Category Archives: Banking

Fed’s Lowest Lowball Inflation Measure “Core PCE” Spikes Further. Highest 3-Month Rate since 1982, by Wolf Richter

Don’t worry, inflation is transitory, even if there’s no end in sight to the monetary policy that’s producing it. From Wolf Richter at wolfstreet.com:

“Way above target”: Fed Chair Jerome Powell.

As push came to shove toward the end of the FOMC press conference on Wednesday, Fed Chair Jerome Powell, fidgeting on the hotseat of inflation and struggling with “transitory” and “temporary,” admitted that the recent rate of inflation was “not moderately above” the Fed’s inflation target but “way above target.” Today, the inflation measure that the Fed uses for this inflation target, annual “core PCE,” spiked further.

The Fed uses the “core PCE” inflation measure because it is the lowest lowball inflation measure that the US government provides. It excludes food and energy, which can be volatile, and it is structured differently than the Consumer Price Index, and it is nearly always below “core CPI.”

This Personal Consumption Expenditures price index without food and energy jumped by 0.45% in June, from May, after having jumped by 0.5% in May, 0.7% in April, and 0.4% in March, according to the Bureau of Economic Analysis today. This lowest lowball inflation measure available in the US was up 3.5% from June last year, the highest year-over-year rate since May 1991:

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Countdown To The Next Lockdown: Biden Says “In All Probability” US Will See More Restrictions, by Tyler Durden

If at first, second, third, etc. you don’t succeed, try the same thing again. The difference this time is that people see through the bullshit and they’re completely fed up with it. From Tyler Durden at zerohedge.com:

By now the narrative has gotten so absurdly grotesque and stupid, it’s as if a platoon of monkeys or, worse, woke SNL writers put it on the back of a shampoo bottle.

Today, when we discussed how US consumers have already burned through almost all of their savings from Biden’s fiscal firehose…

… just as the next burst of inflation is about to come and unleash a stagflationary recession or worse, we said that “there is just one event that could short circuit what appears to be a near-certain recession heading into 2022 and mid-term elections which would be devastating for Democrats faced with an imploding economy: another multi-trillion stimulus, just enough to kick the can by another 4-6 months. But for that to happen, the US economy needs to be shut down again which will only happen only once there is enough covid Delta-variant fearmongering. Which should also explain everything that’s happening right now.”

Well, guess what: after the CDC’s legendary flipflop which has steamrolled the credibility of “science”, and concurrent narrative whiplash it has made even the head of ultra-left liberals spin, today the president who earlier needed an aide to tell him he has “something” stuck to his chin, laid out the Delta endgame when he said that the US will, “in all probability,” see more guidelines and restrictions amid rising coronavirus cases…

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The Latest Lie from on-High: An “Independent Federal Reserve”, by Matthew Piepenburg

Central banks are never independent from the governments that create them. From Matthew Piepenburg at goldswitzerland.com:

Earlier in July, U.S. President Biden came away from a meeting with Fed Chairman Jerome Powell and calmly announced that in addition to inflation being “short term,” we should fear not, as Biden also “made it clear to Chairman Powell that the Fed remains independent,” but “will act as needed.”

Whewwww. Where to even begin in unpacking the lighthouse of reality behind so much verbal fog?

When it comes to market analysis, no one wants to hear political opinions within finance reports, left or right.

We get this.

Thus, rather than run the risk of offending the left, right or center, I’ll be frank in confessing my foundational view that nearly all politico’s (and Fed Chairs) have been universally comical when it comes to math, history or blunt-speak.

In short, the math, facts and warning signs rising by the hour (and outlined below) make it easy to be an equal-opportunity cynic when it comes to fiscal leadership or political “truth.”

So, let’s get back to Biden’s recent observations…

Deconstructing Biden-Speak

As for inflation being “short-term,” we’ve written ad nauseum about our stance on this fiction many times elsewhere.

But as for Biden’s declaration about the Fed being “independent,” let me wipe the coffee I just spilled on my shirt and speak plainly: That’s a lie.

First of all, if the Fed were as “independent” as Biden claims, then how can Biden be so certain they “will act as needed”?

Aren’t “independent” actors supposed to act as they, rather than the politicians, decide or “need”?

