Biden’s Idiocracy! Bank Credit Growth Slows To -0.5% YoY, Every Monthly Payrolls Print In 2023 Has Been Revised Lower (Bidenomics Is The Economic Mutilator!)

Mike Judge wrote and directed a masterpiece of cinema called “Idiocracy” where large corporations convince a progressive government to use Brawndo (a Gatorade clone) to grow vegetables resulting in a Dust Bowl. Why? Because the Progressive leadership determine that plants crave … electrolytes.

But the electrolytes in Bidenomics has resulted in bank credit growth of -0.5% YoY.

On the data front, it has become a running joke: the “strong” Bidenomics economy comes with an expiration date, as it is only “strong” for about a month, at which point the initial “strength” is downgraded, and the data is revised sharply lower.

That has certainly been the case with US labor data, where as we first reported last month, every single monthly payrolls print in 2023 has been revised lower (see chart below), a 12-sigma probability and virtually impossible unless there was political pressure to massage the data higher initially and then revise it lower when nobody is looking.

But the BLS is not done: as we reported last week, besides the now traditional one-month lookback revisions the ridiculously high monthly payrolls prints accumulated over the past year will also be slowly but surely revised gradually lower at annual benchmark revisions for years to come. As Morgan Stanley chief US economist Ellen Zentner explained (full note available to pro subscribers)…

Payrolls get revised too, and we expect a downward revision. Payrolls have an annual benchmark revision that is published in February each year. The revision adjusts the level of payrolls through March of the prior year. For example, a new revision will be published in Feb-24, adjusting payroll levels from April-22 to Mar-23. And a preliminary estimation of the upcoming revision points to a decrease in payroll YoY% growth rates of -0.2pp.

But while downward payroll revisions under Bidenomics are as certain as death and taxes, what we wanted to discuss here are the just as striking downward revisions to US consumption which hit this morning alongside the comprehensive once every-five-years historical revisions to GDP. As a reminder:

Today’s release presents results from the comprehensive update of the National Economic Accounts (NEAs), which include the National Income and Product Accounts (NIPAs) and the Industry Economic Accounts (IEAs). The update includes revised statistics for GDP, GDP by industry, GDI, and their major components. Current-dollar measures of GDP and related components are revised from the first quarter of 2013 through the first quarter of 2023. GDI and selected income components are revised from the first quarter of 1979 through the first quarter of 2023.

Earlier today we already noted the disaster that was Q2 Personal Consumption: instead of the 1.7% unchanged print from the second estimate of Q2 GDP, the final number was a dire 0.8%, a 9-sigma miss to estimates…

… and the worst quarterly increase since the Covid collapse in Q2 2020.

But what about other historical data? After all today’s revision impacted all data from Q1 2013? Therein, as the bard says, lies the rub.

Let’s start with personal consumption, and compare the latest post-revision current data (link) with the most comprehensive pre-revision data as of last month (link). It should come as no surprise to anyone that with the (slight) exception of just Q4 2022, personal consumption in every single quarter since the start of 2022 – when the Fed aggressively started tightening and hiked rates by the most since Volcker – has been revised lower, and in some cases dramatically so.

Bloomberg also picks up on the GDP revision and looking at revisions to the historical data, writes that “the pandemic contraction is seen as being a bit less severe than previously thought: GDP is now reckoned to have dropped at a 28% annual clip in the second quarter of 2020, instead by 29.9%, as the government shut down swathes of the economy to fight the spread of the virus. But the recovery since then has been somewhat slower, according to the update. Growth last year was revised to 1.9% from 2.1%.” And of all GDP components, consumption was the weakest.

So not only was the Fed hiking at a time when personal consumption would grow much less period to period than previously expected, but the US economy was generally weaker than previously expected (as discussed here).

There’s more.

When looking at the composition of the US household’s income statement – the summary of economic accounts – we find just what we had expected: US savings were in fact far lower than previously expected.

In the latest negative revision, US households saved $1.1 trillion less than previously thought over the past six years…

… and indeed as the BEA chart below shows, Americans stashed away an average 8.3% of their disposable income annually from 2017 through 2022, down from a previously estimated 9.4%.

