It’s been a complete round trip in the last month.
The September rate forecast is from CME Fedwatch.
- Today: 66.2 percent
- Week Ago: 39.6 percent
- Month Ago: 67.0 percent
Welcome back to the reality that inflation is a problem.
October CME Probabilities
Two Hike Odds (September and October)
- Today: 19.1 percent
- Week Ago: 9.7 percent
- Month Ago: 20.8 percent
That’s another round trip. But I doubt that.
An October 28 would be a hike would be just six days before the November 3 midterm elections.
The Fed will not want to hike that close to the election.
That fact was a key point in my assessment Political Realities May Force the Fed to Hike in September
It will be a stretch for the Fed to pause for many reasons, not just the CPI.
Click on link for further discussion of what ties the Fed’s hands, forcing a hike.
Also see my post from earlier today, Global Bond Market Rout Continues, Fed’s Barr Ponders Decisive Action
Everything now ties neatly together for a September hike.
I know, Mish, it would be a lot of work, but you could have a YOUTUBE program, pointing at Data/Charts and also making some points about world Politics, etc. If you build a big enough audience: Youtube Pays pretty well.
I couldn’t agree more.
The more the intelligent and well spoken and written bloggers or podcasters there are whether from the libertarian, Austrian, Keynesian, neo-Keynesian, Classical schools of thought the better.
Lending/investing by the Reserve and commercial banks is inflationary and has a negative economic multiplier (is harmful), whereas lending/ investing by the nonbanks is non-inflationary and has a positive multiplier effect (a velocity relationship).
That was what the 1966 S&L credit crunch taught us (where the term originated). The expiration of the FDIC’s unlimited transaction deposit insurance was prima facie evidence.
Percentage of time (savings-investment type deposits) to transaction type deposits:
1939 ,,,,, 0.42
1949 ,,,,, 0.43
1959 ,,,,, 1.30
1969 ,,,,, 2.31
1979 ,,,,, 3.83
1989 ,,,,, 3.84
1999 ,,,,, 5.21
2009 ,,,,, 8.92
2018 ,,,,, 4.87 (declining mid-2016 with the increase in Vt)
Historical FDIC’s insurance coverage deposit account limits (commercial banks):
• 1934 – $2,500
• 1935 – $5,000
• 1950 – $10,000
• 1966 – $15,000
• 1969 – $20,000
• 1974 – $40,000
• 1980 – $100,000
• 2008 – $unlimited
• 2013 – $250,000 (caused taper tantrum)
It’s stock vs. flow.
Frozen savings ,,,,, Reg Q ceiling %
11/01/1933 ,,,,, 0.0300
02/01/1935 ,,,,, 0.0250
01/01/1957 ,,,,, 0.0300
01/01/1962 ,,,,, 0.0350
07/17/1963 ,,,,, 0.0400
11/24/1964 ,,,,, 0.0450
12/06/1965 ,,,,, 0.0550
07/20/1966 ,,,,, 0.0500
04/19/1968 ,,,,, 0.0625
07/21/1970 ,,,,, 0.0750
This is contrary to Bankrupt-u-Bernanke: “Money is fungible”…“One dollar is like any other”, pg. 357 in “The Courage to Act”.
What Sheila Bair complained about in her book: “Bull By the Horns”:
“a married couple could have three separate accounts, each with 250,000-two individual accounts in each of their names and a joint account.” “Then they could set up another 1,250,000 in coverage by setting up a trust account with five different beneficiaries.”
Can’t money creation banks when they lend to borrowers with the purpose of increasing productivity, building a better mousetrap, etc., raise the overall standard of living whereas the recent shadow banking investments in the buildout of data centers, AI funding has reflected negatively from increasing productivity thus far especially given that Chinese AI developers while possibly not as good but weighed against the American costs for AI make the Chinese AI more investable (better mousetrap)?
Sure, that’s right. If the monies represented by the deficits are spent on projects which increase productivity and reduce waste, the deficits are beneficial no matter how financed. The initial inflationary effects of bank financing are quickly overcome by the larger output and lower unit costs. Debt incurred which reduces unit costs of production and promotes the health and welfare of the population obviously is “good” debt.
Lending/investing by the DFIs is largely for existing assets. There is not any assurance that an increase in the money stock will be matched by an offsetting addition to the supply of new goods and services in our market economy.
The Fed under Walsh will not raise short term rates in September. The credit impulse continues to reflect the consumer is waning or 70% of the economy, Stock and bond markets losses are causing a slight diminution in the wealth effect. while the Treasury Dept is playing operation twist crowding out short term buying such as financing appliances, car loans, credit cards etc.
Warsh continues to please his new boss Wall Street by injecting more liquidity into the banksters’ reserve account by buying Bessent’s short term treasury issuance thus keeping rates from spiking.
10-year and above rates will likely increase despite Bessent’s best efforts. Hyperscalers, AI, continue to crowd out other possible supply side and real estate buyers.
The JOLT survey provided more grist for a rate cut. Friday’s fictitious jobs report may cool the hawks jets. Warsh continues to pontificate that the jobs market is quite stable and consistent with full employment per Jackson Hole speech. More fiction.
But the real reason why Warsh won’t raise is quarterly taxes are due causing illiquidity.
WTI is hitting $92/bbl as I type. Any questions as to what inflation will be doing?
Any questions what the bond market will be doing?
