Home » Posts tagged 'monetary policy' (Page 7)

Tag Archives: monetary policy

Inflation should be front and centre for markets – give or take Ukraine, Oil, etc. How real is it, and just how bad could the consequences be? Not talking about it is one way to ensure it hurts.

“The way to crush the bourgeoise is to grind them between the millstones of taxation and inflation.”

This Morning: Inflation should be front and centre for markets – give or take Ukraine, Oil, etc. How real is it, and just how bad could the consequences be? Not talking about it is one way to ensure it hurts.

Contrary to expectations, World War Last didn’t break out yesterday. Either the Russians are stepping back or they are retreating in a forward direction while adding thousands of new troops… Who knows..? Who to believe? In the absence of evidence or a credible reason for Putin pressing the auto-destruct button while he’s winning, (er, yes, he probably is as the West discomboffulates around the issue, beset by leadership crises, division, energy prices and distrust), can we now look forward to Spring?

And get back to worrying about real stuff. Like inflation?

The news this morning is UK inflation hitting a 30-year high, home price rises in the US and UK earning more than the average working wage, and the Fed Minutes – yawn. Put these together and it looks torrid. Yet the market seems unbovvered… There is a strong likelihood the Fed will hike 50 bp in March and up to 10 times in the next (whatever length of time) years/months/minutes… Whateva… Expectations of aggressive moves in rates have doubled in recent weeks.

Commentary in the bond market ranges from the risks of over-aggressive policy mistakes, arguments about how long “transitory” inflation might last, and the risks of further supply and wage driven inflation hikes…

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

Inflation Lowered By Investment In “Intangible Goods”

February 16, 2022

Inflation Lowered By Investment In “Intangible Goods”

Inflation ahead will be contained in certain sectors of the economy. How much inflation we see is still up in the air. From a Main Street perspective, people and businesses are saying that inflation is here to stay and is not a short-lived or transient issue. Still, it is also important to remember that as supply and demand have taught us, what goes up can and often does come down. I contend and envision most of the inflation that takes place will be in hard assets and it will be the result of people losing faith in fiat currencies.When money is created or printed it has to go somewhere, and it has been fueling the “everything bubble.” While feeding the “wealth effect” and inequality, a bubble is not necessarily inflationary. All this can be a difficult concept to grasp. The important point to remember is that everything is relevant and values and prices change. Up until now, much of the newly created money has not resulted in massive inflation. This is because it has been diverted from goods everyone needs to live and into intangible assets not included in the consumer price index.

The way people view fiat currencies way be about to change in a big way, they are generally a poor place to store wealth. To be clear, I view the dollar as the best of the four fiat currencies, however, I expect all of them to come under more pressure in the near future with the yen and euro being the biggest losers. The amount of interest in cryptocurrencies and other inflation hedges is an indication many investors are losing faith in the central banks and fiat currencies. The result may be a monetary crisis and chaos that shifts people into tangibles and a self-feeding inflation loop.

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

The Total Collapse in Confidence of Government on Every Level

February 13, 2022

The Total Collapse in Confidence of Government on Every Level

QUESTION: Greetings!
You have said “they” want the economy to turn down, this is their goal with all the lockdowns.
So now you say that if the economy has a low after March it will mean a decline into 2023.
Does this mean “they” are winning if this happens?

ANSWER: No. This is the most disastrous economic mess I think I have ever seen in history or my personal career. Here we have a collapse in the confidence of governments thanks to the COVID regulations. There is even confusion in businesses in NYC do they demand masks or is that now out completely? The WEF conspirators thought they would win. Just look at the Truckers who have brought Trudeau to his knees.

Biden and Western Leaders are begging Putin to PLEASE invade Ukraine. They now think this will provide the distraction they need to escape from their disastrous COVID scam that was the brainchild of the WEF and has FAILED to work.

Now, add to this mess, we are staring in the face of a total collapse in the confidence of central banks. They have nothing they can do about this type of inflation. Raising rates will have ZERO impact upon shortages other than making them worse. The Fed can keep raising rates until they hit 20%. All they will do is bankrupt more companies in the supply chain, bankrupt emerging markets, and in the end, the shortages will get far worse and prices will soar.

