The Sisyphus Economy! Top 1% Of Earners Gaining Wealth Relative To Middle Class Thanks To The Federal Reserve And Federal Government Policies (Top 1% Have More Wealth Than The Middle Class)

According to mythology, Hades made King Sisyphus roll a huge boulder endlessly up a steep hill in Tartarus. Unfortunately, the modern day version of Sisyphus is the middle class pushing a boulder endlessly up a steep hill while the top 1% (the elite class) horde more and more wealth.

An example of the Sisyphus economy? The top 1% of earners (blue line) have seen an incredible increase in net worth, particularly after Fed Chair Alan Greenspan’s big rate cuts (green line) from 2000 to 2004. Each subsequent rate cuts under Bernanke (2007-2008) and Yellen (who just kept rates too low for too long). The end result? In the red box, the top 1% made out like bandits.

The end result? The top 1% of earners now have more wealth the the middle class.

Of course, asinine Federal government policies (like open borders and making donors wealthy with green energy spending) and the lack of a serious approach to corruption have complicated matters.

So the working class, middle class and low wage workers, are the ones pushing the boulder up a hill while government insiders like Biden make millions through influence peddling. So, unlike the Sisyphus legend, the middle class and low wage workers are being punished by simply existing.

The Fed’s balance sheet has had a similar effect, particularly since the financial crisis of 2007-2008 when The Fed truly became unhinged under Janet Yellen. So of course, Yellen was made Secretary of Treasury, the largest honey pot in the world, so she could continue growing the elites power while minimizing the wealth of all others.

Should we end The Fed? Of course! But we can’t even have a rational discussion on why we are funding a war in Ukraine (to protect their border?) while we leave our borders open to invasion?

Here is one of the 1% who made a fortune by simply having a big mouth and being in politics.

Back In The Saddle Again! Why The Fed Will RAISE Rates (Home Price Growth Reaccelerating, SuperCore Inflation Is Rising, Mass Immigration)

The Federal Reserve (aka, The Keep) is back in the saddle again. The Fed has been unable to control inflation since Federal government spending was so fast and furious after Covid that little thought was given to the long-term ramifications of insane spending. Not to mention The Fed’s overreaction to Covid.

Example?

Home price growth is rising again. Home prices in traditional “bubble cities” out west were cooling, but are reaccelerating. Even Detroit and Cleveland are seeing rapid home price acceleration.

Yes, housing inflation is sticky.

In retrospect, this wholesale dovish euphoria may have been rather short sighted, because after several strong economist reports hit the tape (with the Nov 2024 election growing closer by the day, that should hardly have been a surprise), March rate cut odds collapsed from over 100% in late December, to just 12% currently…

… as first the January CPI printed red blazing hot – with core coming in at 3.9% far higher than the 3.7% expected, with the 3-month annualized rate jumping to 4% from 3.3% and the 6-month annualized rate spiking to 3.7% vs 3.2%, but the biggest highlight was SuperCore CPI (i.e., core CPI services ex-Shelter) which soared 0.7% MoM, the biggest jump since Sept 2022…

… and then the January PPI print come in even hotter, with a core component surging in January by 0.5%, smashing expectations and beating estimates by the most since Jan 2021.

The result: not only has the market rapidly priced out what if formerly saw as many as 6 rate cuts in 2024, but growing speculation that a rate cut may not come at all unless the Fed tightens some more first (and with the S&P500 now over 5000, it is pretty clear that the market has already priced in virtually all rate cuts and has cornered the Fed).

Of course, the mass migration across the Mexican border (who knows? could be up to 11 million under Biden’s Reign of Error). While Paul Krugman, the resident lunatic economist for the New York Times, extols the virtues of mass immigration for driving up GDP, fails to recognize that mass migration is helping drive up prices. This is inflation that The Fed can’t control. And Biden/Mayorkas want even MORE mass immigration.

Maybe Fed Chair Powell should watch the film “The Keep” for lessons on how to control inflation. in the face of government sanctioned mass ILLEGAL immigration from Latin America, China, Africa and The Middle East.

Recession In Mid 2024? Bank Credit And Deposit Growth NEGATIVE After The Stimulus Has Worn Out (EU Ordered To Accept 75 Million More Migrants)

This headline from Zero Hedge makes me so glad I have eaten heart-healthy Quaker Oats and Cheerios every morning for the last 20 years! Study Finds 80% Of Americans Exposed To Fertility-Lowering Chemicals In Cheerios, Quaker Oats. The chemical (chlormequat chloride) was detected in “92 percent of oat-based foods purchased in May 2023, including Quaker Oats and Cheerios.” But that was nothing compared to this Zero Hedge headline: EU “Suicide Pact” Threatens To Flood Continent With 75 Million More Migrants. Makes me wonder if Biden/Mayorkas are under orders from the UN/WEF/Soros to let immigrants pour across our southern border (including 20,000+ Chinese military age males). But back to the economy.

