Bitcoin Rallies To $20k As Yellen Confesses That Inflation Will Remain High For 2022 (So, Monetary Tightening ISN’T The Answer??)

US Treasury Secretary and former Federal Reserve Chain, Janet Yellen, admitted on ABC’s This Week that US inflation is “unacceptably high”and prices are likely to stick with consumers through 2022, and that the US economy is likely to slow down.

“We’ve had high inflation so far this year, and that locks in higher inflation for the rest of the year,” she said Sunday on ABC’s “This Week.” 

“I expect the economy to slow,” she said, adding: “But I don’t think a recession at all inevitable.”

US inflation accelerated to 8.6% in May, a fresh 40-year high that signals price pressures are becoming entrenched in the economy. Those figures dashed any hope that inflation was starting to ebb, prompting the Federal Reserve to unleash its biggest interest-rate increase since 1994.

Hey, I thought strangling the US mortgage market and housing markets was supposed to cool the inflation rate, Janet.

On the good news/bad news front, cryptocurrency Bitcoin fell to $17,600 earlier today before rebounding to above $20,000 as the expectation of further Fed rate increases diminished (Yellen admitted the economy is slowing).

Yellen ignored rising mortgage rates which is putting a chokehold on the US housing market.

Hey Janet! So you are admitting that Biden’s energy policies AND massive Congressional spending bills ARE helping to drive prices through the roof and that Fed rate increases won’t tame the savage inflation beast?

Opening Hell! Markets In Sea Of Red Thanks To Global Slowdown And Fed Signals Of Tightening (Global Markets In Sea Of Red)

Today’s opening bell is “Opening Hell!”

US Treasury 10Y yields are up +12.1 basis points as of 9:40am EST. And rising across the globe.

Equity markets? Dow is down -621.93 points and the NASDAQ is down almost -3%. But equity markets are down across the globe.

Commodities? Once again, all commodities in the red except corn (which I don’t eat) and natural gas.

Speaking of opening hell. The US Treasury 10Y-2Y yield flattened to 7 basis points.

And then we have Markit’s Credit Default Swaps index rising to the highest level since Covid (April 2020).

Markets are in a “Sea of Red.”

Weekend Update! US Gasoline Tops $5 (Highest In History), 2Y Treasury Yields Soaring, Mortgage Rates Highest Since 2008 (Inflation Tax Costing Households $5,200 More YoY)

Up, up and away in our inflationary balloon!

Regular gasoline prices have breached the $5 a gallon barrier, the highest in recorded history. And it is even worse in states like California where regular gas prices have been above $7 per gallon.

Bankrate’s 30-year mortgage rate is now 5.78%, the highest since 2008. And rising really fast as The Fed tightens the monetary noose.

Speaking of noose tightening, the 2-year US Treasury Note yield is rising awfully fast.

The US Treasury 10Y-2Y curve slope just flattened to 8.819 bps and challenging the 0% grade awfully fast.

The US Dollar is soaring as US inflation soars, consumer purchasing power (green line) collapses along with M2 Money Velocity.

There is little doubt that soaring inflation, gasoline and food prices have hurt Biden’s popularity as well as the Democrats popularity ahead of the upcoming mid-year elections. People for the most part vote with their wallets.

According to estimates by Bloomberg Economics, US households will spend $5,200 more this year than they did last year on the same consumption basket.

That breaks down to $433 extra in expenditures every single month. That is what is called “the inflation tax.” And it hurts.

Call this The Inflation Tax Blues.

UMich Buying Condition Plunges To 43, Lowest Since 1982 As Fed Goes Crazy (Consumer Sentiment Drops To Lowest Level EVER)

The Federal Reserve is going crazy on inflation news!

The Fed is expected to raise their target rate to 2.875% by February 2023. With that expectation, mortgage rates (yellow line) are soaring. And with that, University of Michigan’s Buying Conditions for housing has plunged to 43, the lowest levels since 1982 as the US was trying to recover from high inflation.

The University of Michigan consumer sentiment index just plunged to the LOWEST LEVEL in history on inflation and Fed’s reaction.

Average REAL wage growth has now declined to -2.11% YoY.

Do Washington DC politicians and bureaucrats feel like we do? I doubt it.

Run For Cover! Banks Park Near Record Amount With Fed As Global Inflation Soars, Overnight Reverse Repo Operations Above $2 Trillion (Gasoline Prices Rise To Highest In History)

Run for cover!

Markets opened after a long (and expensive) Memorial Day weekend, with the 10-year Treasury yield up 8.1 basis points (to

Meanwhile, banks continue to park funds at The Federal Reserve in the form of reverse repos as global inflation soars.

And then we have US gasoline prices rising to the highest in history.

Its like banks know something that the rest of us don’t. Although we do know about the highest gasoline prices in history.

Memorial Day Update! US Dollar Declining, Gasoline UP 92.4% Under Biden, Food UP 60%, Rents UP 14.75x (Traveling Will Cost A Lot More! But So Does Renting)

Memorial Day weekend is one where families often travel to meet relatives and friends, or travel to Washington DC to remember those who have died in the service of our country.

But traveling has gotten a lot more expensive under Biden. Gasoline prices are up 92.4% under Biden, while food prices are up 60%. Those hamburgers and hot dogs for grilling are being replaced by … pizza? Or maybe plant-based products.

