This is not the legacy that will endear President Biden to voters. Regular gasoline prices have risen 101% under Biden.
But it not just gasoline and diesel that are soaring (while the rest of us are sore!), CRB Foodstuffs are up 58% under Biden while the 30-year mortgage rate is up 89% under Biden.
And this morning, WTI crude futures are up +1.71%.
And up 142% under Biden.
Prices are sizzling and clobbering the American middle class and low wage workers. But former Federal Reserve Chair and current US Treasury Secretary Janet Yellen never saw it coming.
Biden’s just killing us. And Powell is making up for Yellen’s keeping monetary stimulus too high for too long. Price? Mortgage rates are soaring.
Instead of President Ronald Reagan saying ““Mr. Gorbachev, tear down this wall” we need someone to tell President Biden and Federal Reserve Jerome Powell to “Stop driving up prices and making housing unaffordable.” Unfortunately, The Fed thinks that raising interest rates will temper price increases — it won’t. But it could tamper home price growth.
So what we are left with is soaring home prices AND soaring mortgage rates, leaving this scary chart. The housing cost index has risen 114.5% under Biden.
Its only going to get worse from here.
Today’s jobs report for May showed that the U-3 unemployment rate remained the same as April, 3.60%. However, that is lower than the NATURAL rate of unemployment of 4.445% indicating that the labor market is overheated. Historically, The Fed has tightened monetary policy by raising rates when this has happened. So, look for The Fed to keep raising rates.
As I have mentioned before, REAL hourly wage growth is negative since March 2021, just after Biden signed his executive orders canceling drilling on Federal lands and cancelling the Keystone Pipeline. Later, he canceled off-shore drilling permits and Alaska drilling. Now we have REAL average hourly wages declining at -2.8% YoY as The Fed has been reducing M2 Money supply YoY.
Listings of homes is up 11% YoY, the highest in several years.
Let’s see how the housing market does with soaring mortgage rates.
First, ADP US jobs added flopped (only 128.2k jobs added, the lowest reading under Biden and the massive Federal Reserve stimulus). Much lower than the expected 300k. Second, nonfarrm labor productivity fell in Q1 -7.3%. Third, unit labor costs soared to +12.6%.
M2 Money stock YoY is falling, but remains at 8% YoY.
Here is the summary table for today.
And then we have the Atlanta Fed GDPNow, real-time GDP tracker for Q2 at 1.3%.
As M2 Money growth slows, US GDP is slowing as well. Is this a monetary hangover??
And, of course, rents are soaring for the American middle class and low wage workers.
President Biden met with Federal Reserve Chairman Powell to discuss how to control the inflation that is crushing the middle class and low-wage workers.
Here is a good example of why Biden is worried. There is a mid-term election on the horizon and people are angry and scared. Housing, generally the largest asset owned (or rented) by a household is simply unaffordable thanks, in part, to the over-stimulation of the economy by 1) The Federal Reserve in terms of money printing and 2) the Federal government in terms of fiscal stimulus in response to the Covid outbreak in March 2020.
In nominal terms, the gap between US home prices (Case-Shiller National Home Price Index YoY – US Average Hourly Earnings YoY) is near the all-time high.
Yes, home price growth exploded upwards when The Fed rapidly expanded their balance sheet in response to the Covid outbreak … and only now are considering shrinking the balance sheet.
In terms of house prices, CoreLogic has a nice chart depicted the odds of home prices dropping over the coming year. I circled Columbus Ohio because that is where I am moving (knock on wood).
And then we have the 30-year mortgage rate rising with The Fed’s expected tightening of monetary policy. That will certainly make housing even less affordable, unless house price growth cools dramatically.
Americans’ Savings Rate Drops to Lowest Since 2008 as Inflation Bites.
Yes, inflation really bites. In fact, as US inflation is near the 40-year high, US personal savings declined -65% YoY as consumers try to cope with rising prices.
Its not only that personal savings is crashing in the face of inflation, revolving debt has soared as consumers try to cope with rising prices. I call this chart “The Biden Bowl.” Soaring consumer credit card debt with crashing personal savings.
The University of Michigan Consumer Survey showed a decline in May to 58.4 (100 is baseline). Soaring inflation is a likely culprit.
But the truly horrible survey result is the UMich Buying Conditions for Houses, plunging to 45. The reason? Crazy, expensive house prices courtesy of The Federal Reserve and rising mortgages (also, courtesy of The Federal Reserve).
The buying conditions for houses is now the lowest in the history of the University of Michigan consumer survey. In fact, consumer sentiment for housing is far lower than during the awful housing bubble burst of 2008 and the subsequent financial crisis.
And the US economic surprise index has turned negative.
Here is Fed Chair Jerome Powell wielding his monetary bat called “Lucille.”
The reason why home prices are still raging at 17.3% YoY? The Fed’s monetary stimulypto is STILL in place! The Fed’s balance sheet (green line) is still staggering, and The Fed Funds target rate (white line) is a measly 1%.
Atlanta Fed President Raphael Bostic is talking about a pause in Fed tightening. Which they haven’t paused yet.
Fed Chair Jerome Powell is really “slowhand,” not Eric Clapton. Bostic is now a member of The Fed’s “Slowhand” strategy.
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 May 20, 2022.
The Refinance Index decreased 4 percent from the previous week and was 75 percent lower than the same week one year ago. And under Biden, the refinance index is down -83.2%.
The good news? The seasonally adjusted Purchase Index increased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 16 percent lower than the same week one year ago. And the mortgage purchase applications index is down -12% under Biden.
While mortgage interest rates are up 71.7% than one year ago and mortgage rates are up 87% under Biden. As The Federal Reserve signals (but not yet accomplished) monetary tightening.
Once again, The Fed is dead set on cooling inflation caused by 1) Biden’s anti-drilling policies and 2) the remnants of the Federal government spending splurge to combat Covid. The Fed has been increasing their asset purchases (purple line) as inflation increase (blue line). Now they are signaling a decline in the balance sheet (green line) in the hope that it will cool inflation. Fat chance.
Let’s see how DEAD SET The Fed is about tightening monetary policy in the face of rising energy and food prices while a war rages in Ukraine and China in a Covid lockdown.
I have never seen two Federal entities make such a mess in my life. The Federal Reserve and The Federal government.
The good news? The 10-year Treasury yield is down -12.9 BPS this morning generally resulting in lower 30-year mortgage rates. Of course, the reason why the 10-yield is falling is generally bad news.
The bad news? US New Home Sales fell -16.6% MoM in April as mortgage rates skyrocketed.
Since the installation of Joe Biden as President, new home sales have plunged -31.2%, mortgage rates are up 88.9%, and framing lumber prices are up 29.2%.
Biden is out there bragging about rising energy prices which he views as a necessity to force the conversion of America to electric cars and trucks. Biden is the first President in history to gloat over the suffering of American households.
Under Biden, regular gasoline prices are up 92%, diesel prices are up 111%, and CRB Foodstuffs are up 61%.
Say, framing lumber for housing is cheaper than food. Maybe Biden will suggest Americans transform to being beavers and gnaw on wood.
Confounded Interest - Anthony B. Sanders 
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