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Because “fiscal dominance”…

So that recession I keep whining about still hasn’t arrived. What’s going on out there to keep “inevitable” from becoming “imminent”?

It might be as simple as a government borrowing insane amounts of money and giving it to arms makers, banks, and AI companies.

This “fiscal dominance” strategy invokes some serious unintended consequences, including stubborn inflation and rising interest rates. New car loans, for instance, are now more expensive than they were prior to the 2008-2009 crash:

While bank credit is falling into pre-crash territory:

Offices are emptying out:

But unemployment is ridiculously low. With everyone working, how can growth possibly turn negative? Well, if everyone is working multiple part-time jobs and still unable to make ends meet, that might do it:

Meanwhile, lots of under-the-surface stats support the gloom-and-doom thesis. The next chart compares the stock prices of a major shipper and a major pawn shop chain:

According to financial analyst Danielle DiMartino Booth, we might already be in a recession:

‘Washout winter’ spells price rises for UK shoppers with key crops down by a fifth

April 29, 2024

‘Washout winter’ spells price rises for UK shoppers with key crops down by a fifth

Analysts say impact on wheat, barley, oats and oilseed rape harvests means price rises on beer, bread and biscuits and more food imported

UK harvests of important crops could be down by nearly a fifth this year due to the unprecedented wet weather farmers have faced, increasing the likelihood that the prices of bread, beer and biscuits will rise.

Analysis by the Energy and Climate Intelligence Unit (ECIU) has estimated that the amount of wheat, barley, oats and oilseed rape could drop by 4m tonnes this year, a reduction of 17.5% compared with 2023.

The warnings come as farmers have borne the brunt of the heavy rainfall and bad weather experienced over the winter, with the UK experiencing 11 named storms since September.

In England, there was 1,695.9mm of rainfall between October 2022 and March 2024, the wettest 18-month period since records began in 1836.

This has resulted in planted crops either being flooded or damaged by the wet weather, or farmers not being able to establish crops at all.

A closeup picture of a flooded field of brussels sprouts — A flooded field of brussels sprouts at TH Clements and Son Ltd near Boston, Lincolnshire. Photograph: Joe Giddens/PA

Tom Lancaster, a land analyst at ECIU, said: “This washout winter is playing havoc with farmers’ fields leading to soils so waterlogged they cannot be planted or too wet for tractors to apply fertilisers.

“This is likely to mean not only a financial hit for farmers, but higher imports as we look to plug the gap left by a shortfall in UK supply. There’s also a real risk that the price of bread, beer and biscuits could increase as the poor harvest may lead to higher costs.

…click on the above link to read the rest of the article…

Economy Plunges into Stagflation with Both Feet

April 28, 2024

Economy Plunges into Stagflation with Both Feet

Talk about a one-two-three punch to the ground!

Stagflation came in perfectly on target for The Daily Doom’s predictions today. Real GDP is now falling much harder than was expected yesterday by two-faced Jamie Dimon when he spoke out of his second face, saying the economy is “booming,” backed by “healthy consumer finances.” He called it an “unbelievable” economy. I’ll agree with that part. I certainly didn’t believe it when he said it yesterday.

You see, only the day before, his first face said the economy looked like we could be heading into the stagflation of the 70s, which means a stagnant economy with high inflation. Those are diametrically opposite claims to my way of thinking. After he appeared to walk stagflation back yesterday when he said the economy was booming, today we all learned we are already in the stagflation of the 70s. (We’ve actually been in it all year, but it finally got reported.)

The official report on Q1 real GDP for 2024 showed the economy is stagnant, while the Personal Consumption Expenditures (PCE) price index scored its largest inflation gain all year (at 3.4% annualized). To be specific, GDP fell off to a 1.6% annualized pace (adjusted for seasonality and inflation), according to the Bureau of Economic Analysis. That is a plunge to less than half of the 3.4% growth the BEA claimed for the final quarter of 2023 and the 4.9% in the quarter before that, and it even came in well below the 2.4% that was forecast recently by economists in a Dow Jones survey.