The reduction stems from an accounting adjustment that lowered personal income from mutual funds and real estate investment trusts. Additionally, as Bloomberg notes, much of the reduction in personal savings seen in the revised data occurred prior to the pandemic, so its implications for how much extra cash Americans may feel they still have now is not clear cut.

Whatever the reason for the statistical adjustment, however, one can say goodbye to even the faintest speculation that US households have any excess savings left… why they don’t, of course, because even when using the previous methodology which artificially inflated total savings, JPM calculated that excess savings had already run out…

… which means that if Q3 GDP was bad and consumption was “revised” sharply lower (odd how economic data is never revised higher under Joe BIden), Q4 – when savings are virtually non-existant – and where we also get the i) return of student loan payments; ii) the UAW strike; iii) the government shutdown and iv) oil at almost $100 and gasoline at one year highs, is about to fall off a cliff.

Yes, Bidenomics is a form of Brawdo, the economic mutilator!

Making America Last Again (MALA)? US Paying Salaries For Tens Of Thousands Of Ukrainians As 5.8 Million Illegals Enter US Under Biden

Donald Trump was famous for his “Make America Great Again!” campaign. Joe Biden seems to want to make America LAST again (MALA).

A newly aired “60 Minutes” segment entitled The unexpected way American tax dollars are being used in Ukraine has uncovered that the US government is paying the salaries of some 57,000 Ukrainian civic services personnel.

The report details the various ways non-military aid is being spent at a moment GOP Congressional leaders are intensely debating whether to move forward with a proposed defense budget that includes Biden’s push for $24 billion more in military assistance for Kiev.

“The U.S. has spent just over $43 billion on military aid to Ukraine since Russia invaded. That’s equivalent to about 5% of the American defense budget. European countries combined have contributed around $30 billion,” the 60 Minutes report narrates.

And this includes the following stunning detail:

American taxpayers are financing more than just weapons. We discovered the U.S. government’s buying seeds and fertilizer for Ukrainian farmers… and covering the salaries of Ukraine’s first responders – all 57,000 of them.

That includes the team that trains this rescue dog – named Joy – to comb through the wreckage of Russian strikes looking for survivors.

Political commentator Collin Rugg has noted in relation to the potential government shutdown looming for Oct. 1st: “Yes, your tax dollars will be used to fund Ukrainian salaries while American citizens are forced to wait for their pay while the government remains closed,” he said on X.

Rugg is referencing the fact that the Biden administration and Pentagon have declared that Ukraine aid will remain exempt from any potential government shutdown. This means Ukrainian salaries will still be paid, even while federal employees aren’t, in the event of a shutdown.

Here’s more from the 60 Minutes video, featuring a Ukrainian woman “thanking” US taxpayers for footing the bill for Ukrainian employees, thanks to USAID funding:

Tatiana Abramova: Especially in the condition of war, we have to work. We have to pay taxes, we have to pay wage– salary to our employees. We have to work, don’t stop.

Holly Williams: Why does that help Ukraine win the war?

Tatiana Abramova: Because economy is the foundation of everything.

American officials from USAID – the agency in charge of international development – helped Abramova find new customers overseas. In the midst of war, her company is supporting over 70 families.

Meanwhile, a fresh Newsweek headline: US Will Pay Salaries to Thousands of Ukrainians During Government Shutdown…

“US taxpayers will pay the salaries of thousands of Ukrainians, even as the country faces a government shutdown at the end of September.”

But as noted above, this is more like tens of thousands of Ukrainian salaries.

“A federal government shut down will effectively begin on October 1 if Congress isn’t able to pass a funding plan that Biden signs into law,” Newsweek underscores. “If that happens, federal agencies have to stop all nonessential work and will not send paychecks for as long as the shutdown lasts.”

Appropriately, the 60 Minutes episode invoked memory of the late John McCain…

In total, America’s pumped nearly $25 billion of non-military aid into Ukraine’s economy since the invasion began – and you can see it working at the bustling farmers market on John McCain Street in central Kyiv.

The late senator is revered in Ukraine because he pushed the U.S. government to start sending arms to the country… back in 2014.

Here’s how 60 Minutes presents bipartisan support for Biden’s blank check for Ukraine:

While in Kyiv, we learned that three of McCain’s former colleagues were also in town: Democratic Sens. Elizabeth Warren and Richard Blumenthal and Republican Sen. Lindsey Graham. They don’t normally agree on much – together, though, they’re some of the staunchest supporters of U.S. funding for Ukraine’s resistance.

