This awful governmental regime is purposefully trying to destroy capitalism. It’s too easy to see. All of you who disliked Trump over petty BS must be feeling pretty stupid by now.
honestcreditguy
1 year ago
That will be it on rate hikes until November…
inflation is going to take hit next read out and they are not going to mess with mid terms where every democrat should be voted out for stupidity and nonsense
vanderlyn
1 year ago
i believe most of the people including this blog, miss the fact that the fed has only one mandate. that is to keep the banks, the owners of the fed, solvent and in business. all the other concerns about recessions or unemployment is complete hogwash as the concern of the fed. the fact that they say otherwise, constantly means nothing. there is nothing out of the ordinary in history of business cycles to have STAGFLATION for many years. the fed doesn’t care about this. job number one and only job is to keep their owners, the banks, in high cotton.
Indeed. All that “2% target”, “fighting inflation”, “stabilizing the economy”… All a smoke screen. They are not stupid at all.
JeffD
1 year ago
The most impotant thing is ~10% inflation. Infation, inflation, inflation! The stock market and jobs are of tertiary importance right now. The *only* thing that matters is bringing inflation at least into the 4% range, whatever it takes!
phil
1 year ago
Mish shared with us a couple months ago, an ‘article’ or ‘post’ where the rate up and then back down was predicted. Based on that, I bought a bunch of bonds. No regrets. It’s looking good, and whatever happens, I will not complain.
PapaDave
1 year ago
Predicting the future is difficult. Just 10 months ago, Mish thought the Fed wouldn’t raise rates. Now he “expects” it.
From this blog on Sept 22, 2021.
“Fed Anticipates Rate Hikes in 2022 and 2023 – Fade This Consensus
Let’s investigate the Fed’s schedule of anticipated rate hikes and compare what the Fed thinks to what I think.”
And:
“In 2024, one participant thinks the Fed will have short-term rates at 2.50-2.75%. What a hoot!
I assure you the participant who thinks the Fed Funds Rate will only be 0.5-0.75% will be closer to the mark.”
I have never been very good at predicting the future either Mish. But some of your former commenters were pretty good at it. And I paid attention and took advantage of their predictions.
Lol! Because he predicted they wouldn’t raise rates at all, or only a teeny tiny raise in 2022 or 2023. Well that prediction went out the window pretty quick.
But hey, its hard to make predictions. Particularly about the future. Just ask Yogi.
I have never predicted what the fed will do. But then, I also do not obsess about the fed.
I was merely “quoting” Mish from his Sept article. Perhaps I will bold the quote next time to emphasize it better.
Back then, he was quite positive that the Feds dot plots and statements indicating future rate hikes were totally wrong and that they would not raise rates at all. Turns out the dot plots were pretty good and Mish was wrong.
Of course, the future is hard to predict.
Based on the work of others, I keep predicting strong energy prices for the rest of this decade.
I also agree with Mish that the economy could be entering a long shallow recession.
had the pleasure of having a beer and smoke with yogi berra. yes, mish was way off. i always assume i’m wrong and so is everyone pontificating about future events.
Robbyrob
1 year ago
The supply chain crisis is getting better — and it could make a lot of things cheaper soon
#1 The Fed has no idea how to address the demographic problem and hence the labor shortage problem that continues to cripple economic growth. The company I work for right now has 51 critical positions open and many others less critical. Just walked past 3 fast food places, all have “Now Hiring” signs. This is INFLATIONARY.
#2 The Fed and anyone else that’s been paying attention knows that a food shortage is coming this fall, higher interest rates won’t bring in more food just make it more expensive. This is INFLATIONARY
#3 We haven’t hit hurricane season yet, it is just starting and if any refinery is taken offline, we’re off to the races on fuel costs. Again, this is INFLATIONARY and the Fed can’t do anything about it.
#4 The Fed knows there are still supply chain disruptions and China shutdowns; Japan just announced 200,000 new cases of Covid and growing. Higher interest or covid rates won’t fix supply chains – This is INFLATIONARY.
#5 No one thought the Fed would raise this high this fast.
I do expect inflation to come down over the next couple of months slightly but I think it will rocket back up in September/October. I know others feel differently and this is where we place our bets and profit or lose accordingly.
I’m sure those that think a deflationary collapse is coming have bought their put options on the most vulnerable industries and stocks. Let the bragging rights begin.
Demographics has inflationary and deflationary components. The deflationary component is demand destruction for nearly everything but health care. What things to retirees need? Most downsize.
