Cry for Argentina! Their central bank boosted its benchmark Leliq rate by 300 basis points to 78%. The monetary authority’s board considered the increase in response to accelerating inflation and after leaving the key rate unchanged for several months.
Of course, the US Federal Reserve is going in the opposite direction to combat the US banking crisis created by inflation and Yellen’s “Too low for too long” Fed policies.
I am beginning to wonder in Treasury Secretary Janet Yellen and Chicago Mayor Lori Lightfoot are the same person. Both complete Statist screw-ups.
What a mess in Washington DC. While House Republicans are at lagerheads with Senate Democrats and Resident Biden over Federal spending cuts, the price of insuring against a debt default just rose to 76.75.
How bad it that? Put it this way. Millions are fleeing Mexico and Guatemala and coming to the US. But Mexico has a lower cost of insuring against a debt default than the USA. And Guatemala is almost as expensive as the USA.
It will all be over soon, according to CDS prices.
As The Federal Reserve reaffirms their draining of the monetary punch bowl, we are seeing investors flock towards the bond market. Particularly the iShares Short Treasury ETF. $2.5 BILLION to be exact.
Meanwhile, credit ETFs are hammered by record outflows of almost $12 Billion.
The reason why? Inflation remains elevated which is leading The Fed to keep their foot on the monetary brake pedal.
I must admit, Joe Biden has a horribly misleading nickname “Middle Class Joe.” Between Biden’s horrible energy policies and Pelosi’s/Schumer’s spending binges, the US middle class and low wage workers have suffered mightely with the inflation tax. Throw in Jerome Powell and The Federal Reserve’s manic money printing and the American middle class has a problem.
US inflation peaked at 9.1% year-over-year (YoY), but has declined to a still painful 7.1% YoY as The Fed removes it aggressive monetary stimulus. But to cope with persistent US inflation, consumers have had to dip into savings and use more credit cards. As a consequence, personal savings plunged -64.8% YoY while consumer credit rose 7.9% YoY.
The other tax on the middle class and low-wage workers is the 21 straight months of negative REAL weekly earnings growth.
On the housing front, REAL home prices are growing at 1.5% YoY while REAL weekly wage growth is still NEGATIVE at -3.13% YoY.
Make no mistake, inflation caused by The Fed and Federal governments spending is a tax on the middle class and low wage workers.
Biden, Pelosi, Schumer and Powell are the 4 Horseman of the Inflation Apocalypse.
One of the big problems with Federal goverment and Federal Reserve monetary stimulus is … it wears out. Just look at M2 Money growth.
US existing homes sales fell -7.70% in November to 4.09 million units SAAR. And since the same month last year, existing home sales are down -35.4% YoY.
Existing home sales were the lowest in November since 2010.
The good news? The median price of existing homes fell to 3.21% YoY. The bad news? The ark is really bad pointing to a bad December. Inventory for sale (orange line) remains below pre-Covid shutdown levels.
The Federal Reserve forecast for the US economy is a dismal 0.50% YoY. Do I detect a trend?
The FOMC forecast for 2023 and 2024. Core PCE YoY (inflation) is forecast to drop to 3.50%, still considerably higher than The Fed’s target rate of inflation of 2%. And unemployment is forecast to be 4.60%.
To cope with Bidenflation, US personal savings rate as of October is -67.9% YoY. The “good” news is that rents YoY are crashing. But food prices under Inflation Joe remain very high. But most everything is slowing down, not due to Biden’s policies, but a global and US economic slowdown.
With a big slowdown coming our way, you can understand why The Fed’s December Dot Plot is showing declining Fed Funds Target rate starts declining in 2024.
Even US mortgage rates are headed down.
Speaking of going down, cryptos are down across the board with Cardano leading the decline at -6.91%.
Central bankers won’t ride to the rescue when growth slows in this new regime, contrary to what investors have come to expect. They are deliberately causing recessions by overtightening policy to try to rein in inflation. That makes recession foretold. We see central banks eventually backing off from rate hikes as the economic damage becomes reality. We expect inflation to cool but stay persistently higher than central bank targets of 2%.
For some investors, this year’s rout in high-flying technology stocks is more than a bear market: It’s the end of an era for a handful of giant companies such as Facebook parent Meta Platforms Inc. and Amazon.com Inc.
Those companies — known along with Apple Inc., Netflix Inc. and Google parent Alphabet Inc. as the FAANGs — led the move to a digital world and helped power a 13-year bull run. And FAANG drawdown have reached over $3 trillion.
FAANGs (Meta, Amazon, Apple, Alphabet, Netflix) are getting clobbered in 2022.
Typically, when The Fed prints too much money, such as 10% or higher (red line), inflation follows. Particularly when The Fed prints at 25% YoY in Q4 2020, it was followed by the highest inflation rate in 40 years. But if M2 Money continues to slow, inflation will likely slow, but not to The Fed’s target of 2%.
Despite what Minneapolis Fed’s Neal Kashkari said about The Fed having infinite printing resourses, The Fed is going to fight inflation THAT THEY HELPED CAUSE. Biden’s energy policies (did you see that Elon Musk has a car that uses plentiful hydrogen?), and excessive Federal spending by Biden/Pelosi/Schumer, are culprits in creating the supply chain problems facing America. BUT after the 25% surge in M2 Money in 2020 and 2021, we saw M2 Money VELOCITY crash and burn to its lowest level in history. Which means the “bang for the buck” for printing more money is negligible.
Of course, big tech firms got caught influencing the 2020 Presidential election (see Musk’s release of Twitter files) and engaged in restriction of the 1st Amendment (Freedom of Speech). How much will that impact FAANG stocks going foward?
And yes, the US Treasury yield curve is inverted pointing to a recession in 2023.
And yes, apparently Biden was complicit in the Twitter fiasco.
Why is this terrifying? Blockchain technology is a fantastic innovation for processing payments given its ledger capabiliities. But that means that The Federal Reserve might be able to look at your complete history of expenditures. Or worse, perhaps even shut down your ability to make payments, This may lead to a China-style “social credit score” where the Fed and the Federal government punish people for driving “too much” increasing your carbon footprint or eating non-Federal government approved foods and lowering your social credit score.
Will there be safeguards? Allegedly, but remember the FBI hid Hunter Biden’s laptop prior to the Presidential election of late 2020. And HOW did our nation’s regulators completely drop the ball on Sam Bankman-Fried (or Spam Bankfraud)?
Alarm! US home prices are decelerating as inflation rages and The Fed tightens.
Home price growth in the US slowed the most on record as a doubling of borrowing costs (thanks to the US Federal Reserve) has sapped demand.
A national measure of prices increased 13% in August from a year earlier, but is down from 20.79% in March, the S&P CoreLogic Case-Shiller index showed Tuesday. That’s the biggest deceleration in the index’s history.
The housing market has started to slump as the Federal Reserve hikes interest rates to curb the hottest inflation in decades. Even with the deceleration, prices remain high compared to last year. Coupled with mortgage rates that are edging closer to 7%, many would-be buyers have been shut out, while some sellers have retreated.
While 13% growth sounds good, it is not good for renters looking to buy a home.
On related news, I always said in my classes that +/- 10 basis point in the US Treasury yield is a big deal. This morning, the US Treasury 10-year yield is DOWN -16.1 bps. In fact, the 10-year yields are down across the board globally.
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