US CPI on trend for 4-5% at US election in November.
Source: BofA
Above 5%…?
Strong CPI raises market probability of YE25 rates above 5%.
Source: Goldman
Cyclical inflation remains too elevated
“Our measure of cyclical inflation–which should capture the impact of excess demand on prices–appears to be stuck at around 5%, which is too elevated”
Source: Safra
US alone
The US is the only economy in the G10 where the latest inflation print surprised to the upside.
Source: Goldman
200% of GDP
Under current policies, government debt outstanding will grow from 100% to 200% of GDP.
Source: Apollo
Close to $9 trillion in maturities
That’s a significant amount of government debt maturing within the next year.
Source: Apollo
Every year a deficit
OMB forecasts 5% budget deficit every year for the next 10 years.
Source: Apollo
A billion per day….is long gone
US government interest payments per day have doubled from $1bn per day before the pandemic to almost $2bn per day in 2023.
Source: Apollo
Biggest Story of 2020s…Ugly End of 40-year Bond Bull
Chart shows long-term US government bond (15+ year) rolling 10-year annualized returns, %.
Source: Flow Show
Highest yields in 15 years
The intermediate part of the yield curve still offers the highest yields in over fifteen years.
Source: Piper Sandler
Finally, electricity costs keeps rising, ESPECIALLY with the misnamed Inflation Reduction Act (IRA). The real name of the IRA should have been the Large Green Donor Increase Act (LGDIA).
Joe Biden, his Administration, and The Federal Reserve are really “The Alligator People.” Despite what they tell you, they have small brains (particularly Biden) and are hyperfocused on spending.
A good example comes from “Wall Street On Parade” where they show that The Federal Reserve is still paying BILLIONS to US Treasury in the form of remittances (losses). While at the same time, paying the mega banks on Wall Street high interest loans.
As of April 3 of this year, the Federal Reserve (Fed) has racked up $161 billion in accumulated losses. We’re not talking about unrealized losses on the underwater debt securities the Fed holds on its balance sheet, which it does not mark to market. We’re talking about real cash losses it is experiencing from earning approximately 2 percent interest on the $6.97 trillion of debt securities it holds on its balance sheet from its Quantitative Easing (QE) operations while it continues to pay out 5.4 percent interest to the mega banks on Wall Street (and other Fed member banks) for the reserves they hold with the Fed; 5.3 percent interest it pays on reverse repo operations with the Fed; and a whopping 6 percent dividend to member shareholder banks with assets of $10 billion or less and the lesser of 6 percent or the yield on the 10-year Treasury note at the most recent auction prior to the dividend payment to banks with assets larger than $10 billion. (This morning the 10-year Treasury is yielding 4.41 percent.)
Operating losses of this magnitude are unprecedented at the of Fed, which was created in 1913. In a press release dated March 26, the Fed stated this: “The Reserve Banks’ 2023 sum total of expenses exceeded earnings by $114.3 billion.”
As the chart above indicates, the Fed’s ongoing weekly losses have ranged from a high of $3.3 billion for the week ending Wednesday, January 31, 2024, to $1.86 billion for the most recent week ending Wednesday, April 3, 2024.
American taxpayers have good reason to sit up and pay attention to the Fed’s giant and ongoing losses. That’s because when the Fed is operating in the green, as it was on an annual basis for 106 years from 1916 through 2022, the Fed, by law, turns over excess earnings to the U.S. Treasury – thus reducing the amount the U.S. government has to borrow by issuing Treasury debt securities. According to Fed data, between 2011 and 2021, the Fed’s excess earnings paid to the U.S. Treasury totaled more than $920 billion.
WHO pays for the student loan forgiveness? It just doesn’t vanish, it is transferred to taxpayers. Alligators like Alexandria Ocasio Cortez going on talk shows to argue the benefits of being free from financial obligations that student voluntarily agreed to. Say, can AOC get my mortgage forgiven?? Just kidding. Now those same students can borrow additional money to get MBA degrees with the expectation that the student loan is “free money.”
Yes, Biden is acting recklessly (no surprise). Here is a picture of King Gator, Joe Biden.
The Biden Administration and The Federal Reserve ARE the alligator people. Except these gators are hungry for your money and votes constantly.
Despite Biden’s rambling that inflation is improving, bear in mind that the inflation rate is at it highest in 50 years. Yes, it has improved from 18% in 2022 to above 10% today.
A recent research paper by four noted economists, including Larry Summers, the former Treasury Secretary under Barack Obama and former Harvard President, discovered that the real inflation rate during the Biden years, using pre-1983 calculations reached 18% in 2022.
The number is the highest inflation rate the country has seen in over 50 years.
Gold futures prices are soaring and are at $2,422.00. Gold futures prices are up 19.61% over the past year.
Silver futures prices are also soaring and are at $29.64. Silver futures prices are up 16.40% over the past year.