We are facing the total collapse of any confidence in government I suppose this is part of the computer warning that 2022 is a Panic Cycle Year in politics. Even the WEF crew has lost control. As an EXXON Gas Station boldly posted: “YOU ASSHOLES VOTED DEMOCRAT” and we now see what we will get when the only agenda is Climate Change.

Fed Rate Hike Will Cause Hyperinflationary Great Depression – John Williams

February 9, 2022

Fed Rate Hike Will Cause Hyperinflationary Great Depression – John Williams

Economist John Williams says the economy is in deep trouble, and the Fed knows it. Williams says the Fed talking up “robust economic growth” that is causing inflation is “nonsense.” Williams explains, “The one thing that is not causing inflation is ‘robust economic growth.’ So, when they talk about raising interest rates to kill this robust economic growth that’s triggering the inflation, that’s absurd, and the Fed knows it. . . . If the Fed foolishly raised rates as reflected in the payrolls as not being fully recovered, you are going to have a sharp downturn, a double dip depression here. At the same time, you are still going to have the inflation. You are going to end up with an inflationary depression or a hyper-inflationary Great Depression.”

According to Williams’ forecast, “In terms of a crash, I am looking for much higher inflation, maybe hyperinflation, and I am looking for the economy to crash. You can address the inflation by personally holding physical gold and silver.”

So, jobs are going to disappear? Williams says, “They already have, but hopefully all the effects of the pandemic will disappear, and people will get back to work, but that is not happening now. There is no sign of it getting better. In fact, the numbers are indicating it’s getting worse. . . . The holiday retail economy in November and December declined at the worst pace since the Great Recession. You had a negative holiday shopping season. That’s not a booming economy.”

On top of that, Williams says the real inflation rate is 14.8 %, if you disregard all the gimmicks the government uses to make inflation look less than what it really is. Williams says, “That’s the highest inflation rate since the Truman Administration.”

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

The End of Free-Lunch Economics

February 7, 2022

rajan74_STEFANI REYNOLDSAFP via Getty Images_fed

The End of Free-Lunch Economics

Since the global financial crisis, and particularly during the COVID-19 pandemic, fiscal and monetary policymakers have operated as if there are no tradeoffs to their expansionary policy programs. Now that economic conditions have changed, they may soon have to relearn old lessons the hard way.

CHICAGO – Smart economic policymaking invariably requires trading off some pain today for greater future gains. But this is a difficult proposition politically, especially in democracies. It is always easier for elected leaders to indulge their constituents immediately, on the hope that the bill will not arrive while they are still in office. Moreover, those who bear the pain caused by a policy are not necessarily those who will gain from it.

That is why today’s more advanced economies created mechanisms that allow them to make hard choices when necessary. Chief among these are independent central banks and mandated limits on budget deficits. Importantly, political parties reached a consensus to establish and back these mechanisms irrespective of their own immediate political priorities. One reason why many emerging markets have swung from crisis to crisis is that they failed to achieve such consensus. But recent history shows that developed economies, too, are becoming less tolerant of pain, perhaps because their own political consensus has eroded.

Financial markets have become volatile once again, owing to fears that the US Federal Reserve will have to tighten its monetary policy significantly to control inflation. But many investors still hope that the Fed will go easy if asset prices start to fall substantially. If the Fed proves them right, it will become that much harder to normalize financial conditions in the future.

Investors’ hope that the Fed will prolong the party is not baseless. In late 1996, Fed Chair Alan Greenspan warned of financial markets’ “irrational exuberance.”…

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

The Mayhem Below the Surface of the Stock Market Seeps to the Surface: Now it’s the Giants that Topple

January 24, 2022

The Mayhem Below the Surface of the Stock Market Seeps to the Surface: Now it’s the Giants that Topple

The market finally gets it: The Fed is going to tighten to get a handle on its massive inflation problem.