Indeed Zelensky himself while meeting with US Senators in Washington last week said something similar – that without continuing American funds, the war effort is doomed. He urged Congress to keep the billions in aid flowing, and sought to present that Moscow will one day expand aggression beyond just Ukraine.

* * *

Meanwhile, the “aid from the heart of every ordinary American person” will continue (whether those ordinary Americans like or not)…

While Biden seems obsessed with protected Ukraine’s sovereign border, he has left the US southern border wide open. There have been OVER 5.8 MILLION illegal crossings of our southern border.

So, Old Joe Biden is Making America Last Again (MALA)!

Alarm! 3rd Consecutive Year Of Negative Returns On 10-year Treasuries Which Has Never Happened In History (10Y Yields Up 308% Under Biden, Mortgage Rates Up 156%)

Alarm! US 10-year Treasury yields are soaring along with mortgage rates.

The US Treasury market is witnessing another significant selloff, pushing the 10y UST yield close to the 4.50% mark. The surge in real rates is remarkable, reaching 2.12% for the 10y, a level not seen since 08’. While this might appear attractive in real terms compared to historical benchmarks, could we be on the brink of a third consecutive year of negative performance for US Treasuries? To put this into perspective, such a scenario has never occurred in history.

The conforming mortgage rate is at 7.3%, up 156% under since Biden’s coronation as El Presidente of the United Banana Republics of America. Where political opponents are indicted prior to elections.

In Biden’s Banana Republic economy, the US Treasury 10y-2y yield curve remains inverted.

And then we have Mish’s chart on debt as a percentage of GDP from CBO. Remember, we used to worry about the US breaking the 80% debt to GDP level. It is now projected to be 181%. Wow.

This isn’t good!

El Presidente Billions Biden.

Fed’s Dot Plot To Show Fed Pushing Back On 2024 Pricing And Rates Dropping Like A Rock In 2025 To 3.6% (Almost 200 BPS Decline)

The Fed’s Dot Plot, the Open Market Committee’s guesses as to Fed rate policy in the future, despite Treasury Secretary Janet Yellen saying everything is beautiful in the US economy. Then Janet, why is The FOMC siganling a rate cut from 5.6% to 3.6% by 2025?

The Federal Reserve’s dot plot for September will push back on the notion of aggressive rate cuts that the markets are pricing in for next year.

The median of indications will show that policymakers expect a decline in the benchmark rate of as little as 50 basis points or 75 basis points for 2024, compared with the 100 basis points their plot showed in June. I expect the Fed to leave its dot plot for 2023 intact, with the funds rate indicated at 5.6%.

Investors have, of late, swung between pricing rate cuts between the spring and the summer of 2024, which the Fed isn’t in a position to acknowledge based on the current strength of the US economy. The most definitive way of pushing back against that notion is to pencil in less by way of policy loosening than the central bank did in June.

Since that meeting, headline inflation has accelerated, while inflation stripped of housing and energy is still hovering above 4%. Meanwhile, the jobless rate has averaged 3.6% so far this year, around as low as we have ever seen historically — and way below what the Fed estimates will be required to bring the labor market into balance.

The resilience of the job market may, in fact, spur policymakers to pencil in a lower unemployment rate for 2024 than the 4.5% they indicated in June.

Consistent with that outlook, the Fed may be disinclined to revise its 1% growth projection for next year by more than a whisker.

Those revisions are likely to mean that the Fed has reduced scope to loosen policy at the first sign of material weakness in the economy.

Given that James Bullard quit the Fed in August, the new set of projections will be lacking a prescient hawk, whose dot plot has been a rewarding schemata to follow for investors in this cycle. That suggests the skew between the median of the Fed rate projections for next year and top range will be considerably narrower.

An interesting corner of the summary of economic projections to watch will be the Fed’s assumption on the neutral real policy rate, which neither stokes inflation nor crimps output. For several years now the Fed has penciled in a longer-run funds rate of 2.50% predicated on inflation of 2%, thereby projecting a neutral rate of 50 basis points.

However, researchers at the New York Fed reckon that the real neutral rate will reach a staggering 250 basis points by the end of the year, one reason why Treasury long-dated yields have been sticky this late in the policy cycle.