Bitcoin is almost at $70,000 and is up 133.44% over the past year.
Returning to gold, we are seeing another gold breakout, like the breakout in 2008.
Even central banks are loading up on gold, silver, and cryptos. Why? Primarily fear of US reckless budgets and exploding debts/deficits (don’t listen to Biden talk about how “he” reduced deficits and debt (both have risen to dangerous levels under he inattentive eyes).
However, calming the jangled nerves of pension funds is that the S&P 500 stock market index is up 26.04% over the past year.
Overall prices are up by 19.4% since Biden took office.
Of course, the S&P 500 is not sustainable given that it has been driven by excessive spending by the Biden Adminstration coupled with still massive monetary stimulus from The Federal Reserve.
In summary, gold, silver and cryptos are rising on FEAR! Of Biden, Congress and The Fed.
One reason that America’s youth is disgusted with Bidenomics is skyrocketing prices, particulalry housing. (simply unaffordable). Thanks to awful economic policies, home prices are up 32.5% under Biden and 30-year mortgage rates are up a whopping 160%! Good luck buying a home with a part-time job.
The bad news is that the 10-year Treasury yield rose to 4.53%, the highest since November 2023. This means that mortgage rates will rise even further.
Yes, rising rates AND home prices are daunting to part-time job holders.
Mortgage applications increased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 5, 2024.
The Market Composite Index, a measure of mortgage loan application volume, increased 0.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.2 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 23 percent lower than the same week one year ago.
The Refinance Index increased 10 percent from the previous week and was 4 percent higher than the same week one year ago.
We are living in the USA where corruption, favoritism, open borders and an out-of-control Federal budget and debt are destroying this once great nation.
Former Kansas City Fed President Thomas M. Hoenig was absolutely right when he said recently that The Federal Reserve panders to Wall Street, Congress and special interest groups, prioritizing immediate relief over financial stability. Bernanke’s zero-interest rate policies (ZIRP) and Quantitative Easing (QE) were short-term fixes that never went away. Indeed, since the subprime mortgage crisis of 2008-2009, US Dollar purchasing power is DOWN -32% and M2 Money is up a staggering 177%. While Yellen stuck with zero-interest policies until Trump was elected, then raised The Fed Funds Target Rate 8 times. Yellen only raised the target rate once under Obama. Clearly playing political favoritism.
The Federal Reserve’s lack of transparency comes amidst reports that countries are removing their gold and other assets from the U.S. in the wake of the unprecedented Western sanctions imposed on Russia over its invasion of Ukraine. According to a 2023 Invesco survey, a “substantial percentage” of central banks expressed concern about how the U.S. and its allies froze nearly half of Russia’s $650 billion gold and forex reserves.Headline USA filed a FOIA request with the Fed for records reflecting how much gold the Federal Reserve Bank of New York currently holds in its vault, as well as records reflecting the ownership stake that each of FRBNY’s central bank/government clients have in that gold. The FOIA request also sought records about the Fed’s gold holdings prior to Russia’s February 2022 invasion of Ukraine. However, the Federal Reserve denied the FOIA request on Wednesday.
It influences the price of nearly everything, as well as the availability of jobs, the stability of our banking system, and the purchasing power of our money.
When the Fed Chair speaks, the entire world stops to listen.
But the average person has a poor understanding of how this colossally important entity operates. Or even why it exists.
And after a series of asset price bubbles — which some argue we’re in another one now — a chorus skeptical of the Fed’s actions has emerged.
So today we’re doing our best to shine as bright a light as possible on the Fed: how & why it operates, the good & as well as the shortcomings of its actions to date, what direction its policies are likely to take from here, and how all of this impacts the households of regular people like you and me.
Here are my top takeaways from from a speech by former KC Fed President Thomas Hoenig:
Dr Hoenig admits the Federal Reserve has experienced substantial “mission creep” since its creation as a lender of last resort. Its track record is very much “mixed” in terms of delivering on the intent of its policies. In Dr. Hoenig’s opinion, its efforts to add stability sometimes instead only create more instability.
While very critical of the Fed’s QE and ZIRP policies in the wake of the GFC, and more recently in the $trillions in monetary & fiscal stimulus unleashed post-COVID, Dr Hoenig thinks current Fed policy is “about right”. Though he expects the Fed to come under serious pressure soon as ebbing liquidity allows recessionary forces to build. He thinks the Fed will need to make an important decision within the coming year: return to QE and re-flame inflation, or allow a recession to occur.
Dr Hoenig criticizes the Federal Reserve for pandering to various interests, noting that short-term thinking and pressures from Wall Street, Congress, and interest groups often lead to decisions that prioritize immediate relief over long-term stability — a sort of “We’ll act now for optics sake and hopefully figure things out later”
In Dr Hoenig’s opinion, our fiscal policy is a runaway disaster. He criticizes both political parties of Congress for their roles in the cycle of ever-increasing deficits. Democrats advocate increased spending and tax hikes, while Republicans aim to keep taxes low but fail to curb spending. He warns of dire long-term consequences for future generations due to this impasse.
