Q2 marks the 11th STRAIGHT quarter of unrealized losses on investment securities for banks, a streak never seen before. The number of banks on the FDIC Problem Bank List increased to 66 and represents 1.5% of total.
This is in addition to price Increases over last 4 years… CPI Medical Care: +7.8% CPI Apparel: +12.7% CPI Used Cars: +18.3% CPI New Cars: +20.5% CPI Food at home: +21.4% CPI Shelter: +23.4% CPI Food away from home: +25.4% CPI Electricity: +29.8% CPI Gas Utilities: +34.9% CPI Transportation: +38.8% US Home Prices: +48.0% CPI Auto Insurance: +52.4% CPI Gasoline: +53.5% CPI Fuel Oil: +54.9%
Don’t spill the wine, its too expensive under Biden/Harris/Powell.
Following last month’s modest miss in CPI which sparked speculation about a 50bps cut, which was then boosted by the jobs report miss and the huge downward revision, moments ago the BLS reported that – as only a handful of Wall Street strategists warned – CPI actually came in hotter than expected at the core level, rising 0.3% MoM vs expectations of a 0.2% print, with all remaining metrics coming in line, to wit:
CPI 0.2% MoM (or 0.187% unrounded), Exp. 0.2% – in line
And visually, here is the headline print, where the annual CPI increase dropped to just 2.5% from 2.9%, the lowest since February 2021…
.. and the core….
…. as goods deflation is stalling and may even print positive in the coming months, while core service inflation remains the biggest driver.
That was s the 51st straight month of MoM increases in Core CPI, and a new record high.
Under the hood, used car prices fell 1.0%, moderating from last month’s 2.3% drop, while airline fares jumped 3.9%, a big reversal to last month’s bizarre -1.2% drop. Car insurance costs jumped another 0.6%, after rising 1.2%; furniture prices dropped 0.3% reversing last month’s 0.3% rise.
Perhaps more worrying is the fact that while rent inflation has flatlined, shelter inflation posted its first increase since early 2023!
August Shelter inflation up 0.43% MoM and up 5.23% YoY vs 5.05% in July
August Rent Inflation up 0.39% MoM and up 4.97% YoY vs 5.09% in July
And the first monthly increase since March 2023 highlighted:
Last, but not least, and perhaps most ominous of all, is that while inflation refuses to be “killed” even as the Fed is about to start cutting rates, Supercore CPI rose 0.33% MoM, the biggest monthly increase since April, driven by continued acceleration in transportation services, which jumped the most in 5 months.
Finally, money supply growth is reaccelerating…
Which begs the question: how long until the Fed’s next easing cycle unleashes the Arthur Burns fed:
Putting it all together:
Underlying inflation unexpectedly picked up, as core CPI increased 0.3% from July, the most in four months, and 3.2% from a year ago
Only five of the 65 forecasts in Bloomberg’s survey called for a 0.3% increase in the core CPI. Almost everyone else was at 0.2%, and four had it at 0.1%. The five were right.
Shelter prices, the largest category within services, climbed 0.5%, the most since the start of the year and the second month of acceleration, defying widespread expectations for a downshift. Owners’ equivalent rent — a subset of shelter and the biggest individual component of the CPI — rose at a similar pace.
Airfares rose a hefty 3.9% in August after falling for the previous five months while costs for energy and used vehicles fell
Risk assets pumped and dumped and bond yields rose. S&P 500 futures dropped steeply immediately after the report came out, before paring losses. The yield on 10-year Treasuries advanced two basis points to 3.66%. The dollar wavered.
And while one can stick a fork in the market’s hopes for a 50bps rate cut (odds slumped from 30% to 20%… and from 50% last Friday)…
… the question remains: will the Fed really cut rates as shelter inflation inflects higher for the first time since 2023.
After last night’s ABC Presidential debate. Where Kamala acted like she was auditioning for part in the movie “Mean Girls” and the ABS moderators acted like pure Soviet-era Russian journalists.
Since October 2019, native-born US workers have lost 1.4 million jobs; over the same period foreign-born workers have gained 3 million jobs.
Ay ay ay ay, ay ay ay ay!
The last three monthly jobs reports show aggregate job gains of 340K. Of that total 172K are accounted for by Health Care and Social Assistance and 60K by Government. Manufacturing jobs have shrunk by 34K; Professional and Business services, a 16k decline.
Biden/Harris have alliowed the US to be invaded. Under Harris, the new US national anthem will be Jesusita en Chihuahua.
The US government now pays out on average $3bn in interest expenses per day…If the Fed cuts interest rates by 1%-point and the entire yield curve declines by 1%-point, then daily interest expenses will decline from $3bn per day to $2.5bn per day.
Even worse, unfunded Federal liabilities total $219 trillion while total US assets total only $213 trillion. In other words, if China (for example) forced us to pay off our unfunded liabilities like Social Security, Medicare, etc., we couldn’t.
Notice how NO politician ever discusses The Federal goverment spending LESS money. Particularly not Joe “The fool on the hill” Biden or Kamala “Word salad Kammie” Harris.
The Biden/Harris illiusionomics was built on false hoods.
Look at pending home sales, now the LOWEST in history. The midwest led the decline in PHS at -7.8%.
Why? One reason is the illusion of a growing economy … that wasn’t growing organically. It was just Biden/Harris doling out trillions in handouts. Trillions of dollars in annual “consumer spending” is actually just government handouts being spent by people – it’s increased every month this year:
I read “The Arms of Krupp” by William Manchester. A great book about the rise of ThyssenKrupp during World War II. It is one of the world’s largest steel producers, but it now has NEGATIVE ENTERPRISE VALUE.
