Of course, Friday was one of those “Black Fridays” for investors. And pension funds.
The Dow Jone Industrial Average fell -1008.38 points after Powell’s “Mr T” remarks on pain. That was a whopping -3%. The NASDAQ composite index fell almost -4%.
Equity markets struggled in Europe as well, particularly the German DAX index.
The UMich Buying conditions for houses rose slightly, but remains near the lowest level since 1982.
Clubber Powell, Federal Reserve Chairman.
The Case-Shiller house price numbers are due out Tuesday for June and it is expected that they will show a significant slowing in home prices. Biden and Clubber Powell could then take “credit” for slowing “inflation.”
Federal Reserve Chair Jerome Powell signaled the US central bank is likely to keep raising interest rates and leave them elevated for a while to stamp out inflation, and he pushed back against any idea that the Fed would soon reverse course.
“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Powell said Friday in remarks at the Kansas City Fed’s annual policy forum in Jackson Hole, Wyoming. “The historical record cautions strongly against prematurely loosening policy.”
“Restoring price stability will likely require maintaining a restrictive policy stance for some time,”says Federal Reserve Chair Jerome Powell.
He said restoring inflation to the 2% target is the central bank’s “overarching focus right now” even though consumers and businesses will feel economic pain. He reiterated that another “unusually large” increase in the benchmark lending rate could be appropriate when officials gather next month, though he stopped short of committing to one.
And on the ramblings from Foul Powell, the NASDAQ dropped -2.58%.
Mortgage rates? Will likely rise further on Foul Powell’s statements.
It used to be that economists would see two consecutive quarters of negative Real GDP growth and say “recession.” But apparently not economists like Thaler. But at least the Atlanta Fed’s GDPNow real GDP tracker is pointing to weak growth for Q3 at 1.379%.
So, if 1.38% real GDP growth holds up, the US is technically no longer in a recession. So, Thaler would be correct. However, the US Treasury yield curve 10Y-2Y (blue line) remains inverted and the Conference Board’s Leading Indicators (yellow line) is growing at 0.0% YoY.
And for those expecting interesting news from The Fed’s Jackson Hole conference, I expect Powell to say that The Fed is going to have to jack-up rates to fight inflation (which is crushing the middle class and low wage workers).
Unlike Thaler, I don’t see a strong economy, just a weak economy except for employment (at negative wage growth). And declining savings.
The elite class “economists” (aka, cheerleaders) are meeting at Jackson Hole, Wyoming this week. But while they are planning our future, the revision to the miserable Q2 Real GDP report came out this morning.
So, the second pass at measuring Real GDP produced a slightly better number (-0.6% vs -0.9%).
But the GDP PRICE index revision worsened from 8.7% to 8.9%. Look at REAL personal consumption (yellow line) as M2 Money growth slows.
Let’s see how things go at The Fed party at Jackson Hole, Wyoming. It is appropriate for The Fed to hold their party/meeting at Jackson Hole (Teton County) since it has the highest concentration of wealth per household than any other county in the nation.
Biden is the opposite of the miserly Scrooge McDuck. He gives billions to Ukraine and spends trillions on various Federal projects without batting an eye as to how and who is going to pay for all the spending. And Biden’s latest election pandering is no different.
Speaker Pelosi claims that Biden’s bold action on student loan forgiveness is a strong step in Democrats’ fight to … make college even MORE expensive and lead to colleges hiring even MORE administrators (aka, apparatchiks) making colleges even MORE bogged-down in red tape.
And Speaker Pelosi, the costs of Biden’s midterm election buy of votes is estimated to be $300 BILLION. And a report from the Brookings Institution observed that one-third of student debt is owed by the wealthiest 20% of households, while only 8% is owned by the bottom 20%.
So, Biden is letting AOC write-off $10k of her student loan obligation. Bear in mind that the $10k forgiveness is taxed by The Federal government as income.
It looks like The Fed will have to expand the M2 Money supply to pay for “Billions Biden’s” spending spree.