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Game Over, by Sven Henrich

Central banks have put themselves in a bind from which they cannot extricate themselves. From Sven Henrich at northmantrader.com:

Game over. Occam’s Razor: The simplest explanation is often the best one. Central banks will never extract themselves. Whether they ultimately end QE is besides the point. They won’t reduce their balance sheets. They can’t. Powell’s “performance” yesterday was not an accident. He’s been running on the same theme of offering absolutely zero specifics. Why? 3 reasons: 1. There are none as there is no plan. 2. To maintain flexibility and not to be held accountable or anything 3. To not upset markets.

We saw this recently when he actually got challenged on MBS and QE. He couldn’t and wouldn’t offer a rationale as to what is actually economically accomplished by it:

More importantly.

He doesn’t know. And why would he? There is zero precedent for this much combined liquidity from the fiscal and monetary side along with a rapid economic reopening with consumers’ pockets stuffed with free money from the government.

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David Stockman on Why Money Printing Doesn’t Generate Economic Growth

How can the simple act of printing out scrip or making an electronic bookkeeping entry generate anything real, like increased productivity or real economic growth? From David Stockman at internationalman.com:

Fed stimulus

To understand the Fed’s culpability for the inflationary disaster afflicting the American economy, it is necessary to start with the Big Lie that underlies all of its destructive machinations: the claim that market capitalism gravitates toward cyclical instability, recession and chronic shortfall from its potential Full Employment path.

From this presumption, there flows an alleged requirement for continuous central bank “stimulus.” Deft action by the central banking arm of the state is purportedly needed to compensate for the inherent prosperity-retarding imperfections of the free market.

If Fed policy has actually been reducing cyclical instability and pushing the $21 trillion US economy ever closer to its Full Employment potential, then productivity growth should be rising over time commensurate with the Fed’s more aggressive deployment of its “stimulus” policies.

In this context, it should be noted that productivity growth is a purer measure of monetary policy impact than total real GDP growth. That’s because the latter is in part driven by long-run demographics and the annual growth of the labor supply.

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The Moment Wall Street Has Been Waiting For: Retail Is All In, by Charles Hugh Smith

If the average Joe was a good investor or speculator, the average Joe would be a lot richer than most average Joes are. As a rule, when all the average Joes are doing one thing, it’s time to do the opposite. From Charles Hugh Smith at oftwominds.com:

The ideal bagholder is one who adds more on every downturn (buy the dip) and who refuses to sell (diamond hands), holding on for the inevitable Fed-fueled rally to new highs.

Old hands on Wall Street have been wary of being bearish for one reason, and no, it’s not the Federal Reserve: the old hands have been waiting for retail–the individual investor– to go all-in stocks. After 13 long years, this moment has finally arrived: retail is all in.

If you doubt this, just look at record highs in investor sentiment, margin debt and the Buffett Indicator (see chart below). Current valuations are so extreme that the previous extreme in the 2000 dot-com bubble now looks modest in comparison.

I have my own sure-fire indicators for when retail is all-in. One is my Mom’s financial advisor recommends shifting her modest nest-egg out of safe bonds into the go-go stocks that are topping out. Back in late 1999, it was Cisco Systems and the other dot-com leaders, today it’s the FANGMAN stocks. Sure enough, my Mom just informed me her advisor recommended moving money from bonds into a FANG-dominated stock fund. Bingo, we have a winner.

Second indicator: average people who have never traded stocks are all-in and supremely confident they can’t lose. When 20-year college students are trading based on a “genius” 22-year old friend’s advice, retail is all-in. When a worker cleaning a wooden deck pauses to put $100,000 in a company he knows nothing about (yes, true story), retail is all-in.

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Here’s Why the New COVID Relief Program Will Turn the Working Class into Serfs… by Chris MacIntosh

When you rely on the government, it can exact just about any price it wants. From Chris MacIntosh at internationalman.com:

New COVID Relief Program

“This work was strictly voluntary, but any animal that absented himself from it would have his rations reduced by half.” 

George Orwell, Animal Farm

Everything is now political.

ESG, climate change, racism, gender, vaccines. Ask yourself why is it that  all of these things are non-negotiable? Why can’t they be discussed? Why is there no room for dissent, questioning, and discourse?

Something is amiss. Think about it.

The pointy shoes at the IMF tell us that the pandemic will cost the world $28 trillion by 2025, which means it’ll be much, much more.

The truth is the pandemic isn’t the cause. The lockdowns, however, are.

Understanding what exactly this “pandemic” is, is really critical to understanding everything taking place globally and in financial markets both now and in the future.

