Fed Monetary Stimulytpo Now Almost 14 Years Old And Still Running Strong! Top 1% Share Of Net Worth Now Higher Than Bottom 50%, Income Inequality Getting Worse

It has been almost 14 years since The Federal Reserve under Ben Bernanke unleashed zero interest rate policies (ZIRP) and quantitative easing (QE) in late 2008. And Fed monetary stimulypto is still running strong after almost 14 year of monetary mismanagement and asset bubble stimulation.

The Federal Reserve under Bernanke and Yellen raised their target rate exactly once under President Obama before the election of Donald Trump. After Trump was elected, The Fed raised their target rate 8 times, lowered it 5 times. There have been no rate hikes under Biden.

There seemingly never-ending Fed monetary stimulus has resulted in the top 1% seeing their share of total net worth soar relative to the share of net worth of the bottom 50%. But note that starting in 2014 just as The Fed was engaged in QE 3. But the real divergence occurred after The Federal government heaped trillions in fiscal stimulus on top of the skyrocketing monetary stimulus.

In terms of income inequality (as measured by the GINI coefficient), it just keeps getting worse and worse.

Let’s see if The Fed actually delivers by reducing their monetary stimulypto.

My Kuroda! Japan’s Inflation “Miracle” (0.5% Inflation) Despite $5 Trillion BOJ Balance Sheet And -0.10 Policy Rate

My Kuroda!

Forbes has an interesting article on the Japanese “miracle” entitled “The $5 Trillion Inflation Time Bomb No One’s Talking About.”

It’s taken nine years and the Bank of Japan supersizing its balance sheet to the $5 trillion mark, but Asia’s second-biggest economy finally has some inflation.

Officials in Tokyo are realizing the hard way, though, that it’s best to be careful what you wish for as bond yields spike.

Granted, the gains in consumer prices Japan is reporting are negligible compared to those in the U.S. and China. And inflation is still a good distance from the BOJ’s 2% target. Still, the 0.5% rise in consumer prices in January year-on-year is already unnerving the bond market. It followed a 0.8% jump in December and marks the fifth straight month of increases.

The worry is that Japan’s inflation is the “bad” kind. Haruhiko Kuroda was hired as BOJ governor in March 2013 to end deflation. Kuroda unleashed tidal waves of liquidity. That drove the yen down 30%, generated record corporate profits and sent Nikkei 225 Average stocks to 31-year highs.

Despite a staggering balance sheet with a -0.10 bps policy rate, Japan has only 0.5% inflation.

And Japan’s yield curve is negative at 3 year tenor and less.

How is it that Japan has virtually no inflation with negative rates but the USA has 7.5% inflation with a 0.25% target rate? Could it be the USA undertook massive fiscal spending related to COVID and reduced energy sources in an effort to go “green” that led to 7.5% inflation??

My Kuroda!

Good governments don’t go on wild, wasteful spending sprees and shut off energy sources like the Biden Administration and Congress.

Simply Unaffordable! How The Federal Reserve And Federal Government Are Making Housing Unaffordable For Millions (Rents Growing At 18%, Home Prices Growing At 19%, REAL Wages Growing At … -1.80%)

The Federal Reserve and Federal government are helping make housing simply unaffordable!

In January 2020, just prior to the COVID outbreak in the US, the Case-Shiller national home price index was growing at 4% YoY, the Zilliow rent index (all homes) was growing at 2.92% YoY and REAL average hourly earnings were growing at 0.52% YoY.

Then COVID struck and the Federal government dumped trillions of dollars of stimulus into the economy and The Federal Reserve massively expanded its balance sheet. Now the US has home prices growing at a 18.8% rate, rents (for those who can’t afford to purchase a home) growing at 14.91% and REAL hourly earnings growing at -1.80%.

The site Apartment List has an even bleaker view of rent growth, with rents in January 2022 having grown by 18% YoY.

Now that COVID is fading, we see New York City rents growing at 33.5% YoY followed by Florida and Arizona cities at 29.3% and higher rates. Irvine CA is seventh at 28%. The slowest growing city is Oakland, CA is growing at only 0.5%.

So, The Federal Reserve and Federal government have created their version of a horror film with even rents blowing out of control. And it’s getting weirder as inflation blows out of control.

Whip It! US Misery Index Highest In Modern History As Energy, Food And Building Material Prices SOAR (Flexible CPI Overwhelms Declining Unemployment Rate)

It is truly a miserable time for many Americans as demonstrated by the Misery Index (inflation rate + unemployment rate). But rather than using the CPI YoY measure at 7.5%, I am using the FLEXIBLE CPI YoY to compute the misery index. And is it ever miserable!

In January, the CORE flexible CPI YoY + U-3 unemployment rate hit a modern high at 22.99%. Or at least since 1967.

Like the movie “50 Shades of Gray,” we have 50 shades of inflation. Examples?

How about hardwood? Producer Price Index for hardwood is up 30.8% YoY.

How about diesel fuel prices? They are UP 40% since January 1, 2021.

How about housing? UP 20% YoY according to Zillow’s home value index.

Global food prices? UP 20% YoY.

I could go on and on, but you get the picture. Rising energy, food and construction materials are soaring making many Americans miserable.

But Powell and The Fed have promised to whip inflation. Whip it good … with interest rate increases.

