Fed Chair Warns President Biden “We will not be a climate policymaker”

Link: https://mishtalk.com/economics/fed-chair-warns-president-biden-we-will-not-be-a-climate-policymaker

Excerpt:

  • Central Bank Independence: “Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy. The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors.”
  • New Goals: “Taking on new goals, however worthy, without a clear statutory mandate would undermine the case for our independence.”
  • Stick to Mandates: “It is essential that we stick to our statutory goals and authorities, and that we resist the temptation to broaden our scope to address other important social issues of the day.”
  • Climate Change: “Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals. We are not, and will not be, a ‘climate policymaker.” 

Author(s): Mike Shedlock

Publication Date: 10 Jan 2023

Publication Site: Mish Talk

The 2-10 Treasury Yield Spread Note Has Been Inverted Since July 6, 2022

Link: https://mishtalk.com/economics/the-2-10-treasury-yield-spread-note-has-been-inverted-since-july-6-2022

Graphic:

Excerpt:

The 2-year to 10-year inversion is one of the most widely followed recession indicators. It has been inverted continually since July 6, 2022.

The 3-month to 10-year inversion is even more extreme. It has been continually inverted since October 18, 2022.

Author(s): Mike Shedlock

Publication Date: 9 Jan 2023

Publication Site:

Massive Collapse in Used Car Prices and Bankrupt Dealers Is Coming Right Up

Link: https://mishtalk.com/economics/massive-collapse-in-used-car-prices-and-bankrupt-dealers-is-coming-right-up

Graphic:

Excerpt:

https://threadreaderapp.com/thread/1604114489133223937.html


CarDealershipGuy

Carvana may have just quietly started liquidating:

The company is now advertising its *retail* inventory to *wholesale* dealers.

Look at the $5,000 price difference. Wild times.

These are all retail-ready cars being advertised to other dealers – likely at a big loss.

(h/t RayMF for submission)

Alright everyone is asking how to take advantage – here you go:

Dealers: If you’re willing to buy one of these cars for consumers at a flat $600 mark-up, please comment below.

Consumers: If you want one of these cars and willing to pay a flat $600 mark-up, DM the dealer.

Author(s): Mike Shedlock, CarDealershipGuy

Publication Date: 17 Dec 2022

Publication Site: Mish Talk, Twitter

NAHB Housing Sentiment and Present Conditions Crash to Covid-19 Lows

Link: https://mishtalk.com/economics/nahb-housing-sentiment-and-present-conditions-crash-to-covid-19-lows

Graphic:

Excerpt:

Please consider the NAHB/Wells Fargo Housing Market Index (HMI) for December 2022.

The NAHB/Wells Fargo Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

Bloomberg Econoday Consensus Outlook

Spiraling downward, the housing market index has missed Econoday’s consensus every month this year. November’s 33 was 3 points short of the consensus. December’s consensus is 34.

December’s 31 was also 3 points lower than consensus and 1 point lower than the entire consensus range of 32-35.

Well done! Perfection for 12 months is very difficult. 

Author(s): Mike Shedlock

Publication Date: 19 Dec 2022

Publication Site: Mish Talk

Inflation Around the World: How Does the US Compare to Canada and the EU?

Link: https://mishtalk.com/economics/inflation-around-the-world-how-does-the-us-compare-to-canada-and-the-eu

Graphic:

Excerpt:

  • Inflation in the US was the first to peak.
  • US inflation peaked in June at 9.06 percent and is currently (through September) at  8.20 percent.
  • Inflation in France peaked at the lowest rate, 6.08 percent.
  • France also has the lowest current rate of 5.55 percent.  
  • Inflation in Germany is 9.99 percent and still rising
  • Inflation in Italy is 8.87 percent and still rising
  • Inflation in Spain was the highest peak so far at 10.77 percent
  • Inflation in the UK is 8.80 percent matching the July high.
  • Inflation in Canada peaked at 8.13 percent and is now 6.86 percent

Author(s): Mike Shedlock

Publication Date: 3 Dec 2022

Publication Site: Mish Talk

The 2-10 Yield Curve Inversion Recession Signal is the Strongest in Over 40 Years

Link: https://mishtalk.com/economics/the-2-10-yield-curve-inversion-recession-signal-is-the-strongest-in-over-40-years

Graphic:

Excerpt:

The 10-year to 2-year inversion is 71 basis points, the steepest since October 1981 (see chart)

Never before have we seen such strong inversions except right before or in recessions.

It will not be different this time. A recession is on the way, assuming it’s not already started.

Author(s): Mike Shedlock

Publication Date: 22 Nov 2022

Publication Site: Mish Talk

The 3-Month T-Bill Yield Inverts With the 30-Year Long Bond

Link: https://mishtalk.com/economics/the-3-month-t-bill-yield-inverts-with-the-30-year-long-bond

Graphic:

Excerpt:

The 3-Month T-Bill yield hit 4.22% early this morning. At that time the 3-Month to 30-Year inversion was about 9 basis points. 

