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?

Winter Is Coming 2! Mortgage Rates Hit 6%, Gasoline Prices Hit $5, Inflation Continues To Rage (Taylor Rule Implies 22.10% Target Rate, Only At 1.75%)

Where is Stanford’s John Taylor when we need him?

Even since the housing bubble burst and ensuing financial crisis on 2007-2008, The Federal Reserve under Ben “The Savior!” Bernanke, Janet Yellen and Jerome Powell let their zero/low interest rate policies be too low for too long that anyone with common sense knew would lead to serious problems when The Fed was forced (this time by inflation) to end the massive OVER monetary stimulus. We are now living through The Great Reset of the US economy.

Since Biden was sworn-in as President (or El Presidente) in January 2021, 30-year mortgage rates are up 108% to 6%, regular gasoline prices are up 108% to $5 a gallon nationally. Inflation is up to 8.6% YoY.

Bernanke, Yellen and Powell did not follow any rule per se, just a “seat of the pants” panic button approach. Using the Mankiw specification of the Taylor Rule model, the Fed Funds target rate should be 13.25% based on CORE PCE. Notice starting in 2014, The TR suggested target rate started to be higher than the actual Fed target rate. And since the Covid monetary blast of 2020, the gap between the Taylor Rule and Fed target rate (red area) has grown to near the highest level in history. Even now Mohamed A. El-Erian, Chief Economic Advisor at Allianz, is starting to admit that The Fed’s ZIRP policies are beginning to hurt.

But if we use total inflation rather than core inflation, the measure that picks up the actual pain that Americans are feeling from rising gasoline prices and mortgage rate, we get a Fed Target rate of 22.10%. Since The Fed’s current target rate is only 1.75%, The Fed has “Room To Move.”

And in a painful. bad way.

Bernanke, Yellen and Powell must think that The Taylor Rule is the New Jersey ham pork roll.

Alarm! US Industrial Production Slows To 0.2% In May, Lower Than Expected As Fed Tightens The Monetary Noose (It’s NOT Always Sunny In Philadelphia)

Alarm!

As The Federal Reserve tightens the monetary noose (Fed Chair Powell said Fed ‘acutely focused’ on returning inflation to 2%), the US economy is slowing. In fact, May’s Industrial Production report is half of what was expected. Industrial production declined to 0.20% MoM versus the expected 0.4%. At the same time, capacity utilization rose slightly to 79%., but still below expectations.

Mortgage rates are rising rapidly, but the growth has cooled slightly as the economy cools.

Bitcoin is getting demolished by The Fed’s reaction to inflation.

And “It’s Not Always Sunny In Philadelphia.” Since the Philadelphia Fed’s Business General Conditions has dropped into negative territory with, among other things, The Fed’s monetary tightening. And they’ve only just begun (no Carpenters’ songs!).

Here is Phil Hall’s article on housing and The Federal Reserve’s noose tightening. US housing starts dove -14.4% MoM as mortgage rates soared.

If the Biden Administration and Federal Reserve jointly produced a dating site …

But its most central banks too. Look at German home prices against the ECB’s balance sheet

Opening Hell! The Morning After The Fed’s 75 BPS Rate Increase, 10Y Treasury Yield Spikes +11.5 bps, S&P 500 E-mini Down -1.8% (US Housing Starts Plunge -14.4% MoM In May)

Like in the movie The Poseidon Adventure, we can all sing “The Morning After.”

On the heels of The Fed’s 75 basis point surge in the target rate, the US Treasury yield jumped +11.5 BPS as of 8:30 AM EST. The S&P 500 E-mini futures contract is down -1.8%.

As investors brace for a recession, mortgage rates dropped to 6.03%.

Gasoline prices remain near $5 per gallon, diesel prices are near $6 per gallon and The Fed’s massive balance sheet is still in force.

On the housing front, US housing starts plunged -14.4% MoM in May, the biggest decline under Biden.

While housing starts were down -14.4% MoM in May, single-family detached home were down only -9.16%. It was 5+ unit (multifamily) starts that were down -26.83% MoM.

Good morning peeps! Reality is dawning after the market surge yesterday after investors celebrated that The Fed could have raised rates even more.

Closing Hell! 10-year Treasury Yield Surges +11.3 Basis Points And Dow Drops -151 (Biden Never More Optimistic?)

I just read that President Biden has never been more optimistic about the US economy than he is now.

Well, today’s closing bell is not optimistic and is downright bearish.