At The Fed continues to tighten to fight inflation, pending home sales in July crashed and burned. That is, pending home sales fell -22.5% in July as M2 Money growth slowed
If I was still teaching at Ohio State or Chicago, I would ask the students if they see the relation between M2 Money growth and pending home sales.
At least 20 million households — or about 1 in 6 American homes — are behind on their power bills as soaring electricity prices spark what is said to be the worst-ever crisis in late utility payments, according to Bloomberg, citing data from the National Energy Assistance Directors Association (Neada).
Neada said electricity prices had increased significantly since 2020 after a decade of stagnation. The steep rise has resulted in billions of dollars in overdue power bills.
Source: Bloomber
Electricity inflation is being propelled by soaring costs of fossil fuels, such as natural gas, coal, and petroleum.
The chart below shows for the two decades, real electricity prices were relatively flat, except for the commodity boom times around the 2008 GFC. Now CPI less energy has peaked, though electricity continues to rise to a blistering 30% year on year.
Source: Bloomberg
Utility shutoffs have become more common across the US as some lower-tier households are thousands of dollars behind on their power bills.
Jean Su, a senior attorney at the Center for Biological Diversity, which tracks utility disconnections across the US, warned of a “tsunami of shutoff” as the highest inflation in forty years eats away wages and has financially devastated the working poor.
Adrienne Nice is one of those struggling Americans who is more than $3,000 behind on utility bills. Last month, she received a “final notice” from power company Xcel Energy Inc., who turned off the electricity to her studio apartment in Minneapolis as temperatures approached near triple digits.
Nice found it near impossible to save money for utility expenses that have doubled over the past year as food, shelter, and gas prices have also skyrocketed. Her low-paying job as a housecleaner has left her in energy poverty.
I am sure that the Biden Administration talking heads will point to the fact that the US has lower YoY electricity prices than the UK and Euro area.
Suffice it to say, Biden’s “Goin’ Green!!” is very costly to the middle class and low-wage workers. But since the House of Lords (aka, the US Senate) and the Biden Administration are bought-out by billionaires like Bill Gate and Mark Zuckerberg, there is little hope that the middle class will be helped.
US mortgage applications just hit the lowest levels in 22 years, January 2000 as The Federal Reserve continues monetary tightening to combat Bidenflation.
Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 19, 2022. The Refinance Index decreased 3 percent from the previous week and was 83 percent lower than the same week one year ago.The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 21 percent lower than the same week one year ago.
MBA mortgage applications just declined to their lowest level in 22 years (January 2000) as The Fed has begun raising rates to fight inflation caused by 1) excessive monetary stimulus since late 2008, 2) Biden’s green energy policies driving up transportation costs, 3) distortionary Federal spending (e.g., Covid relief, infrastructure bills and now green energy/IRS spending by Biden/Pelosi/Schumer).
Here is the data summary for the latest MBA applications report.
Fed Chair Jerome Powell shrinking The Fed’s balance sheet.
Well, new home sales aren’t coming to the rescue for affordable housing.
July’s New Home Sales crashed and burned. At -32.26% YoY. This is happening as M2 Money growth has declined.
For the month of July, new home sales were down a staggering -`12.65%. However, the average price of new homes rose 19.57% from June. Median price of new home sales were also up 5.91% from June, a large surge.
The supply of new homes? The highest level since the housing collapse of 2008.
The National Association of Realtors’ Homebuyer Affordability Index for fixed-rate mortgages is now at the lowest reading since 2006 and the peak of the 2005-2007 housing bubble that burst catastrophically.
The reason? The Federal Reserve, in their attempt to put out the inflation fire (caused by 1) excessive monetary stimulus since late 2008, 2) rampant Federal spending and 3) Biden’s green energy policies, driving up prices.
If we compare mortgage rates with the US Treasury 10Y-2Y yield curve, you can see that the yield curve remains inverted (historically a bad sign). This may signal an eventual loosening of monetary policy by March 2023.
Confounded Interest - Anthony B. Sanders 
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