Both bank credit growth year-over-year (YoY) and bank deposit growth (YoY) are NEGATIVE. Covid resulted in massive Federal government stimulus spending (and Federal Reserve hyper stimulus) in 2020, but as the stimulus wears out, so does bank lending and deposits.

Having seen The Fed’s QT appear to stall in February, as Reverse Repo liquidity withdrawal accelerates, all eyes are once again back on the situation on bank’s balance sheets and how deposits are standing up (‘adjusted’ by The Fed’s magical seasonals).

And after the prior week’s miraculous surge in deposits (again, according to The Fed), last week saw total bank deposits (seasonally-adjusted) drop $57BN – the biggest weekly drop since October…

This data is from the week when Regional bank shares shit the bed thanks to NYCB…

Interestingly, on a non-seasonally-adjusted basis, total bank deposits declined about the same as SA -$58BN (and are down $180BN YTD)…

And, excluding foreign banks, domestic deposits dropped $52BN SA (Large Banks -$40BN, Small Banks -$12BN), and tumbled $65BN NSA (Large Banks -$57BN, Small Banks -$$8BN)

As the chart above shows, on an NSA basis, domestic banks have only seen one week of inflows in 2024.

As one might expect, loan volumes shrank during that week by just over $9BN (Large banks -$4.6BN, Small banks -$4.4BN)…

And finally, as a reminder – despite the rebound off the lows again this week in regional bank shares, which must mean everything is awesome, right? – the regional bank crisis is still very much alive as evidenced by the red line below (without The Fed’s imminently expiring BTFP facility)…

…what else are big banks (green line) going to do with all that cash burning a hole in their pockets?

The bottom line is – this looks a lot like a ‘Small Bank’ crisis. The last time this happened, the crisis sparked a sudden $300BN ‘run’ in small bank deposits…

Is The Fed ‘hoping’ for a controlled bank-run this time – so as many small bank deposits are drained voluntarily, before they are drained all at once in a panic (and the Reverse Repo facility is empty, unable to provide any cushion)?

It is looking like a recession in mid-2024 as Covid Stimulypto has run its course. Is the US economy so lame that is requires constant Federal government and Federal Reserve manipulation??

Joe Biden (President of the top 1% of Americans) and his likely replacement “Greasy Gavin” Newsom, wrecker of the California economy. Two economy wreckers on the same stage.

Remember when Democrats were the party of the working man and Republicans (like George HW Bush) were called “Country Club Republicans”? Now Biden and Democrats represent the elitist top 1% of wealth and Trump/Republicans (that Biden snidely calls “Maga Republicans”) represent the bottom 99%. Who woulda thunk??

BTW. Congrats to Iowa’s Caitlin Clark who set the all-time NCAA women’s scoring record with a PERFECT shot.

Biden’s Mortgage Market! Mortgage Demand Down 2.3% From Last Week, Purchase Demand Down -12% From Last Year (Mortgage Rate UP 151% Under Bidenomics)

Wake Joe up before the economy go goes … down any further.

Mortgage applications decreased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 9, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 12 percent lower than the same week one year ago.

The Refinance Index decreased 2 percent from the previous week and was 12 percent higher than the same week one year ago.

Mortgage rates (30Y fixed) are up 151% under Bidenomics.

Gimmie (Cheap) Shelter! Shelter Index CPI Increased 0.6 Percent In January (Largest Factor In Monthly Increase In Index) As Inflation Comes In Hotter Than Expected

Gimme (cheap) shelter!

As soon as Joe Biden started bragging on his low-energy campaign trail about inflation declining I knew it would go up. And it is increasing again.

Shelter cost (aka, housing) is still growing.

Expectations were for a big drop in the YoY consumer price index (from +3.4% to +2.9%) but instead it surprised to the upside (just as we warned) with a +3.1% YoY print for headline CPI (spoiling the sub-3% partiers). Consumer prices rose 0.3% MoM (more than the 0.2% exp) but the headline did decline from +3.4% to +3.1% YoY…

Source: Bloomberg

Core CPI fell below 4.00% YoY for the first time since May 2021, but the +3.86% YoY print was hitter than the 3.7% exp (with prices rising 0.4% MoM – the biggest jump since April 2023)…

Source: Bloomberg

CPI Core: The index for all items less food and energy rose 0.4 percent in January.