Since February last year, the hottest most hyped stocks, many of them recent IPOs and SPACS, have been taken out the back and brutalized, either one by one or jointly. The stocks that have by now crashed 60%, 70%, 80%, or even 90% from their highs include luminaries such as Zoom, Redfin, Zillow, Compass, Virgin Galactic, Palantir, Moderna, BioNTech, Peloton, Carvana, Vroom, Chewy, the EV SPAC & IPO gaggle Lordstown Motors, Nikola, Lucid, and Rivian, plus dozens of others. Some of these superheroes are tracked by the ARK Innovation Fund, which has crashed by 55% from its high last February.

This mayhem has been raging beneath the surface of the market since February last year, and in March, I mused, The Most Hyped Corners of the Stock Market Come Unglued. They have since then come unglued a whole lot more. But the surface itself remained relatively calm and the S&P 500 Index set a new high on January 3 this year because the biggest stocks kept gaining or at least didn’t lose their footing.

But now even the giants too are going over the cliff. Combined by market cap, the seven giants, Apple [AAPL], Amazon [AMZN], Meta [FB], Alphabet [GOOG], Microsoft [MSFT], Nvidia [NVDA], and Tesla [TSLA] peaked on January 3, and in the 13 trading days since then have plunged 13.4%. $1.6 trillion in paper wealth vanished (stock data via YCharts):

This is obviously still no big deal, a 13.4% decline, after this huge gigantic run-up. During the March 2020 crash, these giants plunged 28%. But it’s the first time since then that this unappetizing event has occurred.

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

Peter Schiff: The Fed Made This Bed and Now We Have to Lie In It

January 20, 2022

Peter Schiff: The Fed Made This Bed and Now We Have to Lie In It

Inflation is running hot. Economic data is running cold. Stocks and bonds are under pressure. The Fed is scrambling. In his podcast, Peter Schiff talked about the trajectory of the economy. He said we’re on the cusp of the most obvious crisis that virtually nobody saw coming. The Federal Reserve made this bed. Now we have to lie in it.

Stocks and bonds are off to a rough start in 2022 with the expectation of rate hikes on the horizon. In fact, many analysts now think that the Fed could raise interest rates five times in 2022. And some also think the first hike in March could be 50 basis points.

Hedge fund manager Bill Ackman called a .5% rate hike “shock and awe.”

Peter called this “ridiculous.”

It’s not shock and awe. When you’re talking about 7% inflation, a move from zero to 50 basis points is still recklessly low interest rates. And for a Fed that’s actually serious about fighting inflation, raising interest rates to 50 basis points is not nearly enough for the task at hand.”

Even so, a .5% rate hike could have a profound impact and pop the bubble economy.

Given the incredible amount of leverage that’s in the system, a 50 basis point rate hike can still do a lot of damage. And I think Bill Ackman is underestimating the extent of the damage. But not just the damage from the initial hike, but from all the subsequent hike, which aren’t going to do any good about slowing down this inflation freight train.”

Peter noted the price of oil hit has continued its upward trajectory this week. The price of oil is at a seven-year high with plenty of room to keep running up. In 2021, a lot of producers ate their rising costs…

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

Fed Chair Faces the Ultimate Lose-Lose Decision

January 17, 2022

Fed Chair Faces the Ultimate Lose-Lose Decision

Photo by Vadim Sadovski

The U.S. economy teeters between two catastrophes: wild and untamed hyperinflation that turns cash into wallpaper, or an epic crash that would make 2008 look like a day at the beach. Federal Reserve Chairman Jerome Powell has led the U.S. government’s monetary policy to this point.

Now he’s attempting a nearly impossible feat…

He will need to thread the needle between the two economic disasters, between the frying pan and the fire, to return the U.S. economy to any form of sustainable prosperity.

Is that kind of miracle even possible?

The frying pan: 40-year-record-high inflation

We will start with the obvious issue: December’s inflation report of 7% year-over-year price increases. That’s at the end an entire year where inflation rose steadily for eleven of twelve months. August, the exception, saw a 0.1% decline.

Source

In addition, what Powell endlessly assured us was merely “transitory” inflation, a “blip,” caused by “supply chain snarls” and so on? It’s the highest we’ve seen in 40 years.

