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Lower crude prices will make it hard to raise inflation
Headline will look a lot different next year, but as always they only think about core, core had been picking up.
Speaking of Inflation old man, heading out to the new whole foods to pick up dinner, that's a legit inflation thesis
Speaking of Inflation old man, heading out to the new whole foods to pick up dinner, that's a legit inflation thesis
Don't forget the salad.
Speaking of Inflation old man, heading out to the new whole foods to pick up dinner, that's a legit inflation thesis
I feel like Whole Foods has had a lot of good deals lately. Just don't buy $30 a pound cheese.
I feel like Whole Foods has had a lot of good deals lately. Just don't buy $30 a pound cheese.
Spent over $40 bucks on Cheese items, didn't get it under the limit
Economy is very regional. It's overheated in bay area. It's dying in oil states such as North Dakota and Wyoming (it's worse than 2008). Bay area needed positive real interest rates in 2013.
Oil states are acting better
Inflation would kill our nation right now. Debt isn't fixed amount, it's designed to grow with inflation. We'll screw ourselves over with any inflation.
Keeping interest rates low until consumer inflation starts appearing is just another version of the right-wing concept of "trickle-down-economics". Basically, low interest rates is doing hardly anything for the working or jobless poor. The excuse for engaging in ZIRP is that supposedly, eventually (it has taken 8 years already) it will help with jobs and wages. But as soon as that happens, rates will be raised. No trickle down for you!
So basically, all ZIRP is doing is to generate asset inflation (assflation for short), which makes the rich richer and the poor poorer. Just like The Fed and Wall St likes it.
Inflation would kill our nation right now. Debt isn't fixed amount, it's designed to grow with inflation. We'll screw ourselves over with any inflation.
Inflation is supposed to be good for debt holders. Unless you take on additional debt, the principal stays the same... but the ability to pay it off goes up as incomes rise. How is debt designed to grow with inflation?
It is the standard MO of the Fed to inflate away debt. Of which they have created more in the past 8 years than the US since it's inception. IOW keeping the interest rates low is literally a matter of survival.
There surely is over-investment in the Stock Market and some Real Estate. That will surely be corrected through inflation as well and a recession on the prior.
This middle class has been largely shrinking because they are moving up into the next quin-tile. Home ownership is down because of demographics nothing more.
For sure wage earners have taken it in the shorts because of off shoring which keeps wages low. And also the incessant march of inflation. The Fed cares about self preservation through the charade they espouse and nothing else.
My theory is that inflation will come alive with an increase in demand which will be coincident with the Millennials making the biggest purchases of their life.
I don't know how many of you guys use twitter.
This was a heated debate last year and I'll admit there was only 10 of us in the #JustGoForIT crowd that believed that the Fed was warranted to raise rates.
Now, personally, I wanted to go after the
Fed will never raise rates ever, America is doom, the Dollar would sky rocket and the end of the world would come .... my gold piece will then be worth billions crowd.
Which lead to this video
https://www.facebook.com/Logan.Mohtashami/videos/vb.783163249/10153440747423250/?type=3&theater
However, due to demographics I didn't believe we had the consumption based capacity to run through the numbers to have a break away economy, hence why even myself had a 1.9%-2.3% GDP range because CAP X was going to get hit and we simply don't have enough demand on housing starts to push the cycle to super growth mode.
Hence why I am in we need higher inflation on both ECI and CPI core to make warranted and we can still see a hike this year.
One thing I have noticed from others is that the other #JustGoForIt crowd is really banking on Housing Starts to step in because they need the economic output factor from new homes to kick in because Auto's might be peaking in terms of rate of growth
While I agree that Starts, Permits and Sales have legs, I don't believe that we have the escape velocity factor in new homes for this to make it up this year
I mean new homes sales so far are showing negative growth in the first 2 months, (High) comps of 550k from 2015... which I find amusing that 550K is now a high comp.
However, still the sales levels are so low that we should get at least 4%-8% growth with some upside if median sale price cool , which they have allowing smaller homes to be part of the sales mix.
Like all this in cycle, slow and steady, wait for the demographic push come into play.
Don't follow the Dots
However, due to demographics I didn't believe we had the consumption based capacity to run through the numbers to have a break away economy
It's not all demographics. Cheap rates have allowed companies to merge that should not. Then they look for synergies and ways to cap costs in order to pay back already ultra low rate bonds. Companies that could be investing in new products are buying back shares instead. You say there is not demand. That's chicken and the egg problem. If all companies were not buying back shares they would be demand from higher wages they are paying employees.
One hope at this point is that minimum wage laws will spread and put upward pressure on wages for everybody.
It's not all demographics.
You're correct, it's not all demographics
Globalization and Technology have killed inflation in the sense of it spiraling out of control and rates can stay low for a long time as the History of the U.S. has been low rates
We can have pocket inflation where we see it in some sectors
The one thing to note... PCE inflation vs CPI have been deviating from each other for some time now and PCE inflation has been below 2% 50% of the time over the last 20 years and in time where the Fed Funds rate has been over 4%
(it has taken 8 years already)
What is that definition of insanity, something like doing the same thing over and over again and expecting different results? Maybe Janet Yellen needs counseling.
The last time people trusted the Fed to keep their real estate values stable, look what happened, Logan.
Poor underwriting leading to mass speculation and a cash out craze from 2004-2006.
In this cycle we have none of that.