Recession and higher interest rates are very deflationary.
War is inflationary. De-globalization is very inflationary. More union jobs is inflationary.
We might easily have a glut of housing and certainly boomers dying off will eventually result in a glut of housing even if units under construction is insufficient now. Stock market collapse is very deflationary if it progresses.
“The deflationary component is demand destruction for nearly everything but health care. What things to retirees need?”
Most retirees I know are the ones buying new cars for some reason. It never made any sense to me why but that’s been the case with most older/boomer people I know.
According to a chart at link below (I have not validated with BLS) these are the spending patterns of each cohort.
Under 25 – $18K/year
25-34 – $26k/year
35-44 – $33k/year
45-54 – $30k/year
55-64 – $26k/year
65-74 – $22k/year
There is a drop off of spending but I don’t think it is as dire as you make it out to be. The key issue is boomers retire and don’t work anymore but still consume even if it is less, they still consume but contribute little to nothing on the production of goods or services. This is a knock on boomers, they worked their whole life and deserve to retire and have some comforts in life but who’s going to produce those goods and services?
The CBO.Gov released a very depressing report on this topic today, suggest you read it. It’s on the front page entitled, “The Demographic Outlook 2022 to 2052.” I would link to it but this site only likes one link per comment.
If everybody owned one house, then Boomers dying off would make a difference. That’s not the way it works. A small percentage of the population buys tens of houses as assets. Add to that corporations that buy tens of thousands of houses as assets, and the size of the actual population ceases to make much of a difference, unless it drops by more than 1%/year.
It becomes an asset when the quacks are in charge of the system as it has been for some decades, then it becomes ingrained in the popular psyche that asset will not be allowed to tank by the same psychotic cretins.
There are 142 million houses in the US. Of those homes corporations own 300,000 only and although they can make the difference in certain specialized markets overall they do not make the market for housing.
The last figures for the 2nd qtr. GDPnow are out. Latest estimate: -1.2 percent — July 27, 2022. There’s no way this could be correct without a major error in the money stock #s. Stop/go monetary management under Powell has never been worse. The FED has lost control.
Scooot
1 year ago
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.”
Inflation this last year is over 9% so we’d need quite a few years at less than 2% to catch up, if they truly mean the longer run.
Yes, or the 9% plus 1.222% for the next 9 years for a 10 year average.
I suspect they mean they’ll ignore this last year or so and just try to keep it at 2% from when they next get it down to 2%.
Doug78
1 year ago
The Fed has gone full Volker and won’t cut until inflation comes down. I am glad that they didn’t wait two of three years like the Fed did in the ’70s and decided to grab the bull by the horns and raise the rates accordingly. There are still why too many people who believe in the Fed Put exists and that the Fed will lower rates soon to 1) save the stock market 2) save the housing market 3) bail out zombie companies and to basically save them from their individual errors. The world is going into recession and monetary stimulation will not work to stave it off. The restructuring of the supply chains is well on its way and that process will not not be helped by artificially low interest rates. That policy would just prop up the weak companies and undercut the efficient ones. I do not know how long the inflation will last but with the Fed raising rates like they are then the inflation will not last and that is good.
HippyDippy
1 year ago
Jeff Booth hit it right on the head. The demise of the FED, and central banking period, are long overdue. There can be no liberty or prosperity as long as they exist.
randocalrissian
1 year ago
That national debt sure is getting expensive. The interest on US debt must be a multi-bagger by now after all these big hikes. We all know once it gets to 3% (heck, 3.25% once the next hike happens) the interest carry on public debt will rise higher than $1TT/yr. That interest carry will become an insatiable monster at some point.
Sunriver
1 year ago
10 year bond yield is almost even with the FED funds rate.
Whatever it takes to keep people borrowing to purchase what they can’t afford, is the FEDs directive.
billybobjr
1 year ago
Another data point, was just in my local Home Depot store and they have inventory packed in there to the ceiling
refrigerators and appliances down the aisles . I have not seen it like this . I Believe Mish is right deflation
around the corner in some things they will be forced to liquidate at huge discounts in the not to distant future.
Did you see inventory report this morning? Retail up 2% after 1.6% last month, and Wholesale up 1.9% each of last two months. Imagine how much crap that is? You’re right, no chance they sell it all at full price. If they did, imagine the credit card debt bloat that would ensue.
My HD had stacks of nice Samsung washer, dryers and fridges with big yellow special purchase discount stickers on them. Too bad I replaced my just a few years ago.