Most of our readers who have a little gray in their hair may remember how grim the stagflationary crisis of the late 70s and early 80s was. However, the average American is only 38 years old. They most likely have no idea what we’re facing, even while watching their personal expenses go up month after month.

And make no mistake, those expenses have gone up quite a bit for virtually everyone.

The Bureau of Labor and Statistics (BLS) report revealed the prices that rose the most in December 2021 :

Gasoline +49.6%
Fuel oil, and other fuels for heating +48.9% (just in time for the coldest days of winter, too)
Natural gas: +24.1%
Meats, poultry, fish, and eggs: +12.5%
Electricity: +6.3%
Housing +4.1%

If you find this list depressing, I’m afraid your solace isn’t immune to this trend… Distilled spirits (excluding whiskey) rose 3.4% in price.

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

Is Powell Again Pulling Strings From “The Shadows”?

January 17, 2022

Is Powell Again Pulling Strings From “The Shadows”?

Recently, we have seen stocks rally while the dollar falls. Some of us are wondering why the dollar is falling at the same time currency traders are busy penciling in as many as four interest rate increases. The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was down 0.1% on Thursday hitting a two-month low. This drop leaves the dollar with a loss of 1.2% since the start of the new year.A more aggressive tightening of monetary policy and “hawkish” central bank intent on slowing inflation is generally seen as supportive to a currency. Is it possible Powell dropped the dollar to kick the stock market back up? I contend this is what is happening. Such a move has been used in the past. In volatile markets, like we have today ruled at times by emotions, the fear of missing out, and a slew of traders trained to buy the dip, it doesn’t take much to turn an ugly selling streak into a buying panic.

The combination of a sudden drop in the dollar just as the Fed starts talking about tapering and raising rates is difficult to understand. With most seasoned investors allergic to risk, logic would tend to make them view the coming Fed action as a strong headwind to markets going higher. At the same time, higher interest rates and less expansion of the Fed’s balance sheet generally moves the dollar higher.

While it could be argued the falling dollar simply reflects the coming recession into which the Fed is tightening, again I point to Powell as the great enabler…

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

The Fed Just Guaranteed a Stagflation Crisis in 2022 – Here’s How

January 14, 2022

The Fed Just Guaranteed a Stagflation Crisis in 2022 – Here’s How

Chair Powell leads a two day meeting of the Federal Open Market Committee (FOMC) held January 29-30th, 2019. Public domain photo courtesy of the Federal Reserve

I don’t think I can overstate the danger that the U.S. economy is in right now as we enter 2022. While most people are caught up in the ongoing drama of Covid-19, a real threat looms over the nation in the form of a stagflationary tidal wave. The mainstream media is attempting to place the blame on “supply chain disruptions,” but this is a misrepresentation of the issue.

The two factors are indeed intertwined, but the reality is that inflation is the cause of supply chain disruptions, not the result of supply chain disruptions. If we look at the underlying stats for price rises in essential products, we can get a clearer picture.

Before I get into my argument, I really want to stress that this is a truly dangerous time and I suggest that people prepare accordingly. In just the past few months I have seen personal expenses rise at least 20% overall, and I’m sure it’s the same or worse for most of you. Safe-haven investments with intrinsic value like physical precious metals are a good choice for protecting whatever buying power your dollars have left…

Higher prices everywhere

The Consumer Price Index (CPI) is officially at the highest levels in 40 years. CPI measurements often diminish the scale of the problem because they do not include things like food, energy and housing which are core expenses for the public. CPI calculations have also been “adjusted” over the past few decades by the government to express a more positive view on inflation…

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

Peter Schiff: The Fed Can’t Do What It’s Saying It Will Do

January 11, 2022

Peter Schiff: The Fed Can’t Do What It’s Saying It Will Do

The Fed FOMC minutes came out last week, signaling tighter monetary policy. Peter Schiff talked about the minutes in his podcast, arguing that the Fed can’t do what it says it’s going to do. If it does, it will crash the markets and the economy. And it won’t lower inflation.

