From CNBC: The markets have been "absolutely spoiled by the Federal Reserve" and its accommodative monetary policy since the depths of the 2008 financial crisis, former Fed Gov. Kevin Warsh said Tuesday. Warsh, a distinguished visiting fellow at the Hoover Institution, was a Fed governor from 2006 to 2011. He was appointed by President George W. Bush. … [Read more...]
The Monday Melee: Incomes Grow Slower
Long Term Personal Income Trend Not Looking Great In February, Personal Income growth continued, but at a slower pace for the second month in a row. Growth rates are still far from their historical average of 6.8% per year, and for the last two months have fallen further away from that average. Personal Income growth has regularly been below 6.8% per year since the 1980s. Some States Faring Better than Others Quotable: "I'm living so far beyond my income that we may almost be said to be living apart." - E.E. Cummings Educated … [Read more...]
Dot Plot Confusion
Did the Fed really get more dovish at its last meeting? St. Louis Fed President James Bullard explains that market participants may have misinterpreted the Fed’s view on the economy based on its interest rate projections. The Fed should lose the dot plots and give us its base case projections each quarter. … [Read more...]
The Monday Melee: The Grid
Quotable: "Electricity is really just organized lightning." - George Carlin Why We're Better Together: Community micro-grids backed by power storage devices like Tesla batteries may be on the horizon. These small power networks could be more reliable than traditional continent spanning grids. But until costs are reduced dramatically and bugs are worked out, traditional grid networks will remain a much more efficient way to distribute power. Massive grids allow a reduction in overall generating capacity by linking areas where peak demands happen at different times. The IEA shows here that … [Read more...]
Even the Bulls Know the Market is Rigged
CNBC: Ed Yardeni, President of Yardeni Research, shares his view of Fed guidance on the U.S. economy. The markets are all rigged, he says, due to the influence of central bankers. … [Read more...]
Moving the Goal Posts
The Federal Reserve met yesterday and Chair Yellen held a press conference to announce the results of what America’s monetary politburo decided. As was widely expected, Yellen & Co., dropped language about being patient on hiking interest rates. The implication is that the Fed can now hike rates at any meeting. But don’t get too excited. In an apparent effort to keep Goldman flush, and to avoid another spasm in interest markets as occurred during the so-called taper tantrum in 2013, Yellen & Co. struck a much more dovish tone on the economy and rates. The Fed downgraded its forecast … [Read more...]
Deflation “Crisis”: How Will it End?
Unemployed men queued outside a depression soup kitchen opened in Chicago by Al Capone. The Bank for International Settlements, or the “central bankers’ central bank,” is out with an important new study on deflation. Economists’ obsession with deflation and the new made-up problem of “low-flation” (inflation below the central bank’s target) has the world’s central bankers flooding the global financial system with liquidity in an effort to turn the tide. Sweden’s central bank was the latest to pump more liquidity into its economy by further reducing its policy rate into negative territory … [Read more...]
The Monday Melee: Maximum Capacity?
First Three Month Decline in Capacity Utilization Since Recession Today capacity utilization, a measure of economic activity and a closely watched indicator of economic well-being, recorded its first three month decline since the recession. VIDEO: David Stockman: The Economy Is Falling Apart What We're Reading: 4 reasons the Fed won’t raise interest rates this summer (Fortune) The Return of King Dollar (National Review) Bad beginnings. (The Economist) U.S. economy still not following script for breakout year (MarketWatch) … [Read more...]
Consumers Less Happy
The latest University of Michigan Consumer Sentiment Index was released today. For the last two months consumer sentiment has rapidly declined, following six consecutive months of strong increases coinciding with dropping oil prices. The Index fell sharply from 95.4 to 91.2 during the last month. Despite the pullback, the index's current level is still strong and likely means continued growth in consumer spending. Sentiment declined among middle and lower income survey respondents, while upper income respondents' sentiment picked up. The sentiment of the lower income brackets … [Read more...]
The Forgotten Depression
You can get a glimpse into a beautiful economy by looking back to the early 1920s. James Grant, founder of Grant’s Interest Rate Observer, has written a book called The Forgotten Depression. In it he describes how an economic crash in 1921 cured itself mainly because the government did nothing. Sound advice indeed. Listen to Grant’s talk to the Cato Institute here: … [Read more...]
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