapwood Index does.

I've had the pleasure of interviewing the founder of the Chapwood Index, Mr. Ed Batowski, on this program.

And basically, they go to different metropolitan areas and look at the cost of 150 to 500 different items like bread, milk, takeout, pizzas, magazines, and the like, and compare those costs over time.

Now, if you use that methodology, depending on the area of the U.S. in which one lives, the actual inflation rate has ranged from just under 10% annually to about 14.5% per year over the last five years.

So the reality of inflation as it relates to the economy is that it is taking its toll.

Now, there's some evidence of this.

Presently, credit card debt is approaching $1.3 trillion, and credit card delinquency rates are at a 15-year high.

Student loan delinquencies are at a six-year high, and auto loan delinquencies at an all-time high.

Delinquency is defined as any loan which is more than 90 days past due.

Now, when you look at those statistics, those are not statistics that support the resilient and strengthening economy narrative.

Then there's unemployment.

The official unemployment rate sounds pretty good.

It's pretty palatable, pretty tolerable, if you will, 4.1%.

Now, the official unemployment rate measures people of age 16 and older who don't have a job, would like to have one, and are looking for work.

The official unemployment rate excludes those who are unemployed and not looking for a job and those who are marginally employed, those working part-time that want to work full-time, and those that are working for poverty-level wages.

Well, at the Jackson Hole Symposium that recently concluded, the new chair of the Fed, Mr. Kevin Warr, stated that inflation is still running at a bit of a hot rate, noting that the personal consumption expenditure index is running at 3.7% on an annualized basis, and the Consumer Price Index at 3.4%.

Warsh noted that, quote, none of these measures are perfect, but they all tell a similar story.

Inflation is running above our 2% target, end quote.

Now, Warsh's comments were primarily focused on inflation, but he also commented that the U.S. economy is in pretty good shape, noting that the U.S. economy was, quote, resilient and strengthening, end quote.

So what about that statement? Is that really the case? Or is the Fed chair simply saying what he thinks need to be said? Now, when you dig into the data, which I'm going to do with you in this segment, it's hard to make the case that the U.S.

economy is strengthening.

If you start with inflation, as I just mentioned, the PCE rate is 3.7%.

The consumer price index measure of inflation, 3.4%.

Now, as I've discussed on this program in the past, both of these numbers are highly adjusted or highly manipulated to use that term.

Now, if you want to measure price inflation, a simple non-manipulated way to accomplish that task is to look at a static basket of goods and services at some prior point in time and compare the current cost of purchasing those goods and services to that past point in time.

Now, that's exactly what the Chapwood Index does.

I've had the pleasure of interviewing the founder of the Chapwood Index, Mr. Ed Batowski, on this program.

And basically, they go to different metropolitan areas and look at the cost of 150 to 500 different items like bread, milk, takeout, pizzas, magazines, and the like, and compare those costs over time.

Now, if you use that methodology, depending on the area of the U.S. in which one lives, the actual inflation rate has ranged from just under 10% annually to about 14.5% per year over the last five years.

So the reality of inflation as it relates to the economy is that it is taking its toll.

Now, there's some evidence of this.

Presently, credit card debt is approaching $1.3 trillion, and credit card delinquency rates are at a 15-year high.

Student loan delinquencies are at a six-year high, and auto loan delinquencies at an all-time high.

Delinquency is defined as any loan which is more than 90 days past due.

Now, when you look at those statistics, those are not statistics that support the resilient and strengthening economy narrative.

Then there's unemployment.

The official unemployment rate sounds pretty good.

It's pretty palatable, pretty tolerable, if you will, 4.1%.

Now, the official unemployment rate measures people of age 16 and older who don't have a job, would like to have one, and are looking for work.

The official unemployment rate excludes those who are unemployed and not looking for a job and those who are marginally employed, those working part-time that want to work full-time, and those that are working for poverty-level wages.