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 inflation that is crushing Americans is due to energy and food price increases. That is, the non-core inflation. Under Biden, food is up 63%, gasoline is up 92% and diesel prices are up 112%. But The Fed doesn’t consider food and energy prices, per se.
If we look at the Taylor Rule considering fighting inflation including food and energy, The Fed would have to raise their target rate to … 21.38%.
Now, The Fed can clearly cool-off the housing market by raising rates. In fact, my fear is that they go too far and crash the housing market. The Fed will NEVER get to 20% again like we last saw under Volcker in 1981. 20% rates certainly cooled home prices back then and Fed rate hikes helped crash the housing market in 2008.
So, when The Fed says they want to be the inflation-fightin’ Fed, we must be aware what The Fed can and cannot do. They can’t tame the inflation beast in the form of food and energy prices (unless they crash the economy), but they can crush home prices.
Seriously, with soaring energy prices and soaring EVERYTHING prices (except for real wage growth), it is difficult to see how the US will avoid a recession.
Yes, everything is seemingly rising in price, yet REAL average hourly earnings growth keeps falling. Rising price + declining real earnings growth = eventual recession.
The US Senate yesterday confirmed the reappointment of Jerome “Slowhand” Powell as Federal Reserve Chairman.
The good news? Atlanta Fed’s Flexible CPI YoY cooled to 20% in April. The bad news? Flexible prices are still growing at 20% while wages are growing at 5.5% YoY.
On the export front, export prices are cooling and were at 18% YoY in April, down slightly from March. Import prices cooled to 12% YoY as The Federal Reserve has slowed asset purchases.
I would have preferred President Biden appoint a serious Federal Reserve Chairman liked Stanford University’s John Taylor (of Taylor Rule fame). In his honor, here is the Mankin version of the Taylor Rule which calls for a Fed Funds Target Rate of 13.89% while the current Fed Funds Target Rate under Powell and the Gang is … 1%.
Call this “Nobody’s Everything.” Crytpocurrencies are getting clobbered. But then again, the S&P 500 is not doing so well. But crypto stalwarts Bitcoin and Ethereum have down even worse.
At the dollar strengthens, Bitcoin has gotten pummeled.
But at least Bitcoin rose this morning along with Bitcoin Cash. And XRP. But the others are getting clobbered.
Perhaps Joe Biden and Fed Chair Jay Powell are channeling Dean Martin by letting us have it.
Since Obama’s 3rd term as President (aka, Biden’s installation as President on January 20, 2021), mortgage rates have risen 87%, regular gasoline prices have risen 80%, CRB foodstuffs are up 59% and Commodities are up 63%.
And don’t forget about America’s energy life force, WTI Crude Oil. It is UP 123% under Biden.
The Biden Administration and The Federal Reserve together should be called “The Cooler Kings” in that their policies are putting a Big Chill on the mortgage market and equities.
Mortgage rates are skyrocketing thanks to the Federal Reserve.
The 30-year fixed-rate mortgage averaged 5.27% for the week ending May 5, according to data released by Freddie Mac FMCC, -1.62% on Thursday. That’s up 17 basis points from the previous week — one basis point is equal to one hundredth of a percentage point, or 1% of 1%.
House price growth to wage growth is below the all-time high, but remains above housing bubble levels of 2005-2007.
The Refinitiv Venture Capital Index is down 53% since November ’21 as The Fed cranks up interest rates.
Well, at least commodities are soaring under “The Cooler Kings.” Pretty much everything else is sucking wind.
The question, of course, is whether The Federal Reserve will back off its plans to aggressively raise interest rates in lieu of crashing stock market, venture capital, and possibly home prices.
President Biden (or whoever is pulling his strings) is inflicting a “Medusa Touch” on the US. That is, everything his administration touches turns to stone.
Let’s look at average hourly earnings. Thanks to “progressive” energy policies from Biden, REAL average hourly earnings growth has crashed and burned.
But here is the chart that the Biden Administration touts showing average hourly earnings growth at 5.6% YoY (although I doubt if Jen Psaki would leave out the massive distortion caused by The Federal Reserve’s “Let’s go crazy!” monetary policy.
Another Medusa Touch moment is the reverse repo market. When I wrote about reverse repos before, several people wrote me saying “You don’t understand. This is a temporary problem and will vanish shortly.” However, The Fed’s reverse repo facility has now climbed to an all-time high.
Then we have the disruptive effects of The Federal Reserve deciding for us that mortgage rates are too low and should be higher.
Now look at lithium prices, a key element for electric car batteries. Making the switch from Internal combustion engines to electric motors far more costly.
The list goes on and on.
Suffice it to say, everything the Biden Administration touches turns to stone.
But I wager that the Biden Administration wishes that Hunter Biden’s laptop would turn to stone.
Only an elitist DC bureaucrat like Joe Biden would laugh at inflation that is ruining the lives of millions of Americans.
Confounded Interest - Anthony B. Sanders 