It seems to me that the giant retailers (including Amazon) have gotten this year all wrong. In 2020 and 2021 everyone was forced to stay home and so everyone was spending money like crazy on home improvements (building a home office, patio furniture, home remodeling of all kinds) since they were stuck there.
But in 2022 things have almost completely opened up, especially in the travel sector and people who have been cooped up for 2 years are spending wildly on services (think vacations, restaurants etc) instead of goods. So suddenly all these retailers who were loading up expecting the trends of 2020 and 2021 to continue are stuck. Huge markdowns will have to happen to move the inventory.
And yes, some of what Jojo wrote it also causing it. Lots of stuff ordered 6 months ago or more is just arriving now or still set to arrive soon which will only add to the inventory woes for things consumers are no longer buying.
True, but there are still a lot of people working from home. Most who went back to work, work in retail. Not the kind of people buying patio furniture and doing remodeling. I think much of it is people already did these things over the last 2 years and these kinds of expenses are done every 10+ years.
And which brands did you see stacked up to the ceiling? Did you write down the names? Because if you know which companies are providing all this unneeded inventory then you know these companies will be hurting down the line and the way to profit is to short the stock or buy put options on those company shares.
For every observation there is a profit potential, try to exercise it next time.
I guess the massive flow of $$$ in the economy induced by the Fed since 2008 must be covered in their statement under ‘broader
price pressures’. :
“Inflation remains elevated, reflecting supply and demand imbalances
related to the pandemic, higher food and energy prices, and broader
price pressures.”
Oh wait, it is NOT their fault QE got out of control; and those negative real rates–those arejust a delusion.
Thetenyear
1 year ago
So end the war
FOMC says: “Russia’s war against Ukraine is causing tremendous human and economic hardship” – So end the war.
FOMC says: “The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity.” – So insist on peace.
If tremendous human suffering, inflation, and economic hardship are not enough can we end the war based on the Climate Emergency?
Actually yes. If the US wants it to end it will end. Problem is the US does not want it to end. Sadly, it will take much more pain and suffering for Europe to put enough pressure on the US to end the war.
I thought that all of you Stalinist had retired. The whole Nazi/Ukrainian hoax was dreamed up by the KGB now the FSB(new name same old vile intelligence agency) during WWII. Putin and his ultranationalist cronies cannot seem to give up on their imperialist dreams which are very similar to Hitler’s dream of Lebensraum.
It would be a mistake to lay down and enable Putin to annex Donbas region, after that he will take Transistria. Then he will really develop an appetite for conquest. If the US won’t stop him, he could be the next global leader.
Interesting chain of events that you predict. Ever consider history of NATO expansion of Post Soviet Era and US State, CIA with Senator McCain on the ground in Kiev in 16 overthrowing Russian leaning Ukraine elected President? That was an actual chain of events.
But, erasing history works so well in Beltway and Brussels.
Erasing history is easy in Russia too. All you need to do is a survey of Russian textbooks from 1905 to 2005. One hundred years of erasing history that they dont like. Heroes become villians and vice versa. The only truth is that the victors rewrote the history.
The US is not stopping him. US led sanctions are enabling him. Russian is richer than ever thanks to EU oil and gas purchases. EU is more desperate that ever thanks to having to rely on Russia for their energy. US aid to Ukraine is only going to prolong the suffering.
If you want to stop Russia you have to hit their revenue stream. Sanctions that make the price of oil go up will only benefit Russia. Oil needs to go down. How? Add supply by producing more in the US and other friendly countries. Drill, drill, drill
Last I looked the FED did not invade Ukraine – FED is not involved either and cannot sue for peace.
KidHorn
1 year ago
I’m a little surprised they’re hiking as fast as they are. I thought 50bp hikes would be the maximum when they announced they were hiking.
At some point they’ll have to reverse course and start cutting. Not sure how low they’ll go. I wouldn’t be surprised if they never go below 2.0 again. This is the first time inflation has been an issue since QE started. I suspect they’ll be more gun shy going forward knowing inflation can rear it’s ugly head if they cut too much.
Nah – as much as a 100 bps hike was already priced into the markets. 75 bps is actually dovish. Expect one more of these prior to the midterms. Me thinks that then can can “legitimately” claim a pause on Nov 2, and pump the markets, giving the Democrat candidates a pre-election present.
price pressures’. :
related to the pandemic, higher food and energy prices, and broader
price pressures.”