All told, the dot plot and summary of economic projections is what will guide the Treasury market reaction, and from the looks of it, the markets may not like what they see.

Not like what they see? Like Bidenomics??

Homebuilder Sentiment Goes Negative For First Time In 7 Months, Thanks To Bidenomics (Mortgage Rates UP 152% Under Biden)

Bidenomics, the economic gift to big donors and a boot up the backside of middle class and low wage workers, keeps on giving. Now its homebuilder sentiment falling to 45.

U.S. homebuilders are feeling pessimistic about their business for the first time in seven months, thanks to stubbornly high mortgage rates.

Builder confidence in the single-family housing market fell 5 points in September to 45 on the National Association of Home Builders/Wells Fargo Housing Market Index. The decrease follows a 6-point drop in August. Anything below 50 is considered negative.

Mortgage rates are up 152% under Biden’s Reign of Economic Error. Note the big assist the economy got from Covid-related Fed stimulus (red line). The Fed’s balance sheet is still over $8 trillion.

Bidenomics and The Fed have started a fire that The Fed is unwilling to extinguish. Hey Jay, its not magic!

The Biden Blitzkrieg Bop! 10 Red Flags Point To Looming Recession Under Bidenomics

Call Bidenomics a new name: The Biden Blitzkrieg Bop since the administration launched a blitzkrieg attack on America’s middle class and low wage workers through bad energy policies and soaring inflation.

Economists have practically sounded the all-clear on a looming recession, but plenty of signs are still flashing red.

Clearly, economists were wrong earlier this year when they forecast an economic contraction that has yet to manifest. Could they be wrong now?

To be sure, economic growth, the labor market and consumer spending have proven unexpectedly resilient in the face of rising interest rates and elevated inflation. But there are still plenty of signs a recession might still be on its way.

1. An “uncertain outlook” from leading indicators

Many mainstay economic indicators measure the past. So-called leading indicators reflect what likely lies ahead.

The Conference Board’s U.S. Leading Economic Index for July marked its 16th consecutive drop and its longest losing streak since the run-up to the Great Recession in 2007 and 2008.

“The outlook remains highly uncertain,” said Justyna Zabinska-La Monica, senior manager of business cycle indicators, at The Conference Board.

“The leading index continues to suggest that economic activity is likely to decelerate and descend into mild contraction in the months ahead.”

The index is based on 10 components, ranging from stock prices and interest rates to unemployment claims and consumer expectations for business conditions.

2. Consumer confidence is just a hair above recessionary levels

The Conference Board’s consumer confidence index came in at 80.2 in August, hovering just above 80, the level that often signals the U.S. economy is headed for a recession in the coming year.

It is also a leading indicator used to predict consumer spending, which drives more than two-thirds of U.S. economic activity.

3. Consumers are foregoing big-ticket purchases

Retailers report that their customers have shifted their purchasing habits, spending less on furniture and other big ticket items in favor of necessities. They have also been trading down on grocery items, ditching pricier cuts of beef and buying chicken.

“We saw some switch even to some canned products, like canned chicken and canned tuna and things like that,” Costco’s Chief Financial Officer Richard Galanti told analysts on a May conference call.

Consumer spending has remained one of the bright spots in the economy, but most investors expect consumer spending to slow by as early as next year, Bloomberg’s latest Markets Live Pulse survey found.

4. Credit cards are getting maxed out

U.S. consumers ran up their credit card debt past the $1 trillion mark for the first time last month, according to a report on household debt from the Federal Reserve Bank of New York.

Total household debt, which includes home and auto loans, has eclipsed $17 trillion.

The Federal Reserve Bank of St. Louis reports that credit card delinquencies, which are still low compared to periods such as the Great Financial Crisis, are on the rise.

5. Banks are increasingly reluctant to lend

The latest Senior Loan Officer Opinion Survey by the Federal Reserve reports tightening credit conditions across the board, from business loans to home mortgages and consumer credit.

“Regarding banks’ outlook for the second half of 2023, banks reported expecting to further tighten standards on all loan categories,” the Fed survey concluded.

“Banks most frequently cited a less favorable or more uncertain economic outlook and expected deterioration in collateral values and the credit quality of loans as reasons for expecting to tighten lending standards further.”

