Fed Monetary Stimulytpo Now Almost 14 Years Old And Still Running Strong! Top 1% Share Of Net Worth Now Higher Than Bottom 50%, Income Inequality Getting Worse

It has been almost 14 years since The Federal Reserve under Ben Bernanke unleashed zero interest rate policies (ZIRP) and quantitative easing (QE) in late 2008. And Fed monetary stimulypto is still running strong after almost 14 year of monetary mismanagement and asset bubble stimulation.

The Federal Reserve under Bernanke and Yellen raised their target rate exactly once under President Obama before the election of Donald Trump. After Trump was elected, The Fed raised their target rate 8 times, lowered it 5 times. There have been no rate hikes under Biden.

There seemingly never-ending Fed monetary stimulus has resulted in the top 1% seeing their share of total net worth soar relative to the share of net worth of the bottom 50%. But note that starting in 2014 just as The Fed was engaged in QE 3. But the real divergence occurred after The Federal government heaped trillions in fiscal stimulus on top of the skyrocketing monetary stimulus.

In terms of income inequality (as measured by the GINI coefficient), it just keeps getting worse and worse.

Let’s see if The Fed actually delivers by reducing their monetary stimulypto.

Alarm! Mortgage Purchase Applications DOWN 13.1% WoW, Mortgage Refinancing Applications DOWN 16% WoW (Thanks Federal Reserve!)

Alarm!

It is not surprising that applications for a residential mortgage have crashed and burned after The Federal Reserve’s announced intentions to raise their target rate and trim the ballast in the economic tanks. But dang!

Mortgage applications decreased 13.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 18, 2022.

The seasonally adjusted Purchase Index decreased 10 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 6 percent lower than the same week one year ago.

The Refinance Index decreased 16 percent from the previous week and was 56.4 percent lower than the same week one year ago.

While the average loan size did not increase this week, it remained close to the survey’s record high.

What The Fed giveth, The Fed can taketh away. Let’s see if Thurston Powell The Great Magician can raise rates and NOT crash the housing and mortgage markets.

My Kuroda! Japan’s Inflation “Miracle” (0.5% Inflation) Despite $5 Trillion BOJ Balance Sheet And -0.10 Policy Rate

My Kuroda!

Forbes has an interesting article on the Japanese “miracle” entitled “The $5 Trillion Inflation Time Bomb No One’s Talking About.”

It’s taken nine years and the Bank of Japan supersizing its balance sheet to the $5 trillion mark, but Asia’s second-biggest economy finally has some inflation.

Officials in Tokyo are realizing the hard way, though, that it’s best to be careful what you wish for as bond yields spike.

Granted, the gains in consumer prices Japan is reporting are negligible compared to those in the U.S. and China. And inflation is still a good distance from the BOJ’s 2% target. Still, the 0.5% rise in consumer prices in January year-on-year is already unnerving the bond market. It followed a 0.8% jump in December and marks the fifth straight month of increases.

The worry is that Japan’s inflation is the “bad” kind. Haruhiko Kuroda was hired as BOJ governor in March 2013 to end deflation. Kuroda unleashed tidal waves of liquidity. That drove the yen down 30%, generated record corporate profits and sent Nikkei 225 Average stocks to 31-year highs.

Despite a staggering balance sheet with a -0.10 bps policy rate, Japan has only 0.5% inflation.

And Japan’s yield curve is negative at 3 year tenor and less.

How is it that Japan has virtually no inflation with negative rates but the USA has 7.5% inflation with a 0.25% target rate? Could it be the USA undertook massive fiscal spending related to COVID and reduced energy sources in an effort to go “green” that led to 7.5% inflation??

My Kuroda!

Good governments don’t go on wild, wasteful spending sprees and shut off energy sources like the Biden Administration and Congress.

Case-Shiller National Home Price Index Still HOT In December +18.84% YoY As Active Inventories Die (Phoenix AZ Fastest Growing At 32.5% YoY While Washington DC Is Slowest Growing At 10.5% YoY)

The S&P CoreLogic Case-Shiller National home price index remained HOT in December, growing at a 18.84% pace. M2 Money YoY is still smoking at 13.11%.

All 20 metro areas in the Case-Shiller 20 index grew at 10% or higher YoY with my former home city Phoenix leading the way at 32.5% YoY house price growth. Washington DC, aka Mordor on The Potomac, was in last place at 10.5% YoY.

In terms of active inventory of housing, only Phoenix and Columbus Ohio are showing positive growth in active inventory YoY. But even Phoenix and Columbus saw a decline MoM (or month-over-month).

Including Existing Home Sales Active listings in the first chart, we see The Federal Reserve continuing to pump money at at 13.11% clip while active inventory is at an all-time low.

This is nuts.

Mortgage Rate Increases Subside As US Economy Slows, Yield Curve Flattens While Russian/Ukraine Tensions Grow

As US/Russian tensions grow over Ukraine, The Federal Reserve may be forced to postpone or reduce planned rate increases and balance sheet trimming.