Zillow’s Rent Index All Homes YoY was only 0.6234% in February 2021, and has soared to 16.36% YoY under Biden. That is an increase of 14.75x. So, not only is it much more expensive to travel on Memorial Day weekend, but it is far more expensive to stay home in your rental property.

On the currency front, we are seeing the US Dollar falling (greenback line), along with the Yuan/USD cross currency. West Texas Intermediate Crude Cushing OK spot is at $115.07.

At least Venezuela and Iran are benefiting greatly by Biden’s energy policies, even if Americans are suffering. Perhaps this is the new foreign policy of Wynken (US VP Harris), Blynken (US SecState), and Nod (Biden).

Remembering my Uncle Jack Sanders who served in the Battle of The Bulge during World War II, winning an individual Silver Star for bravery and two Purple Hearts. He rose from “buck” private to First Sergeant by the end of WWII.

Fed Carrying $330B In Unrealized Losses On Its Assets As of Q1 (Purchasing Power Of US Dollar And M2 Money Velocity Collapsing Like Dying Star)

Yikes! One of the unmentioned costs of Fed monetary tightening is the one to US taxpayers.

Fed carrying $330B in unrealized losses on its assets according to Q1 financial statement. Which US tax payers are on the hook.

Adjusting for the appreciation in its assets the Fed had seen through the end of last year, the unrealized losses were an even larger $458 billion.

This makes the Ukrainian relief bill of $30 billion look like chump change. Although it is about the same amount as Biden’s student loan forgiveness plan which would about to $321 billion.

Nobody spends other peoples’ money like politicians and now The Federal Reserve. Who are also DC-based politicians.

And yes, the purchasing power of the US Dollar and M2 Money Velocity (GDP/M2) appear to be collapsing like a dying star.

The Fed Is Pitting Wall Street Against Main Street, Investor Share Of Home Purchases Soars (How Far Will The Fed Go With “Tightening”?)

The Federal Reserve has been signaling a tightening of its loose monetary policy (essentially loose since the housing bubble burst of 2008 and the ensuing financial crisis). It is still loose as The Fed hasn’t really trimmed its massive balance sheet yet and has just raised it target rate to 1%.

So, potential home owners have to pay 5.10% for a 30-year fixed-rate mortgage while the effective Fed Funds rate, the rate at which banks lend to each other, is a measly 0.83%. This puts consumers at a relative disadvantage to large Wall Street firms that are gobbling up houses at an accelerated rate.

RealtyTrac has a Attom-sourced table of investor purchases of housing from Q3 2021, before The Fed started helping to crank-up mortgage rates for consumers.

With the US housing market slowing (thanks to The Fed’s signaling of monetary tightening), the question now is how far will The Fed go in its “War on Inflation!”?

You can see a major cause of inflation in the US since 2000: Federal spending and Federal (public) debt. During The Great Recession of 2008-2009, we saw inflation (CPI YoY) collapse into negative territory as Federal spending and debt soared. But the mini-recession of 2020 caused by the Covid governments shutdowns led to TWO surges in Federal spending and debt: Covid relief followed by the infrastructure spending bill. Combined with Biden’s anti-fossil fuel executive orders and massive splash of Federal spending in to the economy, we have inflation soaring.

If surges in Federal spending (requiring surges in Federal debt) have gone away (except for $40 billion in Ukrainian relief and Biden’s possible student loan cancellation of $10,000 that will cost an estimated $321 billion … and help drive up college tuitions even further), we may be over the “twin gorgings” of the Covid spending spree. This alone may result is a decline in the inflation rate.

Where do we sit today with the REAL neutral rate? The REAL Fed Funds Target Rate (upper bound) is -4.41%. It was in positive territory during the Trump years. But then Covid struck.

So, we sit here today with Fed Monetary policy “loose as a goose.” And Wall Street investors “drunk as a skunk” on Fed Stimulus.

No wonder Wall Streeters like to go “Down To The Nightclub!” The Fed still has not taken the monetary stimulypto away, but have taken it away for consumers buying housing.

Consumer Sentiment For Home Buying Falls To Lowest Point In History, Even Lower Than Housing Bubble Burst And Financial Crisis Of 2008 (Housing Too Expensive, Mortgage Rates Soaring, Inflation Roaring)

The numbers keep getting worse.

The University of Michigan Consumer Survey showed a decline in May to 58.4 (100 is baseline). Soaring inflation is a likely culprit.

But the truly horrible survey result is the UMich Buying Conditions for Houses, plunging to 45. The reason? Crazy, expensive house prices courtesy of The Federal Reserve and rising mortgages (also, courtesy of The Federal Reserve).

The buying conditions for houses is now the lowest in the history of the University of Michigan consumer survey. In fact, consumer sentiment for housing is far lower than during the awful housing bubble burst of 2008 and the subsequent financial crisis.

And the US economic surprise index has turned negative.

Here is Fed Chair Jerome Powell wielding his monetary bat called “Lucille.”

Morning Update: Bankrate’s 30Y Mortgage Rate Rises Slightly To 5.29% (Housing Rents UP 16.4% YoY, Gasoline UP 92% Under Biden, Food UP 60%)

US mortgage rates are up slightly this morning. Bankrate’s 30-year mortgage rate survey is up to 5.29%.

The Biden Scorecard is still a bleak one (for non-elitists). Regular gasoline is UP 92% under Biden, Diesel fuel is UP 110%, foodstuffs are up 60% under Biden, Zillow all-house rents are UP 16.4% YoY.

It hurts to be in the middle class under Biden.