So, the two-faced Dimon should have stayed with what his first face said two days ago because GDP readings under 2% are usually considered borderline recession—far from “BOOMING,” which means the US economy is, in fact, stagnant with rising inflation, which means the 1970s are back … because …

…click on the above link to read the rest of the article…

Central Banks Are Wrong about Rate Cuts

April 27, 2024

Central Banks Are Wrong about Rate Cuts

When we talk about monetary policy, people do not understand the importance of interest rates reflecting the reality of inflation and risk. Interest rates are the price of risk and manipulating them down leads to bubbles that end in financial crises, while imposing too high rates can penalize the economy. Ideally, interest rates would flow freely and there would be no central bank to fix them.

A price signal as important as interest rates or the amount of money would prevent the creation of bubbles and, above all, the disproportionate accumulation of risk. The risk of fixing rates too high does not exist when central banks impose reference rates, as they will always make it easier for state borrowing—artificial currency creation—in the most convenient—what they call “no distortions”—and cheap way.

Many analysts say that central banks do not impose interest rates; they only reflect what the market demands. Surprisingly, if that were the case, we wouldn’t have financial traders stuck to screens on a Thursday waiting to decipher what the rate decision is going to be. Moreover, if the central bank only responds to market demand, it is a good reason to let interest rates float freely.

Citizens perceive that raising interest rates with high inflation is harmful; however, they do not seem to understand that what was really destructive was having negative real and nominal interest rates. That’s what encourages economic agents to take far more risks than we can take and to disguise excess debt with a false sense of security. At the same time, it is surprising that citizens praise low rates but then complain that home prices and risky assets rise too fast.

…click on the above link to read the rest of the article…

Growth in Spending Exceeds Growth in Income for Most of the Last 10 Months

April 27, 2024

Growth in Spending Exceeds Growth in Income for Most of the Last 10 Months

A deeper dive into personal income and outlays for March shows significant signs of consumer stress to maintain standards of living.

Real Income and spending data from the BEA, chart by Mish

This is a follow-up with a couple new charts to my post on Friday, Personal Spending Jumps More than Income in March

Income Minus Spending Chart Notes

Real means after inflation. DPI means disposable Personal Income after taxes.
Only twice in the last 10 months has growth in real income been greater than growth in real spending.

Personal Income Four Ways

Understanding Personal Income

The difference between PI (red) and DPI (blue) is taxes, just over 3 trillion dollars annually.
The difference between DPI (blue) and Real DPI (yellow) is inflation.
The difference between Real DPI (yellow) and Real DPI Minus PCTR (green) is Personal Current Transfer Receipts

PCTR are government benefits that include Medicare, Medicaid, food stamps, Social Security, and disability payments.

Personal Income and Real Hourly Wages

Income data from the BEA, hourly earnings from the BLS, chart by Mish

Percentage Increases in Income and Hourly Earnings

DPI is up 25.2 percent since pre-pandemic
Real DPI is up 6.6 percent since pre-pandemic
Real Average Hourly Earnings are up 0.9 percent since pre-pandemic

Income includes wages and salaries, Social Security and other government benefits, dividends, and interest.

Who’s Doing Well and Who Isn’t?

Those dependent on wages and salaries alone have not fared well since the pandemic. That also includes many on government benefits.

The asset holders (those with interest income, rental income, dividend income etc., are doing much better.

On average, things look at least OK, if not good.

But for millions of people struggling with food and rent on real hourly earnings that have gone nowhere in four years, the economy does not look OK.

It’s Not Me, It’s You: Blaming the Public’s “Perception of the Economy”

April 26, 2024

It’s Not Me, It’s You: Blaming the Public’s “Perception of the Economy”

If you think you spent twenty years being ripped off while a generation of rent-seeking scam artists was showered with public subsidies, experts agree: your “perception” needs correcting

“People are really tying Bidenomics and their perception of the economy to the inflation rate,” said Matt Monday of Morning Consult, in a new Bloomberg story titled, “Biden’s gains against Trump vanish against deep economic pessimism, poll shows.” It’s the latest entrant in an intensifying campaign to describe voters, especially in key electoral swing states, as morons and partisan haters who’ll deny reality itself out of political spite.