The chart above still shows the inversion, just a bit less. 

So much for the idea the Fed would steepen the curve. 

Author(s): Mike Shedlock

Publication Date: 1 Nov 2022

Publication Site: Mish Talk

Dot Plot Show Fed Anticipates More Hikes in 2023 to 4.50 Percent

Link: https://mishtalk.com/economics/dot-plot-show-fed-anticipates-more-hikes-in-2023-to-4-50-percent

Graphic:

Excerpt:

Hikes Come Hell or High Water? 

  • The Fed participants have a median expectation of 4.25 to 4.50 percent for the end of 2022
  • That’s another 1.25 percentage points more this year.
  • The Fed then anticipates one more hike in 2023 to 4.50 to 4.75 percent.

I have to admit that a year ago I did not foresee this. But here we are. 

The key question is not where we’ve been but where we are headed. I Highly doubt the Fed hikes another 1.25 percentage points this year or gets anywhere close to 4.50 to 4.75 percent in 2023.

Author(s): Mike Shedlock

Publication Date: 21 Sept 2022

Publication Site: Mish Talk

ECB’s Blunt Press Statement Today Screams One Big Idea, Stagflation Has Arrived

Link: https://mishtalk.com/economics/ecbs-blunt-press-statement-today-screams-one-big-idea-stagflation-has-arrived

Excerpt:

The Governing Council today decided to raise the three key ECB interest rates by 75 basis points. This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to our two per cent medium-term target. Based on our current assessment, over the next several meetings we expect to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.

Inflation remains far too high and is likely to stay above our target for an extended period. According to Eurostat’s flash estimate, inflation reached 9.1 per cent in August. Soaring energy and food prices, demand pressures in some sectors owing to the reopening of the economy, and supply bottlenecks are still driving up inflation. 

Price pressures have continued to strengthen and broaden across the economy and inflation may rise further in the near term.

Very high energy prices are reducing the purchasing power of people’s incomes and, although supply bottlenecks are easing, they are still constraining economic activity. In addition, the adverse geopolitical situation, especially Russia’s unjustified aggression towards Ukraine, is weighing on the confidence of businesses and consumers.

Author(s): Mike Shedlock

Publication Date: 8 Sep 2022

Publication Site: Mish Talk

Fed Rate Hike Odds Jump to Full Point After the Hot CPI Report

Link: https://mishtalk.com/economics/fed-rate-hike-odds-jump-to-full-point-after-the-hot-cpi-report

Graphic:

Excerpt:

Yesterday, the market penciled in a three-quarter point hike. Today, the market expectation is for a full point hike.

The WSJ notes that would be the largest hike since the Fed started directly using overnight interest rates to conduct monetary policy in the early 1990s.

Author(s): Mike Shedlock

Publication Date: 13 July 2022

Publication Site: Mish Talk

The Asininity of Inflation Expectations, Once Again By Powell and the Fed

Link: https://mishtalk.com/economics/the-asininity-of-inflation-expectations-once-again-by-powell-and-the-fed

Graphic:

Excerpt:

Common sense and practical examples suggest that inflation expectations theory is ass backward.

So much of the CPI is nondiscretionary that it’s difficult to impossible for CPI expectations to matter. 

Yet, economists focus on expectations that don’t matter and ignore the expectations that do matter, namely asset prices!

I have written about this several times previously, two of them before I even found the Fed study supporting my view. 

…..

A BIS study concluded “Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive.

Indeed, that must be the case as more goods for less money by default improves standards of living.

The Fed was hell bent on reducing standards of living via inflation. Now they struggle to undo the inflation and asset bubble consequences they created. 

The Fed is the problem, not the solution.

Author(s): Mike Shedlock

Publication Date: 25 Jun 2022

Publication Site: Mish Talk

Japan Has Economic Choices, Two of Them are Poison

Link: https://mishtalk.com/economics/japan-has-economic-choices-two-of-them-are-poison

Graphic:

Excerpt:

1. Japan can defend its interest rate line by printing more money but at expense of the yen 

2. Japan can defend the yen by hiking rates or by selling its reserves until reserves run out

Japan has a nasty choice 

I received this email reply to the above Tweet from Michael Pettis.

Looks right. I’d add that by weakening the yen, Japan seems always to support their exporters at the expense of their consumers, which may be why domestic demand is always so weak and growth so sluggish.

The smart thing for Japan would be to hike rates and let the Yen strengthen. 

Instead, if they stay on the same path, the yen might blow up.

All of Japan’s efforts to achieve growth by inflation and exports have backfired. One might think that after 40 years they would try something else.

The single worst choice for Japan would be to blow its currency reserves in an attempt to defend both the Yen and its interest rate peg.

Author(s): Mike Shedlock

Publication Date: 22 Jun 2022

Publication Site: Mish Talk