The shelter index increased 0.6 percent in January, and was the largest factor in the monthly increase in the index for all items less food and energy.
- The index for owners’ equivalent rent rose 0.6 percent over the month, while the index for rent increased 0.4 percent.
The lodging away from home index increased 1.8 percent in January. The motor vehicle insurance index increased 1.4 percent in January, and the recreation index rose 0.5 percent in January.
Among other indexes that rose in January were communication, personal care, airline fares, and education.
The medical care index rose 0.5 percent in January.
The index for hospital services increased 1.6 percent over the month and the index for physicians’ services increased 0.6 percent.
- The prescription drugs index fell 0.8 percent in January.
The index for used cars and trucks fell 3.4 percent in January.
The index for new vehicles was unchanged in January.
The apparel index also decreased, falling 0.7 percent over the month.

Core Service inflation picked up MoM…

..and accelerated YoY

Source: Bloomberg

Under the hood, food and Energy services costs jumped MoM along with transportation services…

Here’s the biggest component upside surprises…

And one step deeper – the so-called SuperCore: Core CPI Services Ex-Shelter index – soared 0.7% MoM (the biggest jump since Sept 2022…

… driving the YoY change up to +4.4% – the hottest since May 2023….

Source: Bloomberg

Finally, as a reminder, lower inflation does not mean lower prices.

Source: Bloomberg

The actual index of consumer prices hit a new record high this month – and is up over 18% since President Biden’s term began (it was up 8% over President Trump’s full four year term).

And it gets worse…

Source: Bloomberg

And on the higher than expected inflation report, we are still seeing bets on Fed Funds rate falling from 5.50% to 4.233% over the coming year.

The re-accleration of inflation means wage growth is back in the red relative to prices.

Daddy (Ukraine) Warbucks Biden’s Hideous Debt Mess! (Biden Has Added $6.5 Trillion In Debt With Only $1.95 Trillion In Real GDP Growth As Jobs Report Reveals Weakness In Economy)

I watched Tucker Carlson’s interview with Russian President Vladimir Putin. Putin is an amazing contrast to our 81-year old President with dementia who can barely speak while Putin was articulate. Not at all what Hillary Clinton was raving about (she is still furious about losing to Trump after losing to Obama). One thing that caught my attention was Putin talking about The Fed’s endless printing of money. Well, THAT is how the US grows GDP these days. Borrow and spend with the private sector as an after thought.

Let’s revisit the HORRIBLE jobs report from December. Not only were all job gains in the past year entirely thanks to part-time workers, but native-born workers plunged by a another whopping 560 thousand, bringing the two-month total drop to just under 2 million. This meant that not only has all job creation in the past 4 years been exclusively for foreign-born workers, but there has been zero job-creation for native-born American workers since July 2018 (don’t believe us? go ahead and check the data directly from the Fed).

So, the Federal government is borrowing trillions of dollars so that 1) part-time jobs are created and 2) foreign born workers have jobs, but not native born Americans?? (Blogger Paul Krugman thinks that immigration will add $7 trillion in real GDP over the next 10 years and this will save Social Security and Medicare. Huh? I admit, millions of immigrants will spend money, but many will be on the Federal and State doles, so its tax dollars going to immigrants to spend.) This seems like Obama/Biden are using Cloward-Piven tactics to overwhelm Social Security, Medicare and other social services, NOT grow the economy as Krugman projects.

Typically, economists look at measures like M2 Money Velocity (Real GDP/M2). M2 Money Velocity is rising … but still remains below where it was pre-Covid under Donald Trump.

But a more relevant velocity is the velocity of DEBT. As in GDP/Debt. Under Biden, the US has added almost $6.5 TRILLION in debt while real GDP has risen by only $1.949 trillion. That amounts to a DEBT velocity of 0.30. Meaning that the US gets an anemic $30 in real GDP for every $100 in additional Federal debt.

Yes, the US economy is broken and requires endless money printing and debt financing to pay for endless wars and now millions of illegal immigrants getting on “the dole.” Then we have Biden’s forgiving student loan debt (inappropriately) and now Big Tech wants $7 trillion to develop AI (in a normal economy, tech companies would develop AI themselves, but under Obama/Biden, we are not in a normal economy).

Here is Daddy (Ukraine) Warbucks Biden with his biting dog and daughter Ashey.

Biden Too Demented To Be Prosecuted, But Remains President? Bitcoin Soars To Post-ETF-Launch Highs As Net Inflows Explode (US Goes Full Kafka!)