When banks pull back on lending, businesses curb their investments and consumers cut spending, and this trend is expected to continue for at least the rest of the year.

6. Corporate bonds are maturing and refinancing them will be costly

Goldman Sachs estimates that $1.8 trillion in corporate debt is coming due over the next two years and it will have to be refinanced at higher interest rates.

The expense will eat up more corporate resources, possibly leading to slower growth and investment.

Recessions occur as debt levels peak and borrowers begin to default.

Moody’s has already reported a surge in corporate defaults this year. In the first half of the year, it counted 55, that’s 53% more than the 36 that defaulted in all of 2022.

7. Manufacturing remains in a prolonged post-pandemic slump

Manufacturing has been in decline for 10 consecutive months, as measured by the ISM Manufacturing Purchasing Managers Index.

Respondents to the ISM survey reported weaker customer demand because of higher prices and interest rates.

“Orders are in fact falling faster than factories are cutting output, suggesting firms will need to continue scaling back their production volumes into the near future,” writes Chris Williamson, chief business economist at S&P Global Market Intelligence.

“An increasing sense of gloom about the near-term outlook has meanwhile hit hiring and led to a further major pull-back in purchasing activity.”

8. ‘Cascading crises’ could tip the balance of a slowing global economy

China, a growth engine for the past 40 years, is still struggling to recover from the pandemic, global economic growth has fallen below long-term average, and the ailing world could pull the U.S. economy down with it.

Like a plane crash, every economic disaster stems from a confluence of mishaps. Along these lines, G20 nations on Saturday put out a dire warning:

“Cascading crises have posed challenges to long-term growth,” the group said.

“With notable tightening in global financial conditions, which could worsen debt vulnerabilities, persistent inflation and geoeconomic tensions, the balance of risks remains tilted to the downside.”

9. The yield curve, a classic recessionary signal, is still inverted

Investors should be paid more for taking a long-term risk than they should for a short-term risk. That’s why the yield on a 10-year Treasury is supposed to pay a higher yield than a 2-year Treasury.

When this is not the case, it’s called an inverted yield curve, and it has long been considered a sign that a recession is due within the next 18 months.

The yield curve for 10-year and the 2-year Treasury has been inverted since July 2022. It’s been inverted for so long that many observers have given up on its reliability — though it still hasn’t been 18 months since it first inverted.

As for history, the yield curve last inverted was in late 2019, just before the pandemic U.S. recession.

10. Inflation is sticky, and the Fed isn’t done

The soft landing scenario that is so widely embraced is based on observations that inflation has dropped precipitously as the economy continues to grow at a healthy pace and the labor market is still holding strong with the unemployment rate at 3.8%.

The Fed, which has raised interest rates 11 times since March 2022 to curb inflation, can now take a bow. The consumer price index, which measures inflation, has come down from a peak of over 9% in June 2022 to 3.2% on its last reading in July.

The latest reading on CPI, for August, came out Wednesday, and re-accelerated more than expected, with The Fed’s most-watched ‘Core Services CPI Ex-Shelter’ back above 4.00%…

Meanwhile, the Fed, which next meets on Sept. 19-20 to decide on interest rates, is holding fast to its 2% target for inflation and will keep rates higher for longer, or possibly even raise them further to meet that goal.

Wall Street traders are not expecting another increase this month, according to the CME FedWatch tool, which is based on Fed funds futures trading.

Policy makers are still waiting to see what happens next after raising rates to their highest level in 22 years. Perhaps those actions have already sent the economy on a path of contraction. Or perhaps they haven’t done enough to continue slowing inflation.

Sticky inflation presents on ongoing risk of a recession.

“I believe we must proceed gradually,” Dallas Fed President Lorie Logan said last week, “weighing the risk that inflation will be too high against the risk of dampening the economy too much.”

The Biden Blitzkrieg Bop!

Shape Of Things! US Loan And Leases Growth Slowing With Crash In M2 Money Growth As Loan Delinquencies Accelerate

Shape of things in the US economy. But a better tune to descible what is happening is over, under, sideways down.

For example, look at this chart of loans and leases at commercial banks, since last year (YoY). The growth rate is plunging rapidly. Of course, M2 Money growth has already crashed.