But in addition, we see US GDP slowing to near zero (1.285%) as the US Treasury 10Y-2Y yield curve has flattened to 41.684 BPS. The good news? Bankrate’s 30Y mortgage rate increases have slowed to 4.19%.

On a different note, I noticed the Chicago Bulls logo when turned upside-down looks like a space alien violating a crab.

Simply Unaffordable! How The Federal Reserve And Federal Government Are Making Housing Unaffordable For Millions (Rents Growing At 18%, Home Prices Growing At 19%, REAL Wages Growing At … -1.80%)

The Federal Reserve and Federal government are helping make housing simply unaffordable!

In January 2020, just prior to the COVID outbreak in the US, the Case-Shiller national home price index was growing at 4% YoY, the Zilliow rent index (all homes) was growing at 2.92% YoY and REAL average hourly earnings were growing at 0.52% YoY.

Then COVID struck and the Federal government dumped trillions of dollars of stimulus into the economy and The Federal Reserve massively expanded its balance sheet. Now the US has home prices growing at a 18.8% rate, rents (for those who can’t afford to purchase a home) growing at 14.91% and REAL hourly earnings growing at -1.80%.

The site Apartment List has an even bleaker view of rent growth, with rents in January 2022 having grown by 18% YoY.

Now that COVID is fading, we see New York City rents growing at 33.5% YoY followed by Florida and Arizona cities at 29.3% and higher rates. Irvine CA is seventh at 28%. The slowest growing city is Oakland, CA is growing at only 0.5%.

So, The Federal Reserve and Federal government have created their version of a horror film with even rents blowing out of control. And it’s getting weirder as inflation blows out of control.

Surprise! US Existing Home Sales RISE 6.7% In January As Inventory Available Shrinks To Lowest Level Since 1981 (Panic Over Fed Rate Increases??)

Surprise! US existing home sales in January rose to 6.50 million units SAAR versus the expected 6.10 million units. That is a 6.7% increase over December.

The disturbing news is the continued lack of available inventory that peaked in Q4 2007 and has continued its decline to today … the lowest level of available inventory since 1981. Despite the Fed’s massive stimulus that they allegedly will take away. Median price of existing home sales rose to 15.4% YoY. Making homes affordable should NOT be a slogan for The Federal Reserve, the Biden Administration or Congress.

The massive Federal stimulypto (fiscal and monetary) has helped push existing home sales to 6.50 million units SAAR in January. What will happen after The Fed withdraws it stimulus??

What is surprising is that with declining REAL wage growth, we saw a surge in home buying in January.

Remain calm, all is well!

The Shadow Knows! Wu-Xia Shadow Fed Rate Is -0.1974% As Inflation (7.5%) Dwarfs Wage Growth (5.1%) And Q1 GDPNow Falls To 1.285%

The Shadow Knows!

Wu-Xia employs an approximation that makes a nonlinear term structure model extremely tractable for analysis of an economy operating near the zero lower bound for interest rates. It can be used to summarize the macroeconomic effects of unconventional monetary policy (ZIRP + QE). The Shadow Rate is now -0.1974%.

The good news? The Atlanta Fed Wage Growth tracker is showing a 5.1% wage growth. The bad news? Inflation is ruining that growth at a whopping 7.5% rate leaving REAL wage growth at -2.4%.

And the Atlanta Fed’s GDPNow Q1 forecast is a measly 1.285%. Apparently, the fiscal and monetary stimulypto has worn out.

And liquidity in the equity market has seemingly vanished.

The Biden Administration and Congress need a distraction from the awful inflation news caused by Biden’s energy policies, sheer wasteful spending and Federal Reserve policy errors (too much monetary stimulus for too long).

Zoltan! On Why the Fed Needs to Spark a Market Crash (As US Housing Starts Decline With Rising Mortgage Rates)

Zoltan!

Credit Suisse’s Zoltan Pozsar thinks The Federal Reserve needs to spark a market crash. Really Zoltan??

If The Fed does its expected “shock and awe” (or shock and awful), it will be more than the stock markets will crash. The housing market could crash too.

Take the current US housing situation with its limited inventory of listings combined with massive Fed stimulypto.

US 1-unit housing starts are down -4.1% in January. But heck, it is January! But on a year-over-year basis, 1-unit housing starts are down -2.4%. But what will happen if The Fed ACTUALLY withdraws its gargantuan monetary stimulus (green line)?

Existing home sales inventory continues to decline as Bankrate’s 30-year mortgage rate starts to climb with expectations of Fed “Shock and Awful.”

Say hello to The Federal Reserve Board of Governors!

Jay The Revelator! Minutes Show Fed Ready To Raise Rates, Shrink Balance Sheet “Soon” (Mortgage Rates SOAR To 4.23%)

Jay “The Revelator” Powell has told us in The Fed minutes that The Fed is ready to raise rates and shrink the balance “soon.” Sort of like saying “Shock and Awe” is coming.

The minutes of the recent Fed Open Market Committee (FOMC) have been released. Yet they only mention “soon.” Just like when my wife asks me to take out the trash and I reply “soon.” At which point she realizes that I have no intention of doing it.

The REAL 10-year Treasury yield is now -5.44%.