Trump warns Iran of total destruction following US strikes
Yet he denied that the use of nuclear weapons is being considered.
Here is the dilemma, Donny boy:
If you could deliver “total destruction” to Iran using conventional weapons, you would have already done so. You know it, we know it and more importantly, Iran knows it.
You are not going to use nuclear weapons, because if you do, you will put yourself in an even bigger mess than you are now.
So all that is left for you to do is yell empty threats at the clouds while inflation destroys your political capital and any legacy you ever hoped to have other than being the president at the wheel when the US lost its global super power status.
Enjoy the ride Donny boy, you earned it.
It is absurd that Trump would consider using nuclear weapons to stop the use of nuclear weapons… Trump is that absurd in his thinking.
Trump does not think. Trump emotes.
nukes would have fallout and kill off many of our allies over time. guess who moves into any area where nukes are used in 21st century? one guess.
I don;t see why you all are complaining about:
a. rates are going up because we have such strong growth
b. we are respected around the world and have plenty of munitions
c. we fired every general who didn’t believe in testosterone
d. we just signed the most amazing oil lease ever
e. No one is free-loading our health care system anymore
f. Private contributu=ions have paid for everything
g. I have a great assistant
Some Fed official to come out and reveal that there’s really going to be no rate hikes -in 5,4,3……
Should be a full point bump.
As people are being dropped off of food stamps, lower priced unhealthy foods sales will drop. EBT will be restored not to save starving people, but to save starving food corporations
They’ll just starve because they live in food deserts where dollar general is the only store. Ain’t we great?
North Koreans supplement their diet with grass and bark from the local trees!
Aren’t nukes great?
Is the joke that we are now on par with North Korea?
you are forgetting one thing… GLP1 to the rescue.. instead of food stamps or EBT…Gobi will distribute it to all and claim “Make America Healthy Again”
Trump will stop the rate hike. As soon as the new missiles are ready.
Number 1 is FUEL costs!
#2 The trucks carrying goods may run CLEANER, however, they operate less efficiently. Newer trucks usually use more FUEL per mile than the older ones did.
Obviously, a trucking concern needs to make a profit in order to stay in business?
Not true. Fuel efficiency has gradually climbed over the years. Operators were not happy with the newer clap-trap required on engines to reduce emissions, but fuel economy has improved. Not all of it has to do engines. Some due to transmission, less rolling resistance on tires, aero package on tractor, aero package on trailers. Also, if the driver has a lead foot, that’ll kill fuel economy. I had a driver deliver a full load of 22 tons of steel on a flatbed trailer from IL to FL a few years ago. He told me he averaged just under 7mpg on a relatively new Freightliner Cascadia running a DD15 engine. Pretty flat route for the most part.
Stop complaining about a few more pennies on the price of gasoline.
Dyson just announced a $499 TOOTHBRUSH! 🤣
Taco not likely to approve.
How do they plan to tackle price inflation caused by wars and oil prices with a rate hike? And Main Street? “Data” notwithstanding, it is not doing well. That calls for a rate cut, but my bet is that the Fed will make lots of hawkish sounds and jawboning while sitting tight…until after the midterms
Higher rate –> less borrowing –> less money circulating –> less bidding for goods and services –> lower inflation
Correct my errors pls
Your rate cut will just make inflation worse. I get that we can’t afford the public debt interest carry, but you’re smoking zines if you think that we are going to make our debt interest carry at all affordable by lowering rates. What is the primary benefit of lower rates that you foresee?
Of course a rate cut will make inflation worse – but that’s not Trump’s problem.
The debt will be for future generations – so why should Trump care?
Potentially less government spending if servicing cost get high enough to get congress to realize we are on a path to destruction financially.
Except for Rand Paul who has really pushed for a simple balanced budget?
“A simple balanced budget” = guaranteed severe social dislocation on every block in the USA this week, eventually aggregating to civil war. Eventually aggregating to world war. Sorry.
And if we do nothing???
> How do they plan to tackle price inflation caused by wars and oil prices with a rate hike? And Main Street?
They will do nothing but nod in agreement with Thucydides’ observation that “the strong do what they will and the weak suffer as they must”. … provided the drugs didn’t completely erode their college memories.
So for the end of this year we have on deck:
Surely all of these things at once will go smoothly and cooler heads will prevail because they did back in the 80s!
Oh and how can I forget! We’re now resorting to kiting checks with the national debt because Trump put a dancing monkey in charge of it.
“…six count ’em six years of endless bullshit, theft, graft, corruption, ect. being billed to them”
If there is some notion that there have only been 6 years of them – then I have no idea what garnered attention before that????
America prior to the pandemic was in a much better place. You can tell because if you told someone in 2019 the President was going to try to override midterm elections they’d call you a nutcase. Affordability has rapidly vanished, groceries are 50% more expensive, and culture is sour. Regardless of how you liked the teens, it was a much better show than this.
Absolutely correct.
The market was better even though the Fed was making sure there were no losers.
inflation is a global problem right now.
Global debt and global money supply is growing exponentially.
Inflation is not just a US problem. Basically all currencies are being devalued.
We are about due for a cluster-palooza.
And then some!!
The things you can bet on in Kalshi are less aggressive than Polymarket. Like there’s no betting on war or military actions going on in the world. However, I did just see a new market on Kalshi with the question, “Will the midterm elections be held on time?”