Biden is apparently too demented to be prosecuted for illegally sharing top-secret documents, but is able to be President?? And people wonder why Bitcoin is so popular??

Yesterday saw the third largest net inflow into spot Bitcoin ETFs, totaling over $400 million with iShares Bitcoin Trust (IBIT) seeing over $200 million inflows alone, dominating the $101 million outflow from GBTC…

Source: Bloomberg

The net inflow yesterday meant that 8,698 BTC were taken off the market and put into cold storage.

“We think bitcoin could be one of the most talked about brands on Wall Street in the next decade,” Mike Willis, CEO and founder of ONEFUND, told CoinDesk.

“You’re at the beginning of the ‘bitcoin era’ on Wall Street.” Although remiss to offer a price prediction, Willis said he thinks bitcoin could easily catch up to gold’s market cap.

That has pushed the total net inflow into spot bitcoin ETFs up to $2.23 Billion…

Source: Bloomberg

IBIT also became the first ETF to exceed GBTC’s daily trading volume. However, the total trading volume of all 11 spot Bitcoin ETFs fell below $1 billion for the first time since they launched.

Source: Bloomberg

The result of all this is that bitcoin prices have soared back up near $48,000, erasing all the post-launch ‘sell the news’ losses…

Source: Bloomberg

Interestingly, this is a seasonally positive period for crypto:

“The next few days are of paramount statistical importance as bitcoin tends to rally by +11% around Chinese New Year, starting on February 10 (Saturday),” Markus Thielen, head of research at Matrixport and founder of 10x Research.

“During the last 9 years, Bitcoin has been up every time traders would have bought bitcoin 3 days before and sold it ten days after the start of the Chinese New Year.”

Coinbase just issued a report that suggests Bitcoin spot ETF activity accounts for around 10-15% of total bitcoin trading activity across centralized exchanges.

Smaller tokens such as Ether, Solana and Cardano also pushed upward…

Source: Bloomberg

As CoinTelegraph reports, Coinbase analysts say there have been more important crypto themes emerging in the aftermath of the spot Bitcoin ETF launches in the U.S., including the rising decentralized finance (DeFi) activity, which could “add meaningfully” to the value proposition for Ether.

Ethereum community member and investor Ryan Berckmans believes that Ethereum’s switch from a proof-of-work to a proof-of-stake consensus mechanism could drive ETH’s price to as high as $27,000 during the bull cycle.

“Bitcoin appears set to resume its march up after the Grayscale outflows finally tapered off,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets.

The “halving narrative” will gather momentum, potentially taking Bitcoin past $50,000 in the next few weeks, she said.

The quadrennial halving cuts the quantity of Bitcoin that miners receive for operating power-hungry computers that secure the network by solving complex puzzles.

Halving is key to capping the supply of Bitcoin at 21 million tokens. Rewards drop to 3.125 coins per block from 6.25 coins in the upcoming event.

Previous halving events “preceded strong bull runs,” a team including DBS Bank Ltd. Chief Economist Taimur Baig wrote in a note.

“There is a simple economic reason why prices should rise. As the reward for mining decreases, the price for mining output (namely Bitcoin) must increase to compensate and not trigger a withdrawal of computational resources by miners,” the team said.

With the growing demand from institutional investors, the diminishing supply could help BTC hit new market highs.

The US has gone full Kafka where no news is too insane. Maybe this should be Biden’s campaign slogan?

US Jobs In The Underworld! Mass Layoffs Plague Bidenomics For 2024 (Credit Card Delinquency Rate SOARS As Bidenomics Dies)

Like Offenbach’s “Orpheus in the Underworld,” the US economy under Joe Biden is going to hell. Like the tech sector! Thanks to the massive hiring surge related to Covid and Covid spending, now trimming the bloat.

In the real world labor market – in 2024... (not the one Biden, Yellen and Powell occupy) … companies are slashing jobs.

1. Twitch: 35% of workforce
2. Roomba: 31% of workforce
3. Hasbro: 20% of workforce
4. LA Times: 20% of workforce
5. Spotify: 17% of workforce
6. Levi’s: 15% of workforce
7. Xerox: 15% of workforce
8. Qualtrics: 14% of workforce
9. Wayfair: 13% of workforce
10. Duolingo: 10% of workforce
11. Washington Post: 10% of workforce
12: Snap: 10% of workforce
13. eBay: 9% of workforce
14. Business Insider: 8% of workforce
15. Paypal: 7% of workforce
16. Charles Schwab: 6% of workforce
17. Docusign: 6% of workforce
18. UPS: 2% of workforce
19. Blackrock: 3% of workforce
20. Citigroup: 20,000 employees
21. Pixar: 1,300 employees