This campaign has been weirdly perverse in its mockery. Seattle Times cartoonist David Horsey recently tossed off a visual of the reality-denying swing voter, rendering him as a pudgy, confused hominid in the mode of Monty Python’s duncelike Gumbys. Having negative feelings about “the best performing [economy] in the world” is equivalent to denying who won the Super Bowl:

When the Wall Street Journal a few weeks ago ran “What’s Wrong With the Economy? It’s You, Not the Data,” I thought the “It’s not me, it’s you” framing had to be ironic, a spoof of these increasingly numerous “perception of the economy” pieces. Nope:

Noting that 74% of respondents in a recent poll said they felt inflation in the “past year” was going in the wrong direction, author Greg Ip noted flatly “it’s not true,” adding:

I’m not stating an opinion. This isn’t something on which reasonable people can disagree. If hard economic data count for anything, we can say unambiguously that inflation has moved in the right direction in the past year.

…click on the above link to read the rest of the article…

Oil prices aren’t the Fed’s biggest problem right now — American demand is, says an economist

April 24, 2024

Oil prices aren’t the Fed’s biggest problem right now — American demand is, says an economist

Inflation could see a resurgence in 2025, BlackRock strategists warned. Jonathan Kitchen/Getty Images

“I think what’s difficult for the Fed currently is actually the part of CPI that is being driven by demand, rather than the supply issues or the energy issues, which are perhaps easier to deal with,” Samy Chaar, the chief economist of Lombard Odier, told Bloomberg TV. The Swiss private bank managed 193 billion Swiss francs, or $212.8 billion, in assets at the end of December.

A key inflation metric for the Fed, the Personal Consumption Expenditures Price Index, was little changed in March over its 2.8% reading in February. Federal Reserve chair Jerome Powell highlighted the index earlier this week as he signaled that interest rate cuts may come later, rather than sooner.

The US economy has been strong, with job growth and retail sales also rising more than expected for the month of March.

“The problem with the US is the sticky part that comes from services. Services is demand, and that demand needs to come from somewhere — and that’s a robust economy,” Chaar told Bloomberg. A gauge from the Institute for Supply Management showed the US service sector expanded moderately in March.

“Consumers are consuming because they have jobs, because they have rising incomes,” Chaar said.

This means inflation is fueled by demand rather than oil supply, even if a rise in energy prices complicates the Fed’s job, he said.

The Fed is now trying to engineer a soft landing for the hot US economy without causing it to tip into a recession.

“I would say the biggest challenge here for the Fed is to manage the demand of the US economy,” Chaar said. “It comes from domestic America, not from the Middle East.”

What the Rising Gold Price Signals

April 24, 2024

What the Rising Gold Price Signals

The recent run-up in the gold price has not garnered the attention among the mainstream financial media outlets as it should. Gold has, in part, been overshadowed by the rise in the price of bitcoin and other cryptocurrencies.

Naturally, the financial press, which is really an arm of the government and its central bank, wants to ignore, as much as possible, references to gold as protection against the continuing increase in the price level which itself has been deliberately understated by monetary officials. The media and government understand that precious metals are the ultimate security against runaway inflation and economic collapse.

While the increase in the gold price has reached nominal highs, it and the price of silver have not passed their all-time 1980 highs in real terms. Adjusted for inflation, gold would have to rise to about $3590 an ounce while silver would have to surpass $50 an ounce. Both are poised to exceed these watermarks in the not-too-distant future.

Precious metals will continue to escalate unless the Federal Reserve radically changes its interest rate policy to combat inflation as former Fed Chairman Paul Volcker once did. Volcker raised interest rates to double-digit levels which caused gold prices to fall. While Volcker could get away with such actions (because, at the time, the U.S. was still a creditor nation), current Chair Jerome Powell cannot because of the enormity of public and private debt. Double-digit interest rates would collapse the economy and plunge millions of Americans into bankruptcy.

