30. Rates Up, Inflation Back, and Who’s Really Running the Fed

Six months ago, the Fed dot plot was pointing toward rate cuts. The consensus on Wall Street, in academia, and in financial media was convergent: relief was coming for borrowers. Professor Edwin Burton saw it differently.   In this episode of Rubber Meets the Road Economics, Burton — one of the University of Virginia's most respected financial economists — returns to explain why that consensus has now fully reversed, and what it signals for the months ahead. The Fed held its target this week at 3.5–3.75%. But the real story isn't what the Fed did. It's what the market is doing — and why Burton believes the pressure is decisively upward on rates.   The conversation covers:   Why money supply growth jumping from ~3–4% to 7% annually in just three months is the real inflation indicator nobody's watching Burton's revised inflation forecast: from 2.5% to approximately 4% by year-end How the Iran War's closure of the Strait of Hormuz is affecting Brent crude (briefly $128/barrel) — and why America is relatively insulated while Europe and Asia aren't The American household budget crisis hiding in plain sight: $10,000/year in property taxes, $20–25,000/year in healthcare, on a median Virginia income of $80,000 Why Jamie Dimon's bond crisis warning deserves a serious hearing — and why the nation's liquidity problem matters more than its asset base The Spirit Airlines bailout debate: why bankruptcy is the right tool, and why the government should get out of the way The single most clarifying argument in this episode — that interest rates are set by supply and demand in the $14 trillion daily repo market, not by whoever carries a briefcase into the Eccles Building Why Kevin Warsh's simultaneous goals of lower rates and a smaller Fed balance sheet are "two incompatible views" — and why he'll find that out fast   This episode is essential listening for investors recalibrating bond exposure, economists tracking monetary transmission, and anyone trying to understand why economic aggregates look reasonable while family budgets feel impossible.