Dr Hoenig is very worried about the current stability of the banking system (and this from a former Direct of the FDIC!). He advocates for essential reforms to address government spending, prioritize essential areas without relying on future borrowed funds or inflationary measures, and communicate transparently with the public. He stresses the importance of reducing debt growth substantially below national income growth to avoid a full-blown crisis scenario in the future.
Dr Hoenig predicts the purchasing power of the US dollar (and other world fiat currencies) will continue to decline due to current policies and the lack of a “discipline” to money creation. Until such a discipline is restored (perhaps a return to some sort of hard backing of the currency), the dollar’s fall in purchasing power won’t abate.
Dr Hoenig suggests investing time in reading history and biographies as a valuable way to learn about leadership and gain insights into what strategies works and which don’t.
Here is the “Sound Money Parade” in 1896. By the aftermath of the subprime crisis, Janet Yellen (1993-2020) adopted the UNSOUND Money Fest, an orgy of printing and charging near zero interest rates. Powell in 2021 is ever-so-slowly unwinding The Fed’s balance sheet, but Powell has raised The Target Rate to its highest level since 1998 to fight inflation caused by Biden’s policies.
Combine The Fed not telling us how much gold they hold and their overprinting problems since 2008, and you can see why investors are turning to gold and silver and crypto currencies. The adoption of Central Bank Digital Currency (CBDC) is a step towards financial collapse.
Here is a parade you will NEVER see in Washington DC. A Sound Money Parade!
Powell is beginning to act like a sound money fan, but he still is taking his sweet time shriking the balance sheet.
I am thinking of fleeing to Lilliehammer Normay like Frank Tagliano.
Like last month, today’s jobs report for March is better than Februrary’s miracle report, but has some glaring bad news that the Administration and slobbering media will ignore. Now you know why I no longer appear on CNBC, CNN or Fox Business anymore.
Let’s start with the good news! The BLS reported that in March, the US added a whopping 303K jobs, tied for the highest since Jan 2023!
Turning our attention to the unemployment rate, it unexpectedly dipped again, dropping to 3.8%, from 3.9%, in line with estimates, as the number of unemployed workers dipped modestly from 6.458 million to 6.429 million while the number of employed workers rose by almost half a million workers; the unemployment rate for Blacks (6.4 percent) increased in March to the highest level in almost two years, while the rates for Asians (2.5 percent) and Hispanics (4.5 percent) decreased. The jobless rates for adult men (3.3 percent), adult women (3.6 percent), teenagers (12.6 percent), and Whites (3.4 percent) showed little or no change over the month.
In contrast, the participation rate rose from 62.5% to 62.7%, above the 62.6% expected, as the overall civilian labor force increased slightly less than the number of employed people.
Now for the not-so-good news. The average hourly earnings came in as expected, rising 0.3% MoM, up from last month’s upward revised 0.2% sequential increase (revised from 0.1%), On an annual basis, the hourly earnings rose 4.1%, as expected, and down from 4.3%. This was the lowest print in almost three years: the last time wages rose by this much was the summer of 2021.
Now for the bad news.
For those wondering if the jobs were all part-time, the answer is a resounding yes: in March, full-time jobs dropped by 6,000 as Part-time jobs soared by 691,000.
On a year-over-year (YoY) basis, full-time jobs were down -1.0% while part-time jobs were up 7.1%
Native-born versus foreign born? On a YoY basis, native-born employment was down -0.5% while foreign-born employment increased by 4.2%.
Not only is Biden importing Democrat voters (since 70% of Americans HATE Biden’s policies), they are also displacing native-born Americans in the labor force.
Manufacturing jobs added were ZERO. So, much for all of Biden’s claims. But NON-PRODUCTIVE government jobs were up 71,000. So our manufacturing jobs are dead while non-productive government jobs are growing like crazy.
Under Biden, the Administrative state is growing faster than manufacturing since Feb 2023. The Biden Administration implements new rules to prevent Trump’s ability to purge deep state employees if re-elected in 2024.
How will The Fed respond? Likely will lead to limited rate cuts.
There is gold in them thar hills in California. And politicians like Gavin Newsom (aka, Pond Scum) not only spend all their cash available from (ruinous) taxes, but also spend like drunken miners and run up massive deficits and debts.
Governor Gavin Newsom bragged of a surplus, but California is seriously underwater. The next recession will hit the state extremely hard.
California’s total state and local government debt now stands at almost $1.6 trillion, or about half the state’s GDP.