The US Treasury 10-year yield rose … ANOTHER … 11.3 basis points as rumors circulate that The Fed might actually raise their target rate by 75 basis points.

And the venerable Dow (DJIA) is down -152 points today.

Markets are anticipating an increase of The Fed Funds target rate from 1% to 1.568%, less than the rumored 75 basis point increase being bandied about.

At least Columbus Ohio home prices are growing slower than the national average.

If Biden is wildly optimistic about the economy, then he needs to get out of The White House and talk to average Americans and not people like Robert De Niro.

Curly’s Oyster Stew? April Home Prices Grow At 20.9% YoY As Fed Is Slow To Remove Massive Monetary Stimulus (But Watch Out!)

US home prices are still skyrocketing as The Federal Reserve kept its massive foot on the monetary accelerator pedal.

CoreLogic’s home price index grew at a 20.9% YoY pace in April, but is expected to slow to 5.6% YoY in late 2022.

Remember peeps, The Fed still have its staggering monetary stimulypto in place.

The Fed is signaling its withdrawal of stimulus, causing mortgage rates to soar.

Given the slowdown of the US and global economy, we shall see if The Fed keeps to its tightening plans. As of today, the market is expecting The Fed to raise its target rate from 1% to 3.819% by February 2023. That is a 291% increase in The Fed’s target rate.ng

The Fed trying to tame inflation (caused by The Fed and Biden’s energy policies and Congressional spending) is like Curly trying to eat oyster stew.

We’re Goin’ Down! Treasury Curves Goes Negative As Mortgage Rates Hit 5.87% As Fed Tightens Its Choke Hold

We’ve goin’ down!

The US Treasury 10Y-5Y yield curve has gone into negative territory (which usually occurs before a recession). At the same time, US mortgage rates are climbing like Tom Cruise in “Top Gun: Maverick” to 5.87% as The Fed tightens its choke hold on markets.

The 10Y-5Y Treasury curve typically goes negative before a recession.

And then we have today’s PPI report (Producer Price Index), rising 10.8% YoY as M2 Money stock starts to decline a bit.

Here is a better view of mortgage rates under Biden/Powell.

I hate this chart from John Burns.

Biden/Powell/Pelosi/Schumer are collectively “Mr Freeze.”

Closing Hell! NASDAQ Tanks -4.58%, 10Y Treasury Yield Spikes +22 Basis Points, 10Y-2Y Yield Curve Flattens To Near Zero (MBS Prices Pull A Titanic)

Not nibbling on baby formula, watching the sun bake, all those people paying $5 per gallon for gas. Wasting away again in Biden/Powellville.

It was closing hell for a terrible day in markets as investors struggle to process the dreadful and seemingly endless inflation report on Friday.

What happened today? The NASDAQ tanked -4.58% and the 10-year Treasury yield jumped 22.2 basis points. Gulp.

The 22.2 bps jump in the 10-year Treasury yield has led to Agency MBS prices pulling a Titanic and sank.

Somehow, I don’t think that Biden and Congress are going to help the middle class and low-wage workers.

Fear The Talking Fed! US Treasury And MBS Returns Get Hammered As Fed Signals Monetary Tightening (Mortgage Rate Rises And 10Y-2Y Yield Curve Flattens To 8.8 Basis Points)

The Federal Reserve is making up for Bernanke and Yellen’s “too slow to remove” Fed stimulus policies (QE1 – QE3) and Powell’s Covid-related QE4. Now The Fed is trying to remove the stimulus in a (misguided) attempt to cool inflation. Remember, the dramatic rise in prices was caused by more than Fed stimulypto, it was also caused by Biden’s executive orders driving up oil, gasoline and natural gas prices and the massive Federal spending bills signed by Biden.

The result of The Fed’s jawboning about undoing Fed stimulypto is take away the punch bowl. But the results are troubling. Both the total return indices for US Treasuries and Agency Mortgage-backed Securities (MBS) have declined dramatically since inflation has been rising (highest in 40 years) and The Fed is expected to crank their target rate by February 2023 to 3.448% (The Fed Funds Target Rate currently stands at 1%). That is almost a 250 basis point rise in the target rate in 8 months.

While the 10-year rate is rising rapidly, the 2-year Treasury yield is REALLY rising fast.

And the yield curve (10Y-2Y) is down to +8.819 basis points as The Fed signals tightening.

And with rising 10 and 2Y Treasury yields, we are seeing the fastest rise in mortgage rates since 1981.

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.