Rates went up once in this cycle on the long end and what happened
18 months of negative purchase application numbers leading to an adjusted to population the lowest level on Mortgage Demand ever recorded U.S. history in 2014 and
Prices still went up because inventory is too low and their are no distress homes coming onto the market
Low rates haven't spurred any speculation
It was the over inverted thesis on non capacity owning debt that lead to the massive spike in housing inventory
Professor Sufi from Chicago Booth and I have talked about this over the years, there is a great You Tube Clip at the Conference in San Francisco in 2013 talking about this very subject
And Logan, home builders don't build too quickly when there are low interest rates and banks are not lending.
That's more an economic issue and working from an over investment thesis from the last cycle. Demographic economics were good from 1996-2007, that was a real warranted economic fact but still the cycle lead to speculation and all over heated speculation economic sectors end badly
New homes are just simply expensive too and factor why we have had the worst recovery ever on new home sales even with the lowest rates ever post WWII
Had the Fed kept the money supply stable,
If the lending standards of today were allowed to take hold back in 1996 ... the housing market would have looked a lot different from 1996-2007
That is where I see the Fed as being part of the conspiracy
:-) you're certainly an interesting man Gary, I remember our chats going back to the BusinessInsider days, now Joey is at Bloomberg
I am trying to get to the bottom of it,
tenacity is always an admirable trait
If you learn;
Teach.
When you yearn;
Reach.
If you're last;
Run.
Catch up fast
Son!
If you're stopped;
Go.
Make your fast
Slow.
Let your last breath
Be your last blow.
mispricing risk?
I believed that the Fed and a lot people didn't understand what the concept of non capacity debt is and how that multiplier impact can be damaging to the economy as it gives a false reality.
Hence why many of my articles have been consistent with the theme that lending standards are not tight today and nor we should ever ease them for the sake of financially engineering growth.
House Of Debt is a good book you might want to read.
However, in bigger context it takes more variables than just one to create a bubble, speculation is a dance that needs many partners
The Fed does create inflation, it is just not clandestine it is obvious.
Mr. Glibert
You can take this chart, it's very popular among a set of economic friends I have
BTW that peak at 1980 in your graph was caused by Chairman Martin forced to print money by LBJ who held his job over his head.
Since the US has seen globalization which has mitigated the effects of money printing.
Yes that is a very good graph, you should consider the effects it has had
"Many women, especially those in the booming textile industry, earned between $5 and $7 a week for working more than 50 hours"
http://www.historynet.com/the-first-minimum-wage.htm
Call it $7 for 50hrs, that's 14c/hr. in 1912
So by the resident kook's numbers, mill workers in Boston were making $2.80/hr. (2015 dollars) back then
But at least it was 'honest money', LOL.
The bottom line is that money -- spending power -- creates demand.
In economies with excess, idle capacity to create wealth to satisfy this demand, fiat money distributed to the masses just results in a rising standard of living and increased employment. In economies like Zimbabwe and Weimar Germany, it results in hyper-inflation (though the Wiemar inflation was such a brief event something else was going on).
As for the 1800s, so much opportunity was going idle due to an artificial scarcity of capital. People, towns, and governments had to beg the Captains of Industry to build rails, bribing them with immense gifts of the unclaimed commons to get them to invest in capital improvements that would make them billions anyway.
The 2000s is a different dynamic than then, or the 1900s for that matter. Fiat is also allowing us to float on a colossal negative investment position:
http://www.bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm
This is ~$25,000 per capita right now. I don't feel good about this, not at all.
I guess buybacks are up 11%?
I read where small business lending is trending lower. Because of Dudd Frany
Commercial and industrial loans at banks rise by $11.9 billion in a week to $2.043 trillion
chart even way into 2008,
That was the Housing Bubble, the mother of all over investment thesis on the most toxic debt build up and packaging economic cycle we have ever seen. :-)
It takes a village to raise a child, it takes a entire country to work together to mess things up that bad
it takes a entire country to work together to mess things up that bad
You underestimate the Fed.
How so?
Way to much velocity power....It's like when people think Presidents can really change economic cycles,
If the Fed moved against inflation up or down, that would be a valid thesis but that hasn't been the case.
The recessions pre 1900 were longer and harder on the American people only 2 Recession post 1900 were dramatic in terms of length ...
A lot my Gold Bug Anti Fed friends always say
The Fed allows speculation to happen
However, if underwriting standards today were placed back in 1996, a lot of the excess speculation would have been taken out of line
Way to much velocity power
? velocity is beyond the reach of the Fed as we see today.Logan Mohtashami says
If the Fed moved against inflation up or down, that would be a valid thesis but that hasn't been the case.
That is not the case with Volcker.
The recessions pre 1900 were longer and harder on the American people only 2 Recession post 1900 were dramatic in terms of length ...
But there were "stimulated" with inflated/printed out of thin air money.
However, if underwriting standards today were placed back in 1996, a lot of the excess speculation would have been taken out of line
So you are saying that banks knowingly wrote bad loans?
So you are saying that banks knowingly wrote bad loans?
The loan that were created I termed them back then as Band Aid Loans
These loans had no capacity to work long term, they were only needed to bridge until the next refinance happened.
Those lenders are all gone, none exist because they created Non Capacity Owning debt .... Which allowed home ownership to be a speculation and then from 2004-2006 the cash out craze happened which made things even worse
A lot debt on debt leverage
That is not the case with Volcker.
The economy that Paul V. had to deal with is much different now. That time frame was the birth of globalization and the start of the export/import side of the U.S. where we began to import deflationary factors, hence our trade surplus now.
Technology , Globalization, Demographics killed inflation ... while creating pocket inflation
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