The rising price of gold is anticipating some of the promised policy actions of the Fed. Since the end of last year, the central bank has indicated that it would be cutting interest rates. In addition, Powell is considering ending the Fed’s “Quantitative Tightening” (QT) program. Both are highly inflationary.

…click on the above link to read the rest of the article…

Kick Back, Watch It Crumble

April 22, 2024

Kick Back, Watch It Crumble

Monetarily and fiscally there seems to be no other way to describe our government’s actions other than willingly and excitedly driving the country full speed ahead toward the death of the dollar.

The title to this post comes from one of my favorite NOFX songs, Dinosaurs Will Die.

While I’m sure the band in absolutely no way agrees with most, if not all, of my political leanings, the critiques they raise about the music industry in the song could serve just as well as many of the questions I want to ask of legacy mainstream media and politicians from both sides of the aisle in our government.

Leading those questions, for me, is this one: Doesn’t it elicit a hopeless feeling sometimes that we always have to learn the hard way in this country?

Few things are surer than taxes and death, but one of them is that our powers that be will make up any excuses necessary, scapegoat anything possible, and generally exercise every single possible wrong decision before reluctantly realizing that a consequential, uncomfortable yet important, proactive adult decision needs to be made and/or communicated to the American public.

Nobody ever wants to fess up to doing something wrong and nobody has a tolerance for even an ounce of discomfort, even when it accompanies an obvious decision that is in the best interest of our nation.

There have been too many examples in recent memory to name, but one of the latest bouts of us acting like a scared 6 year old with an aversion to reality was the farce of the Fed and Biden administration constantly telling the nation that inflation was transitory, when that has turned out to be the polar opposite of the truth.

Janet Yellen, unable to ascertain a clue in the real world, looking for one in the virtual world.

…click on the above link to read the rest of the article…

Inflation is Causing Tectonic Shifts

April 14, 2024

Inflation is Causing Tectonic Shifts

Even if stock investors are acting as if nothing happened along the road they are walking, they will soon wish they had not missed the obvious.

a person walking down a road next to a stone wall — Photo by Roberta Piana on Unsplash

Yesterday when stocks crashed hard, I wrote the following caveat to their epitaph:

Whoa! Delusions broken. At least, for today, but give investors a wisp of faint hope tomorrow, and greed may go from free fall to free floating again.

Indeed, the faintest wisp was all they got in today’s PCE inflation report, but that was all it took to send them deliriously positive in a state of euphoria and denial again. That won’t likely last long, foolish as it is, because the road is likely to be more than bumpy from here on out on the inflation front—more like jagged—and because bond investors today refused to give up the tougher edge they took yesterday with the bond vigilantes holding out for better returns. Never underestimate the foolishness and denial that undergirds this stock market, causing investors to miss the obvious signs on each side of them.

… Because, as I also wrote yesterday …

The 2YR yield is now getting very close to 5%. At those levels Treasuries will be seriously sucking money out of stocks for the practically free ride of doing nothing but sitting home with zero risk and clipping interest coupons. Those days won’t be long in coming.

That is what we saw today in bond action as yields continued to rise. A few articles in the news today highlighted how bond traders are now demanding higher yields from US Treasuries and not letting go of the reins…

…click on the above link to read the rest of the article…

The CPI Rose Sharply in March Led by Shelter and Gasoline

April 11, 2024

The CPI Rose Sharply in March Led by Shelter and Gasoline

The CPI rose 0.4 percent in March. Rent is up another 0.4 percent in March with gasoline up 1.7 percent. Together, the pair was about half of the total rise.

Yet Another Groundhog Day for Rent

I repeat my core key theme for over two years now. People keep telling me rents are falling, I keep saying they aren’t.

Rent of primary residence, the cost that best equates to the rent people pay, jumped another 0.4 percent in March. Rent of primary residence has gone up at least 0.4 percent for 31 consecutive months!

The “rents are falling” (or soon will) projections have been based on the price of new leases and cherry picked markets. But existing leases, much more important, keep rising.

