Weekend Update! Gasoline Prices UP 101% Under Biden, Mortgage Rates UP 89%, Foodstuffs UP 58% (Crude Oil Futures UP 142%)

This is not the legacy that will endear President Biden to voters. Regular gasoline prices have risen 101% under Biden.

But it not just gasoline and diesel that are soaring (while the rest of us are sore!), CRB Foodstuffs are up 58% under Biden while the 30-year mortgage rate is up 89% under Biden.

And this morning, WTI crude futures are up +1.71%.

And up 142% under Biden.

Prices are sizzling and clobbering the American middle class and low wage workers. But former Federal Reserve Chair and current US Treasury Secretary Janet Yellen never saw it coming.

Biden’s just killing us. And Powell is making up for Yellen’s keeping monetary stimulus too high for too long. Price? Mortgage rates are soaring.

Bad Night At The Whiskey! ADP Jobs Added Flops, Unit Labor Costs SOAR, Labor Productivity Goes Negative (As Monetary Stimulus Wears Off)

Bad night at The Whiskey!

Or a bad day for the US economy.

First, ADP US jobs added flopped (only 128.2k jobs added, the lowest reading under Biden and the massive Federal Reserve stimulus). Much lower than the expected 300k. Second, nonfarrm labor productivity fell in Q1 -7.3%. Third, unit labor costs soared to +12.6%.

M2 Money stock YoY is falling, but remains at 8% YoY.

Here is the summary table for today.

And then we have the Atlanta Fed GDPNow, real-time GDP tracker for Q2 at 1.3%.

As M2 Money growth slows, US GDP is slowing as well. Is this a monetary hangover??

And, of course, rents are soaring for the American middle class and low wage workers.

Here is a video of Biden meeting with Fed Chair Powell to discuss what to do to middle-class Americans with regards to inflation.

Simply Unaffordable! Real Home Price Growth At 12% YoY, Real Wage Growth At -1.864% (Inflation Making Americans Suffer As Mortgage Rates Rise FAST)

Simply unaffordable!

President Biden met with Federal Reserve Chairman Powell to discuss how to control the inflation that is crushing the middle class and low-wage workers.

Here is a good example of why Biden is worried. There is a mid-term election on the horizon and people are angry and scared. Housing, generally the largest asset owned (or rented) by a household is simply unaffordable thanks, in part, to the over-stimulation of the economy by 1) The Federal Reserve in terms of money printing and 2) the Federal government in terms of fiscal stimulus in response to the Covid outbreak in March 2020.

In nominal terms, the gap between US home prices (Case-Shiller National Home Price Index YoY – US Average Hourly Earnings YoY) is near the all-time high.

Yes, home price growth exploded upwards when The Fed rapidly expanded their balance sheet in response to the Covid outbreak … and only now are considering shrinking the balance sheet.

In terms of house prices, CoreLogic has a nice chart depicted the odds of home prices dropping over the coming year. I circled Columbus Ohio because that is where I am moving (knock on wood).

And then we have the 30-year mortgage rate rising with The Fed’s expected tightening of monetary policy. That will certainly make housing even less affordable, unless house price growth cools dramatically.

You might as well face it, we’re addicted to gov.

Doctor, doctor (Yellen), we’ve got a bad case of UNAFFORDABLE HOUSING.

Step! 2-year Treasury Yield Rises +10.5 Basis Points On Fed Tightening, 10Y-2Y Yield Curve Flattens

Another 10 basis point jumps in Treasury yields, this time at the 2-year Treasury Note.

The 10Y-2Y Treasury slope just flattened to +26 BPS.

Another step in rising mortgage rates!

Washington DC is anything but Harmony Hall.

US Gasoline And Food Prices Soar To All-time Highs As Fed Begins Removing Monetary Stimulus (10-year US Treasury Yield Jumps 8.7 BPS)

US gasoline prices just rose to an all-time high. Yes, even higher than the Dubya-era gasoline price surge of 2008.

Rising gasoline and diesel prices are helping drive up food prices to the highest level in history.

The proxy war the US is fighting in with Russia in Ukraine is helping drive up food prices. But at the core is Biden’s anti-fossil fuel drilling executive orders starting when Statist Joe (and The Fish) became President.

As The Fed begins unwinding their massive balance sheet, the 10-year US Treasury yield jumped 8.7 basis points.

Case Study: How The Fed’s Overstimulus Is Driving Columbus Ohio’s Home Prices To The Moon! (18.6% In Q1 2022 Versus 6.15% In Q4 2019 Pre-Covid)

Earlier today, we saw that the Case-Shiller National home price index in March rose to its fastest rate in history.

Columbus Ohio is not covered by Case-Shiller in their 20-city index, but the FHFA’s home price index does. And in Q1 2022, home prices grew at a 18.6% YoY clip.

Before Covid and the march of The Federal Reserve (and Biden’s anti-fossil fuel orders), home prices in Columbus Ohio were only growing at a 6.15% YoY rate. So, thanks to The Fed, home prices in Columbus are growing at nearly 3 times the pre-Covid rate.

Here is the CS national home price index.

Let’s see how Columbus home prices do with US Treasury yields starting to rise 10+ bps again.

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.

German Inflation Hits 60-Year-High As German 10Y Bund Rises +9.4 BPS, US 10Y-2Y Curve Stabilizes At 25.8 BPS After Initial Fed Shock (Mr. President, Have Pity Of The Working Man)

German inflation hit another post-World-War-II record high, piling pressure on The ECB’s need to exit from crisis-era stimulus after numbers from Spain also printed hotter than expected.

Driven by soaring energy and food costs, this morning’s data showed consumer prices in Europe’s largest economy surged 8.7% YoY – far hotter than the +8.1% expected (the highest since the start of the monthly statistics in 1963).

And top of that, the German 10-year Bund rate rose +9.4 BPS this morning, although Finland, Hungary and Slovakia all rose above +10 BPS.

While US markets are closed today in honor of Memorial Day, the US Treasury curve (10Y-2Y) has stabilized at 25.8 basis points after the initial shock of The Fed finally raising rates for the first time under Biden.

Then there is this headline: Biden to Meet Powell to Discuss Economy Amid Inflation Pain. So much for Fed independence. I wonder if Powell will say “Joe, have you ever considered canceling your executive orders on oil and natural gas exploration?”

Or perhaps Powell can bring Randy Newman to The White House to sing “Mr. President, have pity of the working man.”

OR maybe Biden can tell Powell to pause monetary tightening to avoid mortgage rates from rising to disastrous levels.

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.