And here’s the government-supplied statistics…

The number of Americans filing for jobless benefits for the first time last week dropped from 227k to 218k (below the 220k exp). On an NSA basis, claims tumbled even more…

Source: Bloomberg

We assume there was some impact in here from the ice storms, but still, Oregon, Ohio, and California saw the biggest declines in claims while Missouri and Texas saw the biggest increase…

Continuing jobless claims also decline (of course, it’s an election year) from 1.894mm to 1.871mm…

Source: Bloomberg

We give the Richmond Fed’s Tom Barkin the last word:

“I am cautious about accuracy of numbers around the turn of the year.”

Cautious is one word…

Not to mention 2024 is an election year, so expect mega nonsense spewing from The White House and the BLS and other government agencies.

With massive job cuts in the real world (unlike the protected, ivory tower of Biden and Congress), the serious delinquency rate on credit cards.

Deficit Joe Strikes Again! Record $10 Trillion In US Treasuries Coming To Market In 2024 As Budget Deficits SOAR Under “Deficit Joe” (Don’t Forget About $212.5 TRILLION In Unfunded Liabilities)

The great Will Rogers once said he never met a man he didn’t like. US President Joe Biden and Democrats have never met a spending opportunity they didn’t like (except for US border security, of course).

Under “Deficit Joe” Biden, Federal budget deficits have soared! And deficits are projected to grow!

Over the past year, we have been closely watching the staggering acceleration in the growth of both US debt (the chart below which is just one month old is already woefully outdated, as total US debt just hit $34.191 trillion on the first day of February)…

… and global debt.

The problem, as Apollo’s gloomy chief strategist Torsten Slok points out, is that this feverish pace will only accelerate further, as a record $8.9 trillion of government debt will mature over the next year.

Meanwhile, the government budget deficit in 2024 will be $1.4 trillion according to the CBO (realistically expect this number to hit $2.0 trillion), and the Fed has been running down its balance sheet by $60 billion per month.

The bottom line is that someone will need to buy more than $10 trillion in US government bonds in 2024. That is more than one-third of US government debt outstanding. And more than one-third of US GDP.

This may be a particular challenge when the biggest holders of US Treasuries, namely foreigners, continue to shrink their share.

More fundamentally, Slok muses, “interest rate-sensitive balance sheets such as households, pension, and insurance have been the biggest buyers of Treasuries in 2023, and the question is whether they will continue to buy once the Fed starts cutting rates.”

(Spoiler alert: no… but that’s what QE is for, and sooner or later, it’s coming back).

Apollo’s latest updated outlook on Treasury demand is below (pdf link).

And don’t forget about $212.5 TRILLION in unfunded liabilities (Social Security, Medicare, etc).

Hey Joe! Food Inflation Is Not Yet Dead (Cocoa, Beef, Coffee Prices Soaring As Deutsche Bank Cuts 3,500 Jobs)

Hey Joe! Food inflation isn’t dead yet!

The Biden Administration which motto should be “Make Crime Great Again!” with awful crime in big cities, and millions pouring over the border, not to mention providing jobs for foreign workers and not native born Americans, is likely breathing a sigh of relief as food inflation falling to 2.7% year-over-year, still higher than pre-Covid levels under Trump. But at least food price inflation is slowing as The Fed’s money stimulus recedes.

But food inflation may not be dead.

Cocoa prices climbed to a 46-year high this week in New York as concerns about dry conditions across West Africa could reduce yields for the Ivory Coast, the world’s largest producer of cocoa beans, ahead of the mid-crop in April.

In the US, a rapidly shrinking cattle herd, now at the lowest levels in seven decades, has pushed the supermarket price of beef to a record of $5.21 per pound. Rising food prices are the central bank’s worst enemy.

To end the week, breakfast lovers will be disappointed to learn robusta bean prices in Vietnam, the world’s largest producer of the bean, are absolutely out of control.

Local robusta prices in Vietnam hit a record on Thursday, topping nearly 80,000 per kilogram.

“That’s threatening to push prices in London up further, even after the benchmark capped its own all-time high this week at $3,336 a ton,” Bloomberg said, adding the surge in prices was primarily due to farmers “hoarding” the bean.

To recap this week, cocoa bean, beef, and robusta bean prices have been marching higher.

More bad news for Biden. Even though overall food inflation has receded, voters have long memories.

Speaking of bad news, The Teutonic Titanic (aka, Deutsche Bank) just annouced that it is cutting 3.500 jobs over the next two years.