That isn’t an alarming ratio when compared to the national debt, which has now soared to 128 percent of U.S. GDP with no end in sight. But Californians carry this $1.6 trillion state and local debt ($40,000 per capita) in addition to their share of the national debt (about $90,000 per capita).
Unsurprisingly, California has the highest unemployment rate in the nation at 5.7 percent vs. 4.1 percent nationally.
A Booming Economy?
California has massive problems although the stock market is at a record high and the economy is allegedly booming. The next recession will hit California exceptionally hard, and it’s not too far off.
But thanks to Newsom’s Presidential ambitions (God help us!), along with virtually psychopathic state legislators, California has been tax crazy (particularly in 2022). This has helped to drive a demoralized middle class to Arizona, Texas, Nevada and other lower tax states.
And then we have California’s fast food minumum wage disaster, causing closing of small, family-owned restaurants. And causing massive layoffs in the fast food industry and probably leading to an AI takeover of corporate resturants (I remember taking my poor wife to Olive Garden and I refused to use to electronic ordering system and demanded a real waiter to serve us. The waiter told us that nobody liked the electronic ordering system).
While not the only guilty party, Newsom is a leader … in bankrupting California with his budgetary fantasies and Presidential aspirations.
I am surprised that Newsom hasn’t used the themesong from Jim Bowie as his themesong.
The Federal Reserve has created America’s version of India’s caste system. At the top of the neo American caste system are bankers and the political donor class. The top 1%. The other 99% are losing ground to the Brahmin Banker Class.
In 1913, Woodrow Wilson and his progressives promised that the Federal Reserve would avert both depressions and inflation, while preventing the wealthy from controlling America’s financial markets at the expense of the poor, the new untouchable class.
As you can see, the Brahmin Banker class (top .1% of net worth) are beating the socks off the bottom 50% of the new American caste system. This problems has greatly accelerated under Biden’s Reign of Error.
For two decades, the Fed kept interest rates artificially low to help finance massive government spending. When that spending reached unprecedented heights in 2020, the Fed intervened more drastically than ever, creating trillions of dollars and devaluing the currency.
Thus began an unparalleled transfer of wealth that continues to this day, and which has driven a wedge between different groups of Americans.
The painful inflation of the last three years has increased prices throughout the economy, distorting the signals that prices are supposed to convey to buyers and sellers. For example, the cost to own a median-price home today has doubled since January 2021, but it’s still the same house.
This phenomenon represents the monetization of housing, where a dwelling becomes a much better store of value than the currency, even if the real value of the house hasn’t improved.
Likewise, Americans’ earnings have increased substantially over the last three years, but not in the most meaningful sense—that is, what they can buy. Instead, the opposite has happened, and today’s larger incomes buy less.
What would have been a decent salary in 2019 is no longer enough to even get by in many places, and it’s certainly not enough to ever fulfill the American dream of homeownership.
A family earning the median household income can afford a median-price home in only a handful of major metropolitan areas in the entire country. In many cities, the cost to own a median price home exceeds the take-home pay from the median household income. Even if you didn’t spend a dime on other necessities such as food, you still wouldn’t have enough for your mortgage payment.
It’s truly a condemnation of the status quo when even those with seemingly high incomes cannot afford a typical house.
Worse, as prices continue marching upward, people can save less, making it harder to accrue a sufficient down payment. Even by the time a family reaches their goal, home prices have increased again, and they’re back on the hamster wheel, trying to save for an even larger down payment.
Meanwhile, inflation is steadily, though silently, taxing away the real value of the family’s savings as they sit in the bank.
This has left countless Americans as perpetual renters, with almost an entire generation of young people giving up on having the standard of living that their parents had. An artificial chasm has been constructed between those who already own capital, like housing, and the remaining Americans who can only borrow such assets, as they do by renting.
Similarly, many of those struggling to afford sharply increased rents are going deeply into debt to keep a roof over their head while those who locked in a mortgage with a fixed interest rate before both home prices and interest rates exploded have shielded themselves from one of the largest drivers behind the cost-of-living increases of the last three years.
Many homeowners could not afford to buy their same home today. The monthly mortgage payment on a median-price home has doubled since January 2021. Thus, even if two families have identical incomes, the one that bought a home three years ago has a nearly insurmountable advantage over the other family trying to do so today.
The Fed’s monetary manipulations have financed trillions of dollars in federal budget deficits, but they’ve also created a permanent American underclass, something antithetical to the Founders’ vision for the country.
Class mobility is at the heart of the American dream, and the Fed has turned it into a nightmare.
Here is a photo of Joe Biden with “Doctor” Jill on Easter Sunday flanked by Fed Chair Jerome Powell and Jared Bernstein (whom I once debated in Washington DC).
Update: KJP confessed that it was Obama who created the Trans Day of Awareness back in 2009 (although strangly not enacted until this part Easter Sunday).
Confounded Interest - Anthony B. Sanders 
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