The cause? Germany is up the creek without an economic paddle after years of gross mismanagement by Angela Merkel and her party. Mass immigration in Germany and a slowdown in the global economy aren’t helping.
These are the essential pillars of “21st century socialism” and the radical left Peronism that obliterated Argentina. These are also the main elements of the economic plan presented by Kamala Harris and the Democratic Party. Undoubtedly, this is the most radical socialist economic plan ever announced by the Democrats.
According to the Committee for a Responsible Federal Budget (CRFB), Harris’s proposals will cost $1.95 trillion over 10 years. However, it emphasizes that if certain measures become permanent, this figure could increase to $2.25 trillion.
The Harris campaign has stated that these costs will be offset by a classic excuse of socialism in any election: “higher taxes on corporations and high earners.” This is, obviously, ludicrous, because there is no revenue measure that will cover the already bloated $2 trillion annual deficit and an added $2 trillion. The mantra of “higher taxes for the rich” always means higher taxes and more inflation, a hidden tax, for you.
The Congressional Budget Office (CBO) has already warned of the fiscal disaster of the United States, with an annual deficit of 6% of GDP. Despite not accounting for a recession and projecting record tax revenues from 2024 to 2034, the CBO predicts an explosion in the budget deficit from $1.9 trillion to $2.8 trillion by 2034, even before factoring in Harris’s new spending plan. This means that the adjusted deficit will rise above 6.9 percent of GDP by 2034, almost twice the average of 3.7 percent over the previous 50 years.
Following the Harris plan, the United States public debt will likely increase by $24 trillion in a decade. As I have explained, there is no set of revenue measures that can bring $2 trillion per year in additional tax receipts, and tax hikes will harm both investment and growth.
An economy that generates an annual deficit of 6 percent of GDP to achieve a mere 2 percent annual growth is already on a dangerous path, and Harris’ plan would make it even worse.
Kamala Harris promises to cut inflation by spending and printing more money, reducing competition, and attacking businesses. It has never worked and never will because it is upside-down economics. Welcome to the US “Peronism.”.
Imagine all those United States citizens who have escaped Latin American or European economies impoverished by interventionism to find a better opportunity in the United States only to find that the same policies will be implemented by Harris.
The narrative of price gouging and greedflation is simply false. In 2023, profit margins in the grocery industry hit the lowest level since 2019, at 1.6%, according to the IMF. Corporations, even if they were stupid and reckless, cannot make all prices rise constantly. Competition would eat away at their market share; newcomers would eliminate them, and aggregate prices would fall. Furthermore, stores and businesses cannot make aggregate prices soar, maintain the increase, and consolidate it, which is the measure of inflation (CPI) we read every month. The only thing that can make all prices rise and continue increasing at a slower pace is printing money and eroding the purchasing power of the currency.
The only thing that can make aggregate prices rise constantly is the destruction of the purchasing power of the currency, which comes from massive government spending and printing currency to disguise fiscal imbalances.
Kamala Harris and her team know that their spending plan will make the national debt soar and that price controls do not reduce prices. In fact, these should not be called “price controls” but “limits to competition.” If corporations were the cause of inflation and price controls were the solution, Peronist Argentina would have enjoyed the lowest inflation in the world in the past decades.
Harris’ proposals to forgive debt are profoundly anti-social. They do not forgive any debt; they just add it to the national debt and make you pay for it. This enormous increase in public debt will be a burden for every American, particularly the poorest, with persistent inflation and lower real wages. US citizens have already endured negative real wage growth since January 2021, when Biden took office, according to the Federal reserve of St Louis. Expect worse.
Why does Harris promote the same policies that have failed everywhere? Promising free stuff and blaming others for the negative consequences is the defining strategy of socialist politicians.
Are you surprised to see how Germany, France, and other historically rich nations slump into stagnation, high debt, persistent inflation, enormous taxes, and the destruction of the middle class? Those policies are what Harris is promising. Who benefits? The vast government and its surrounding corporations reap the benefits.
Many people hold the belief that a nation cannot be considered socialist if it contains private companies. It makes no sense. State control does not limit itself to capital ownership but also to the imposition of increasingly restrictive laws, regulations, and confiscatory taxes. In fact, the government likes to absorb most of the wealth created by the private sector without the inconvenience of managing the businesses. Huerta de Soto defines socialism as “any system of institutional, methodical aggression against the free exercise of entrepreneurship” and that is precisely what Harris promises.
Higher taxes and more debt.
The government will print money to provide subsidies in a currency that is constantly losing value. It will blame stores and businesses for inflation. Interventionist policies will continue to erode the private sector. And they will repeat.
The makers of these policies are aware that they will negatively impact the economy, yet they will also engender a substantial number of enslaved citizens who rely on the government and must abide by its decisions. Voters see an alleged tsunami of free money but ignore the fact that they will pay for it through higher inflation, lower real wages, and diminishing opportunities for small businesses and families.
Yes, under Obama/Biden, then Biden/Harris,
The Harris team believes deficits do not matter and that the Federal Reserve can always disguise any budget imbalance. However, cracks have already appeared. Persistent inflation is the consequence of years of excessive spending and monetization. The next step is the risk of losing the US dollar as the world reserve currency when the world stops accepting the ever-increasing debt.
Under Obama/Biden and Biden/Harris, we have seen massive money printing and devaluation of the US Dollar. Trump/Pence too, but they were nailed with Covid. And the Democrat shut down off schools and local economies.
But all Harris (America’s Eva Peron) wants to do is dance. And not answer serious questions.
Confounded Interest - Anthony B. Sanders 
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