Only 8 to 9 percent of renters move each year. It’s been a huge mistake thinking new leases and finished construction would drive rent prices.

The overall CPI and core CPI Joined the party this month, all rising 0.4 percent.

Let’s tune into the BLS Report for the more details.

CPI Month-Over-Month Details

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in March on a seasonally adjusted basis,
The index for shelter, rent, and Owner’s Equivalent Rent (OER) all increased 0.4 percent.
The energy index rose 1.1 percent over the month. Gasoline rose 1.7 percent.
Shelter and energy contributed over half of the monthly increase in the index for all items.
The food index rose 0.1 percent with food at home unchanged but food away from home index up 0.3 percent.
The all items less food and energy, labeled the core CPI, rose 0.4 percent for the third month.
The price of new and used vehicles declined in March.

CPI Year-Over-Year

…click on the above link to read the rest of the article…

Biden’s Inflation Narrative Dies as Price Growth Rises to a Seven-Month High

April 11, 2024

Biden’s Inflation Narrative Dies as Price Growth Rises to a Seven-Month High

“…we can expect the administration and the regime in general to continue gaslighting the public and claiming that greedy capitalists cause inflation.”

According to the Bureau of Labor Statistics’ latest price inflation data, CPI inflation in March rose to a seven-month high, and price inflation hasn’t proven nearly as transitory as the regime’s economists have long predicted.

According to the BLS, Consumer Price Index (CPI) inflation rose 3.5 percent year over year during March, without seasonal adjustment. That’s the thirty-seventh month in a row of inflation well above the Fed’s arbitrary 2 percent inflation target.

Month-over-month inflation was flat with the CPI rising by 0.4 percent from February to March, with seasonal adjustment. Month-to-month growth had also been 0.4 percent from January to February.

The ongoing price increases largely reflect growth in prices for food, services, electricity, and shelter.

For example, prices for “food away from home” were up 4.2 percent in March over the previous year. Gasoline prices rose 1.3 percent over the period, but electricity surged to 5.0 percent. Prices for “services less energy services” rose 5.4 percent, year over year, while shelter rose 5.7 percent over the period.

Some specific categories were well above even this in year-over-year price inflation. For example:

Car insurance prices: up 22.2%
Car repair prices: up 11.6%
Transportation prices: up 10.7%
Hospital services prices: up 7.5%
Homeowners’ prices (“Owners’ equivalent rent”): up 5.9%

Removing volatile energy and food prices from the index, we find price inflation nonetheless remains stubbornly high. So-called core CPI growth remains almost double the “two-percent target”—at 3.8 percent—keeping price inflation growth near thirty-year highs. In other words, core CPI is a long way from returning to “normal.” Moreover, March’s month-over-month increase remains at 0.4 percent, which is the largest increase recorded in any month since April 2023.

Biden Blames Corporate Greed

…click on the above link to read the rest of the article…

Proposal to Move Bank Regulation Goalposts Signals Underlying Problems in Financial System

April 5, 2024

Proposal to Move Bank Regulation Goalposts Signals Underlying Problems in Financial System

If a formula spits out a number you don’t like, just change the formula so you get a better number!

That’s exactly what the Bureau of Labor Statistics did to the Consumer Price Index formula in the 1990s. Because the CPI kept indicating price inflation was too high, the BLS tweaked the formula to spit out a lower inflation number.

Now the International Swaps and Derivatives Association (ISDA) is trying to talk the Federal Reserve into changing the formula for the supplementary leverage ratio (SLR) to make bank balance sheets look better.

This proposal sends some alarming messages about the stability of the banking system and confidence in U.S. government debt.

What Is the SLR and Why Do They Want to Change It?

The SLR is calculated by dividing the bank’s tier 1 capital (capital held in a bank’s reserves and used to fund business activities for the bank’s clients) by all assets on the bank’s balance sheet, including U.S. Treasuries and deposits at Federal Reserve Banks.