This virus is statistically as dangerous to the population as a bad flu. “No, not possible, Chris. Look at the response by governments. Surely that’s disproportionate.” Yes, it is, but there is a reason.

To understand the answer to this more fully we need to go back to 2008 and then walk forward tracking the unfolding events.

Following the housing crash and subsequent banking crisis QE was brought in as the tool to “fix” what could have and should have been fixed by letting the banks fail and putting on trial and jailing Wall Street bankers as well as regulatory agencies who were all willfully and knowingly involved in a massive fraud.

The economy has been hanging by a thread ever since.

Then in 2019 the money market seized up with the overnight lending rate shooting up, causing the pointy shoes at the Fed (and the ECB in coordination with the BOE, too) to step in to “fix” it.

They printed upwards of 100 million smackaroos PER NIGHT.

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Cascade of Consequences, by Jim Quinn

The consequences we’ve seen have been bad enough, but the worst is yet to come. From Jim Quinn at theburningplatform.com:

“There was truth and there was untruth, and if you clung to the truth even against the whole world, you were not mad.” – George Orwell 1984

Image

“People will agree with you only if they already agree with you. You do not change people’s minds.”Frank Zappa

Orwell and Zappa’s words of wisdom have never been truer than they are today. The level of untruth proliferated by the government, mainstream media, central bankers, military leaders, Big Tech, Big Pharma, Big Corp., and billionaire oligarchs has reached prolific heights. We are lost in a whirlwind of lies, destined to grow into a tornado of tragedy and ultimately result in a cascade of consequences.

Since the installation of the illegitimate dementia patient as president of this dying empire of debt by the Deep State (billionaire oligarchs, surveillance state agencies, military industrial complex, Silicon Valley censorship tyrants, corrupt bought off state politicians, Soros installed bureaucrats, and their propaganda arm – fake news media outlets), the country has further fractured into warring factions.

It has been driven by political party, moral vs. immoral, black vs. white, criminals vs. police, normal vs. abnormal, capitalists vs. communists, Federal Reserve vs. the people, vaxxer sheep vs. natural immunity realists, authoritarians vs. freedom fighters, critical thinkers vs. non-thinking believers, privileged elite vs. common men and women, citizens vs. traitors, powerful vs. powerless, and evil versus good.

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The Death of Truth & the Rise of Centralized Government Control, by Matthew Piepenburg

Being criminal enterprises, governments destroy trust. From Matthew Piepenburg at goldswitzerland.com:

As I write this from a France making ever more bold moves toward forced vaccination, one can’t help but ponder the broader issues of centralized government control, regardless of one’s take on vaccine or no vaccine.

Focusing on financial rather than viral data, the evidence of centralized state control over natural market forces in the stock and bond markets is becoming increasingly incontrovertible.

We’ve written elsewhere about the death of logic and the madness of crowds. It should therefore come as little surprise that the death of truth is yet another casualty of the increased central control we are experiencing in global markets.

Debt Crisis Disguised as a Health Black Swan

Long before COVID reared its highly controversial head (from viral source debates, baby-with-bathwater policy reactions, censored science as to vaccine efficacy and safety, distorted math on infection rates vs death rates, and centralized government control by officials acting “for your own safety” vs. Constitutional and legal issues of individual choice), the global financia

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We Can Have Low Interest Rates Or Robust Growth. But Not Both. By Daniel Lacalle

A naysayer economist is saying that you can’t have your cake and eat it, too, in a world that believes you can have your cake, eat it, have it again, and eat it again. From Daniel Lacalle at mises.org:

Central banks should know by now that you cannot have negative interest rates with low bond yields and strong growth. One or the other.

Central banks have chosen low bond yields at any cost, despite all the evidence of stagnation ahead. This creates enormous problems and perverse incentives.

It is not a surprise that markets have bounced aggressively, driven by the tech sector, after a slump based on concerns about the pace of economic growth. Stimulus package effects are increasingly short, and this was pretty evident in the poor figures of industrial production and the ZEW survey gauge of expectations. The same can be said about a weakening ISM index in the United States. United States ISM Services PMI came in at 60.1, below expectations (63.5) in June, precisely in the sector where the recovery should be strongest.

Interestingly, European markets declined sharply after the European Central Bank sent the ultimate dovish message, a change in its inflation target that would allow the central bank to exceed its 2 percent limit without change of policy. What does it all tell us?

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