While several market strategists and analysts expect U.S. inflation to drop considerably in 2023 compared with last year, Michael Wilkerson, founder of Stormwall Advisors, thinks the inflation rate could climb as high as 12% by the end of this year. The country’s inflation rate has cooled down over the past seven months, but Wilkerson insists that the U.S. Federal Reserve “is going to run out of firepower.”
Stormwall Advisors’ Michael Wilkerson Believes U.S. Will ‘See Another Spike up’ in Inflation
Over the last two months, many reports have stated that inflation has peaked, and in the U.S., the consumer price index (CPI) has dropped for seven consecutive months since its high in June 2022. In a recent interview between Kitco News anchor Michelle Makori and Michael Wilkerson, founder of Stormwall Advisors, Wilkerson expressed his expectation of another surge in U.S. inflation. While acknowledging that his view is in the minority, Wilkerson emphasized that “inflation doesn’t move in a linear path; you do see some cycling.”
“I don’t believe we’ve seen the end of inflation and I do think we’re gonna see another spike up,” Wilkerson said during his interview. “Whether it’s 8% or 12%, nor can I say precisely what it will be by the end of 2023, but I do believe that it is possible that we find ourselves back in that range this year.”
Wilkerson explained how the M2 money supply has grown since 2008 and has further ballooned during the Covid-19 pandemic. As the executive of Stormwall Advisors and author of “Why America Matters: The Case for a New Exceptionalism,” Wilkerson asserted that the increase in the money supply inevitably results in an accompanying increase in prices, as evidenced by historical patterns. He believes that, from the perspective of policymakers, inflation is a preferable option since it is the “lesser of two evils.”
“The Fed is going to run out of firepower,” Wilkerson told Makori. “Ultimately, this becomes a trade-off between tamping down on inflation, slaying the inflationary dragon, and allowing recession and unemployment to rise. And governments, always and everywhere, choose inflation,” he added.
Several analysts and economists believe, however, that inflation will decrease this year. For example, economist Mohamed El-Erian of the University of Cambridge expects inflation to become “sticky” at around 4% in midyear. Adam Posen, the president of the Peterson Institute for International Economics and former Bank of England official, anticipates that U.S. inflation will reach the 3% range by the end of 2023. “Getting from the high inflation where we are now towards 3% is baked in,” Posen said at the end of Dec. 2022.
During his conversation with Makori, Wilkerson shared a contrarian view and emphasized that price inflation would eventually catch up. “The money supply increased by 40 percent just from the year 2000,” Wilkerson said. “There has never been a time in history when the money supply increased by that much without resulting in inflation — price inflation always catches up with money supply inflation.”
Do you agree with Wilkerson’s contrarian view on inflation, or do you think the predictions of other economists will hold true? Share your thoughts about this subject in the comments section below.