Banks use the SLR to calculate the amount of equity capital they must hold relative to their total leverage exposure. Regulations imposed after the 2008 financial crisis require category I, II, and III banks to maintain an SLR of 3 percent. “Globally Systemically Important Banks” are required to keep an extra 2 percent SLR buffer.

During the pandemic, the Fed temporarily altered SLR requirements, allowing banks to exclude Treasuries and reserves from the formula’s denominator. This made it easier to maintain the required SLR ratio.

As a Federal Reserve note explained, the banking system “exhibited considerable strains” during the reign of COVID-19. As the pandemic unfolded and governments began shutting down economies, banks quickly liquidated risky assets and increased their cash holdings. This resulted in a “sharp increase in bank deposits.”

…click on the above link to read the rest of the article…

The Second and Final Gilded Age

April 4, 2024

The Second and Final Gilded Age

New data shows that the total wealth of the top 1% of Americans just hit a record $44 trillion. Corporate profits are also hitting record highs, raking in $2.8 trillion in the last three months of 2023 alone. And that’s after taxes. It won’t surprise you to hear, given these massive numbers, that inflation is being driven primarily by corporate greed and these staggering, record profits. By raising the cost of food, housing, and every basic need corporations are facilitating a gargantuan transfer of wealth from the working class to the 1%. In doing so they’re cementing this era’s position as the second Gilded Age.

For most of you, that’s probably not new information. Inequality has been soaring since the Reagan era, and even though workers have been creating more and more wealth, we’re seeing a smaller and smaller share of the value we produce. But this Gilded Age is slightly different from the first, and more importantly our remedy for this era should be separate and distinct.

The Gilded Age of the late 1800s is typically defined by extreme inequality and the monopolistic consolidation of industries. A handful of men, the Robber Barons, controlled the railroads, mines, newspapers, and, ultimately, the country. The concentration of wealth was so extreme that one man, John D. Rockefeller, is estimated to have been worth approximately $400 billion at the peak of his wealth, which was about 2% of the entire U.S. economy. Others like Andrew Carnegie, J. P. Morgan, and Cornelius Vanderbilt also pillaged and ruled the country with ruthless business tactics, exploitation of workers, and political corruption.

…click on the above link to read the rest of the article..

Canadians Are F**ked: Secret RCMP Report

March 29, 2024

Canadians Are F**ked: Secret RCMP Report

A previously secret (and still heavily redacted) RCMP report warns the Canadian government to expect civil unrest once citizens realize how totally screwed the economic situation is, the National Post reports.

“The coming period of recession will … accelerate the decline in living standards that the younger generations have already witnessed compared to earlier generations,” reads the “Whole-of-Government Five-Year Trends’ report for Canada- of which the aforementioned heavily redacted version was made public thanks to an ‘access of information’ request filed by Matt Malone, an assistant professor of law at British Columbia’s Thompson Rivers University, and an expert in government secrecy.

“For example, many Canadians under 35 are unlikely ever to be able to buy a place to live,” the report continues.

According to the report, labeled as “special operational information” and originally intended to be distributed only within the RCMP and among “decision makers” in the federal government, trends are in motion “that could have a significant effect on the Canadian government and the RCMP.”

The authors warn that Canada’s current situation “will probably deteriorate further in the next five years,” and that in addition to worsening living standards, Canada faces unpredictable seasonal catastrophes, including wildfires and flooding.

Another major theme of the report is that Canadians are set to become increasingly disillusioned with their government, which authors mostly chalk up to “misinformation,” “conspiracy theories” and “paranoia.” -National Post

“Law enforcement should expect continuing social and political polarization fueled by misinformation campaigns and an increasing mistrust for all democratic institutions,” reads one of the report’s “overarching considerations,” the Post reports.

“Erosion of Trust”

“The past seven years have seen marked social and political polarization in the Western world,” reads part of the first sentence of a heavily redacted section, entitled “erosion of trust,” with the remainder deleted by government censors – who also eliminated most of a section warning about “paranoid populism.”

…click on the above link to read the rest of the article…

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“…we can expect the administration and the regime in general to continue gaslighting the public and claiming that greedy capitalists cause inflation.”

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