Loan delinquenices? The trend in delinquencies is rising as consumers struggle with inflation.

When asked about future Fed policies, Powell angrily replied “I’m a man.” Just kidding, but that is almost as nonsensical as his other answers.

Inflation Reanimator! Producer Prices Soar In August As Goods Inflation Reignites While WTI Crude Hits $90

Jerome Powell is the God of Hellfire and he brought us …. FIRE! By rapildy raising The Fed’s target rate rapidly. And then sending mixed signals as inflation begins heating up … again.

WTI crude just hit $90. Rising oil prices may be one of the reasons.

After yesterday’s hotter than expected rebound in CPI, all eyes are on PPI for signs that the pipeline for inflation may be more dove-friendly.

It wasn’t!

Producer Prices rose 0.7% MoM in August (up from +0.3% in July and hotter than the +0.4% exp). That is the hottest PPI since June 2022, and pushed YoY prices up 1.6%…

Source: Bloomberg

Goods prices are reaccelerating fast, now back into inflation YoY (as Services cost growth slowed only modestly)…

Source: Bloomberg

As a reminder, much of last month’s PPI rise was driven by a big jump in portfolio management costs – as stocks soared. August saw a further rise in those costs…

Source: Bloomberg

More problematically, the pipeline for PPI appears to have inflected as intermediate demand is re-accelerating…

Source: Bloomberg

This is not what The Fed wanted to hear.

US Credit Default Swaps Price Now Above Spain As US Debt Gets Close To $33 TRILLION And $194 TRILLION In Unfunded Federal Promises (Joy To The Globalist Elites!)

I ain’t never been to Spain, but the US under Biden is like Spain in terms of default risk.

Actually, I have to Spain numerous times and love visiting Barcelona. But the US debt fiasco under Biden and Congressional spending sprees has led to … US credit default swap being priced worse than Spain’s CDS.

With Biden/Congress orgy of spending (and a declining economy in many important respects), the US is seeing Federal debt near $33 TRILLION and even worse, unfunded Federal liabilities (promises, promises) are at $193 TRILLION, almost 6 times the current Federal debt load.

If you are into archaelogy and fossils, Nancy Pelosi (83) has announced that she is running for re-election to The House. Hasn’t San Francisco suffered enough under Feinstein, Newsom and Mayor Breed?

Or as 3 Dog Night sang, “Joy to the globalist elites!”

Bidenomics In 3 Charts! Net Cash Farm Income Growth Negative, Office Vacancy Rate Now Higher Than Financial Crisis, 19% Growth In Federal Debt And $194 TRILLION In Unfunded Liabilities (WEF’s Klaus Schwab Approves Biden’s Message!)

Bidenomics is a train wreck. But unlike E. Palestine Ohio, the site of a train derailment and massive toxic spill (for which Biden has yet to visit), Bidenomics is a continuing train wreck.

The first chart is the record decline in US net cash farm income. Now in negative growth!

Second, US office vacancy rate is now higher than the peak during the financial crisis. Of course, Covid shutdowns and work from home is the primary driver, but Democrat crime policies are making it more hazardous to work in offices in major American cities, so Bidenomics isn’t helping.

Under Bidenomics, US debt is now near $33 trillion. Up 19% under Biden. And while not Biden’s fault, the US has promised $194 TRILLION in unfunded liabilities. Biden won’t do anything to halt the entitlement growth.

Is Biden acting on behalf of World Economic Forum’s Klaus Schwab? Well, Biden appointed John Kerry, another dimwitted former US Senator like Biden, to be his climate Czar. Kerry wants to shut down farms and starve the population, just like his Overlord Klaus Schwab.

Are Biden and America’s Progressives part of Schwab’s “Great Reset?” Where we eat insects while Biden, Kerry, Schwab and the elites feast on Wagyu beef, foie gras, and expensive champagne. Elitist Treasury Secretary Yellen looks like she could use some Ozempic!

And then we have elitist California governor Gavin “Count Yorga” Newsom opining on Biden’s great “success.” 70% of Americans say things are going badly under Biden, but California Democrat Gov. Gavin Newsom says he’s “very inspired by the master class of the last two-and-a-half years”

Ah, the elite class! Reminds me of the French aristocracy under Louis the 16th and Marie Antoinette. “Let them eat crickets!”