The Fed minutes were widely viewed as even more hawkish than the messaging coming out of the December meeting. Peter said the minutes even surprised him a bit. But he reminded us that when he’s talking about a “hawkish” Fed, he’s not really talking about hawks.

They’re extinct. They may as well be the dodo bird at the Federal Reserve. Everybody is a dove. We’re just talking about degrees of dovishness. And so, the Fed was less dovish than the markets had expected.”

The minutes indicated we could now see four interest rate hikes this year. Three hikes were widely anticipated after the meeting. That would push rates up to about 1% by the end of the year. In the big scheme of things, and against the backdrop of the current economic data, that’s not a lot.

You cannot describe those itsy-bitsy moves in any way ‘hawkish.’”

But comments regarding quantitative tightening – shrinking the balance sheet – really roiled the markets.

In other words, they’re going to go from being a massive buyer in US Treasuries and mortgage-backed securities to a seller of those securities. And that’s what really spooked the markets. Because that sent the bond markets tanking.”

Yields on the 10-year Treasury hit a 52-week high and briefly pushed above 1.8%.

If the Fed is going to shift from buying bonds to selling, clearly, that will put heavy pressure on the bond market. But Peter said there is one thing that the markets don’t seem to comprehend.

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

“Minsky Moments Almost Certainly Await”: Nomura Fears ‘Collateral’ Damage From The QE-to-QT Transition

January 10, 2022

“Minsky Moments Almost Certainly Await”: Nomura Fears ‘Collateral’ Damage From The QE-to-QT Transition

“Minsky Moments” almost certainly await, warns Nomura’s Charlie McElligott in his latest note as he reflects on a massive week ahead for markets.

With Powell testimony and bunches of Fed speakers, along with US economic releases headlined by the market’s most important datapoint in the CPI release Wednesday, in addition to PPI, Retail Sales and Consumer Sentiment over the course of the week, plus two Duration-heavy auctions ($36B of 10Y and $22B 30Y, on top of tomorrow’s $52B 3Y),… and finally, US corporate earnings season kickoff (highlighted by JPM, C and WFC this upcoming Friday), it is no wonder that investors are degrossing still…

While the long-end of the curve is reversing modestly – after some more ugliness overnight – STIRs continue to grind hawkishly higher with March now consolidating around a 90% chance of a rate-hike…

McElligott raises some worries of a rapid ‘reversal’ risk in bonds – via “market tantrum” forcing the Fed to yet-again “Bend the Knee” – as market positioning in bonds is extreme to say the least.

Looking at the QIS CTA Trend model to get a sense of the “bearish momentum” and asymmetry within Fixed-Income positioning, we currently see the net exposure across G10 Bonds is back to 10 year historical “extreme Short” at just 2.2%ile overall exposure since 2011; further, the aggregate $notional position across the agg G10 Bond positions is now greater that -2 SD rank (i.e. very “net Short”) dating all the way back to 2002.

Similarly, the Nomura MD notes that eventually, the more this selloff in legacy long / crowded hyper Growth Tech extends, there is ultimately a mounting risk of a sharp counter-trend rally in beaten-down Nasdaq, particularly considering the extremely magnitude of the Dealer “short Gamma” profile in QQQ ($Gamma -$476mm, 3.4%ile since 2013…

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

The Economy May Be Finally Peaking, and the Fed Won’t Help Matters

December 29, 2021

THE ECONOMY MAY BE FINALLY PEAKING, AND THE FED WON’T HELP MATTERS

Here we go again it may seem to many. The Fed is preparing us for a policy tightening just when a powerful growth cycle upturn is faltering. Or is it in fact an example of another well-known type of error from Fed history—getting behind the curve of rising inflation? The most plausible answer is that it is neither.

Instead, the huge monetary inflation shock which the Fed has administered so far in this pandemic means that the “normalization steps” now in prospect for 2022 are all but irrelevant to macroeconomic prospects or asset market price trajectories.

The more Federal Reserve chief Jerome Powell has been huffing and puffing, since his renomination (November 22), about normalizing policy, the steeper has been the fall in long-term interest rates. In the first two trading weeks following the renomination, the ten-year yield on US Treasurys was down by thirty basis points to 1.35 percent. A coincidence, surely, explained in part by the possible Omicron menace? Yes, perhaps in part, but not altogether.

