Talk about an economy that seems dependent on Federal government money printing. The US economy seems hopelessly addicted to gov money printing.
Today, US job openings fell in February to 9,931k. While that is still a large number, look at the chart of job openings and M2 Money printing. There is a one year lag between maximum printing and job openings. But M2 Money growth has collapsed.
Silicon Valley Bank’s blunders were encouraged by US regulation, went untested by the Federal Reserve and were “hiding in plain sight” until Wall Street and depositors grew alarmed.
That’s JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon’s assessment of the US banking crisis that sent markets careening last month, an episode he predicts is “not yet over” and will be felt for years. He said US authorities shouldn’t “overreact” with more rules.
In his wide-ranging annual letter to shareholders on Tuesday, Dimon described his firm’s aspirations for using artificial intelligence and ChatGPT, weighed in on geopolitics, and provided updates on JPMorgan’s activities in Ohio. This time, many of his sharpest remarks ripped at regulation, including capital rules that pushed banks to binge on low-interest assets that lost value as interest rates shot up.
“Ironically, banks were incented to own very safe government securities because they were considered highly liquid by regulators and carried very low capital requirements,” Dimon said. “Even worse,” he added, the Federal Reserve didn’t stress-test banks on what would happen as rates jumped.
When Silicon Valley Bank’s uninsured depositors realized it was losing money selling securities to keep up with withdrawal requests, they raced to pull their cash. Regulators then intervened and seized it.
Yes. Banking regulators were so focused on credit-exposure of banks (remember the subprime crisis of 2008?) that they really screwed up by having banks load-up on low credit-risk assets that usually have interest rate risk associated with them like Treasuries and mortgage-backed securities (MBS). What could go wrong?
What went wrong was that interest rates rose and unrealized losses on Treasuries and Agency MBS exploded.
Here is a chart of urealized losses on investment securities that banks have accumulated.
Apparently, The Fed and FDIC (and the myriad of Federal and State regulators) sit high on a mountain top and ignore interest rate risk.
Not only did the ISM Manfacturimng Report on New Business Order fall to 44.3, but price PAID also fell as The Fed hikes rates (yellow line) and slowing M2 Money growth (green line).
Office REITs are really hurting as Count Powellula sucks the blood (liquidity) from the market.
Count Powellula. “I vant to suck the blood from your economy.”
To show you how Yellen/Powell’s Too Low For Too Long (TLFTL) monetary polices coupled with Biden/Pelosi/Schumer’s (add McConnell to this foul-smelling witches’ brew), Powell and The Gang (aka, The Fed) slammed on the monetary brakes. On a year-over-year basis, M2 Money growth has crashed tl -3.13%. The shocking number is The Fed Fund Effective Rate which rose over 5,000% YoY.
Actually, the US has been on a money printing spree since 1995, but it was Covid spending and monetary expansion in 2020 that crushed M2 Money Velocity (GDP/M2).
Here is Supernatural’s Leviathan monster Dick Roman handing an award to sparkless President Joe Biden. But Biden did spark massive inflation that crushed the US middle class and low wage workers.
Former Fed Chair (and current Treasury Secretary) Janet Yellen protected President Obama by raising The Fed’s target rate only once while Obama was in office. Then raised rates 8 times after Donald Trump was elected in November 2016. Well, Fed Chair Jerome Powell was following Yellen’s TLFTL (Too Low For Too Long) playbook by delaying raising rates once inflation hit 2% in March 2021. Then Powell started raising rates like crazy, unlike Yellen and her zero interest rate policies (ZIRP or ZORP for zero OUTRAGEOUS rate policy).
One of the safe assets that Federal regulators encouraged banks to hold was agency mortgage-backed securities. The orange circle denotes when headline inflation YoY hit 2% (March 2021). Powell and the gang waited over a year (remember, they said inflation was “transitory”). But another Democrat, Biden, was now President and Powell (like Yellen) didn’t want to rock the boat. So, Powell and the gang waited until headline inflation hit 7% before they took action. Like Yellen, Powell waited too long .
The result? Agency mortgage-backed securities (MBS) got clobbered (white line) as MBS duration (purple line) rose dramatically. Duration is the weighted-average life of MBS and is a measure of risk.
Any surprise that unrealized losses have been piling up at US banks? Not really, only some regional banks weren’t paying attention and got crushed.
And US bank deposits are crashing despite Biden’s and Yellen’s saying the “all is well!”
Yellen and Powell praising ZORP (Zero OUTRAGEOUS rate policies).
Well, the University of Michigan consumer sentiment indices are out for March … and they are ugly.
As a baseline, consumer confidence in February 2020 (just before Covid) was 101. After Covid and massive Fed stimulus and Federal government spending spree, consumer confidence in March fell to 62.0, a far cry from 101 under Trump.
Even worse, the UMich buying conditions for housing hit 142 in February 2020 but has declined to 47 in March 2023.
Why would ANYONE have confidence in the US economy under a complete fool with dementia like “China Joe” Biden??
Inflation is slowing just a little. But my feeling about The Fed (that partly caused the problem in the first place by keeping rates too low for too long (TLTL) under Yellen is all I can do is laugh.
The US Core Deflator (Personal Consumption Expenditure CORE PRICE Index YoY fell only slightly in February to a still-high 4.6% in February despite The Fed jacking up interest rates and slowing M2 Money growth.
I thought Biden and Congress passed the inflation reduction act??
The Covid outbreak in early 2020 (from which I came close to dying) resulted in legendary Fed stimulus and Federal government spending. But as The Fed attempts to cool inflation by slowing M2 Money printing and raising The Fed’s target rate, we are seeing the lowest personal consumption expenditures print under Biden’s reign of error, a measly 1%.
On top of the dismal revision to the Q4, we are seeing WARN notices increasing, particularly for large states. Worker Adjustment and Retraining (WARN) Notices are picking up which points to unemployment claims soon rising and a deterioration in the jobs market, posing a risk to stocks.
Biden’s reign of error continues with horrible policies. With the help of Congress.
Confounded Interest - Anthony B. Sanders 
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