Double Whammy, Staglflation Style! US Rents Soaring (12%) As Real-time Q1 GDP Slows To 0.7%

Call this a double whammy! Red-hot rents combined with a slowing economy.

According to CoreLogic, single-family annual rent growth finished 2021 at a new record: 11.7% YoY for high tier rental properties and 10.4% YoY for low tier rental properties.

Of course, southern and southwest rental properties are seeing the fastest rent growth. Particularly Miami at 36% YoY. Phoenix is no slouch at 19% growth in rents.

Inflation is really ripping the insides out of America’s working class. Especially with real-time GDP slowing to 0.7%.

Double whammy, indeed!

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US Mortgage Rates Jump To 4.2%, Spread Between Fixed-rate Mortgages And 5/1 Adjustable-rate Mortgages Now 133 Basis Points (Broken ARMs??)

The US 30-year mortgage rate broke through the 4% barrier. According to Bankrate’s mortgage survey, the 30-year mortgage rate is now 4.2%.

Even more interesting is the 5/1 Adjustable Rate Mortgage (ARM) rate falling slightly to 2.87%. That is quite a spread between the 30-year fixed and 5/1 ARM rates! That is 133 basis points.

Broken ARMs??

Fed’s Bullard Backs Supersized Hike, Seeks Full Point by July 1 (10Y-2Y Yield Curve Crashing)

Call this “The running of the Bull(ard)s mouth.”

Federal Reserve Bank of St. Louis President James Bullard said he supports raising interest rates by a full percentage point by the start of July — including the first half-point hike since 2000 — in response to the hottest inflation in four decades.

“I’d like to see 100 basis points in the bag by July 1,” Bullard, a voter on monetary policy this year, said in an interview with Bloomberg News on Thursday. “I was already more hawkish but I have pulled up dramatically what I think the committee should do.”

Bullard’s plan involves spreading the increases over three meetings, shrinking the Fed’s balance sheet starting in the second quarter, and then deciding on the path of rates in the second half based on updated data. He said he was undecided on whether the March meeting should begin with 50 basis points, and would defer to Fed Chair Jerome Powell in leading the discussion. Powell, at a press conference in January, didn’t rule out the idea of such a move.

Bullard’s comments, along with the war drums along The Potomac about a Russian invasion of The Ukraine, are causing the 2-year Treasury yield to rise faster than the 10-year yield.

Resulting in a crashing 10Y-2Y curve.

The GINI measure of income inequality is at an all-time high as the purchasing power of the US Dollar is at an all-time low. Way to go, Federal Reserve and Congress!

What will The Fed decide at their emergency, closed-door meeting today? Nice transparency, Powell!

Bidenflation? WTI Crude UP 91% Under Biden, Foodstuffs UP 47%, 30Y Mortgage Rates UP 39% (6-7 Rate Increases, What’s It Going To Be?)

Well, it has been a cringe-worthy year+ under President Biden. West Texas Intermediate Crude futures price is up 91% and the Commodity Research Bureau Foodstuffs index is up 47%. Talk about Biden’s energy folicies being passed through to American households in the form of higher food costs and energy prices!

And then we have mortgage rates. Bankrate’s 30Y mortgage rate is up to almost 4%, up 39% since the beginning of 2021.

Other central banks are raising rates like banshees on the moor, while The Federal Reserve continues to send conflicting signals about possible March rate hikes.

Goldman Sachs sees 7 rate hikes in 2022, culminating in an eventual 2% rate in December.

Fed Funds Futures are signalling 7 rates increases by the February 1, 2023 meeting.

6 or 7 rate hikes, what’s it going to be?

It’s just like Biden to blame COVID for reckless Federal monetary and fiscal policies that overloaded the system.

US Inflation Surges To 7.5% YoY, REAL Weekly Wage Growth Falls To -3.1% YoY (Taylor Rule Now Suggests Fed Funds Target Rate Of …18.90%)

As expected, US inflation surged from 7.0% in December to 7.5% in January.

REAL average weekly earnings growth YoY fell to -3.1%.

Energy prices YoY lead the wage (fuel oil UP 46.5% YoY). Used cars and trucks UP 40.5%. At least food is up “only” 7%.

At 7.5% CPI, the Taylor Rule suggests that The Federal Reserve should have their target rate be 18.90%.

At least CORE inflation is “only” 6% YoY.

How about rent CPI? The owner’s equivalent rent of residences rose to 4.09% YoY. Seems a little misleading since home prices nationally are growing at 18.81% YoY.

Fed Funds Futures data points to 6-7 rate HIKES over the coming year. BRACE FOR IMPACT!!

Yes, this is Powell’s famous chili recipe if The Fed actually starts to raise rates and pare back the balance sheet stimulus.

30 Tons! Mortgage Rates Rising As Fed Navigates Rising Rate With $30 Trillion In Federal Debt (Good Time To Buy Home Hits All-time Low)

30 Trillion in debt and what do you get? Another day older and deeper in debt. What else do we get? Rising inflation and rising interest rates.

Mortgage rates are rising rapidly as The Federal Reserve contemplates 5-7 rate increases over the next year and removing their balance sheet stimulus.

And according to Fannie Mae, the share of Americans to say it’s a good time to buy a home hits an all-time low.

Yes, I want to see how The Federal Reserve will navigate the rising rate scenario in the face of $30 trillion … and growing … Federal debt load.

Instead of Tennessee Ernie Ford, I want to hear Delaware Joe Biden explain this to us.