The chief’s performance is now in the theater of the absurd. Many in the marketplace have deserted the audience, though the noise still irritates them. Instead, they focus on the drama of monetary reality. The title? “Lost Illusions on the Journey from Mega Pandemic Inflation to Great Depression.” The evolving mood of the audience here will have a powerful effect on financial markets and ultimately the global economy.

Toward understanding the theater of the absurd and its triviality, recall the story of the natural history museum renowned for its dinosaur relics. The guardian there, quizzed by a child as to the age of those specimens, answers: 5 million years and 90 days. How so? Because when he started work there, around three months ago, he was told their age was 5 million years!

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

My “Wealth Effect Monitor” & “Wealth Disparity Monitor” for the Fed’s Money-Printer Economy: December Update

December 28, 2021

My “Wealth Effect Monitor” & “Wealth Disparity Monitor” for the Fed’s Money-Printer Economy: December Update

Billionaires got more billions, bottom half of Americans got peanuts and inflation.

My “Wealth Effect Monitor” uses the data that the Fed releases quarterly about the wealth of households. The Fed, after having released the overall data for the third quarter earlier in December, has now released the detailed data by wealth category for the “1%,” the “2% to 9%,” the “next 40%” (the top 10% to 50%) and the “bottom 50%.”

Wealth here is defined as assets minus debts. The wealth of the 1% ($43.9 trillion, according to the Fed) is owned by 1% of the population. The wealth of the “bottom 50%” (only $3.4 trillion) gets split across half the population. My Wealth Effect Monitor takes this a step further and tracks the wealth of the average household in each category.

The average wealth in the 1% category ticked up by only $121,000 in Q3 from Q2, after skyrocketing over the prior five quarters, to $34,478,000 per household (red line). In the bottom 50% category, the average wealth ticked up by $6,800 $53,600 (green line). And get this: About half of that “wealth” at the bottom 50% is the value of consumer durable goods such as cars, appliances, etc. Even the top 2% to 9% (yellow), have been totally left behind by the explosion of wealth at the 1%:

Note the immense increase in the wealth for the 1% households, following the Fed’s money-printing scheme and interest rate repression in March 2020.

A household is defined by the Census Bureau as the people living at one address, whether they’re a three-generation family or five roommates or a single person. In the third quarter, there were 127.4 million households in the US, per Census estimates.

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

Gold and silver prospects for 2022

December 27, 2021

Gold and silver prospects for 2022

It has been a disappointing year for profit-seeking precious metal investors, but for those few of us looking to accumulate gold and silver as the ultimate insurance against runaway inflation it has been an unexpected bonus.

After reviewing the current year to gain a perspective for 2022, this article summarises the outlook for the dollar, the euro, and their financial systems. The key issue is the interest rate outlook, and how that will impact financial markets, which are wholly unprepared for the consequences of the massive expansions of currency and credit over the last two years.

We look briefly at geopolitical factors and conclude that Presidents Putin and Xi have assessed President Biden and his administration to be fundamentally weak. Putin is now driving a wedge between the US and the UK on one side and the pusillanimous, disorganised EU nations on the other, using energy supplies and the massing of troops on the Ukrainian border as levers to apply pressure. Either the situation escalates to an invasion of Ukraine (unlikely) or America backs off under pressure from the EU. Meanwhile, China will continue to build its presence in the South China Sea and its global influence through its silk roads. Less appreciated is that China and Russia continue to accumulate gold and are ditching the dollar.

And finally, we look at silver, which is set to become the star performer against fiat currencies, driven by a combination of poor liquidity, ESG-driven industrial demand and investor realisation that its price has much catching up to do compared with lithium, uranium, and copper. The potential for a fiat currency collapse is thrown in for nothing.
2021 — That was the year that was

This year has been disappointing for precious metals investors. Figure 1 shows how gold and silver have performed since 31 December 2020.

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

Tag Archives: monetary policy

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Post navigation

Latest Posts