Economists are always the last to know - or at least the last to admit - what is going on in the economy. Yesterday, Treasury Secretary Janet Yellen continued her apology tour and acknowledged again her misdiagnosis of inflation as “transitory” last year while warning that expectations of a rapid fall in inflation are unrealistic. At the same time, One of her predecessors, Larry Summers, who made a rare correct call warning that the government’s pandemic spending would trigger high inflation, has now published a National Bureau of Economic Research Working Paper (“Comparing Past and Present Inflation", NBER Working Paper 30116, http://www.nber.org/papers/w/30116) pointing out what was widely known, i.e., that the way inflation is calculated by the government has changed over the years and doesn’t conform with reality. Leaving aside the details of Professor Summers’ argument (you can read the paper if you are interested), his study confirms that economic policy is set by people guided by flawed models. We watch the Fed stumble from one policy failure to another, creating market bubbles, massive wealth inequality, and runaway debt and speculation with few if any complaints from business and political leaders. Instead, our so-called elites benefit from this intellectually and morally corrupt regime without a thought about the future destruction being wrought on America’s (and the world’s) economy by their fellow empty suits.

But now the wolves are gathering at the gates. Having contributed mightily to the highest inflation in 40 years, the Fed has limited tools to fight it. The only thing that will lower energy and labor costs is an economic slowdown. A recession is both an economic necessity and a near-certainty. Corporate earnings, inflated by phony non-GAAP earnings adjustments, are declining and there is only so much managements can do to fake their way through a slowdown (especially with so much debt on their balance sheets). And consumers, despite the incessant stream of bullshit we are fed about their strength, are maxing out their credit cards and struggling with nauseatingly high energy, food and housing costs (all conveniently excluded from government inflation statistics) and are going to reduce their spending (and are telling the University of Michigan that they are decidedly not happy).

If you know anything about history, you know that inflation is not only an insidious tax on citizens but a pernicious and destabilizing psychological phenomenon that shatters confidence and slows economic behavior. The current inflation was rising for years on the back of ill-advised energy, labor, antitrust and monetary and fiscal policies that were disguised by phony economic statistics fed to the unwashed masses by government and the media. But eventually the truth could no longer be hidden and the asset hyperinflation that began after the Great Financial Crisis of 2008/9 finally seeped into goods and services. And now it is here to stay absent a sharp economic slowdown.

Everybody hoped the Fed could just keep printing infinite amounts of money without consequence and asset prices could just keep rising “to the moon.” There’s a reason that nobody lives on the moon (though Elon Musk is welcome to be the first - the SEC doesn’t have jurisdiction up there) - the moon cannot sustain life. And the economic and market fantasies that fed the stock market bubble of the last decade can’t sustain themselves any longer. If you think this bear market is over, book a flight on the next Space X flight to outer space - with a little luck, Elon’s little rocket will never return to earth and you’ll never have to face reality.