Category : Federal Reserve

(NYT front page) Inflation Is Unrelenting, Bad News for the Fed and White House

Prices continued to climb at a brutally rapid pace in September, with a key inflation index increasing at the fastest rate in 40 years, bad news for the Federal Reserve as it struggles to wrestle the cost of living back under control.

Overall inflation climbed 8.2 percent over the year through September, according to the latest Consumer Price Index report on Thursday, a slight moderation from August but more than what economists had expected.

Even more worrisome, underlying inflation trends are headed in the wrong direction. After stripping out fuel and food — which are volatile and removed to get a better sense of the trajectory — prices climbed 6.6 percent over the year through September. That was the quickest rate since 1982.

Inflation has been rapid for a year and a half now, and it is proving stubborn even as the Fed mounts its most aggressive campaign in generations to slow the economy and bring price increases under control. Fast inflation has also triggered the highest Social Security cost-of-living adjustment in decades — an 8.7 percent increase in benefits to retired and disabled Americans, a move that was announced Thursday.

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Posted in * Economics, Politics, Economy, Federal Reserve, Politics in General, President Joe Biden

(FT) Fed-led dash for higher rates risks ‘world recession’, warns top EU diplomat

[Josep] Borrell, speaking at an annual conference of EU ambassadors, admitted that Brussels was “quite reluctant” to believe US warnings that Russia was going to invade Ukraine in February and had failed to analyse Russian president Vladimir Putin’s actions.

“We didn’t believe it will happen . . . And we haven’t foreseen neither the capacity of Putin to escalate,” he said.

Borrell added Brussels failed to understand what other countries wanted, and instead pushed its own ideas on them.

“We think that we know better what is in other people’s interests,” he said. “We have to listen more . . . to the rest of the world. We need to have more empathy.

“We try to export our model, but we don’t think how others will perceive this,” he added.

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Posted in * Economics, Politics, Economy, Federal Reserve, Foreign Relations, Globalization, Politics in General

(Economist) Financial markets are in trouble. Where will the cracks appear?

It is hard not to feel a sense of foreboding. As the Federal Reserve has tightened policy, asset prices have plunged. Stocks, as measured by the Wilshire 5000 all-cap index, have shed $12trn of market capitalisation since January. Another $7trn has been wiped off bonds, which have lost 14% of their value. Some $2trn of crypto market-cap has vanished over the past year. House prices adjust more slowly, but are falling. Mortgage rates have hit 7%, up from 3% last year. And this is all in America—one of the world’s strongest economies.

Rising rates will slow the American economy and should break the back of inflation. But what else will they break? Since the Federal Reserve raised rates again on September 22nd, global markets have been in turmoil. When the British government announced unfunded tax cuts a day later, fire-sales by pension funds caused the yield on government bonds (or “gilts”) to spiral out of control. Contagion then spread to the American Treasury market, which is as volatile and illiquid as it was at the start of covid-19. The cost to insure against the default of Credit Suisse, a global bank, has risen sharply. These ructions indicate the world is entering a new phase, in which financial markets no longer just reflect the pain of adjusting to the new economic context—pricing in higher rates and lower growth—but now also spread pain of their own.

The most catastrophic pain is felt when financial institutions fail. There are two ways they do so: illiquidity or insolvency. Tighter monetary policy is likely to prompt or reveal both.

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Posted in * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Euro, European Central Bank, Federal Reserve, Globalization, Labor/Labor Unions/Labor Market, Personal Finance, Stock Market

(Economist) Markets are reeling from higher rates. The world economy is next

The world’s financial markets are going through their most painful adjustment since the global financial crisis. Adapting to the prospect of higher American interest rates, the ten-year Treasury yield briefly hit 4% this week, its highest level since 2010. Global stock markets have sold off sharply, and bond portfolios have lost an astonishing 21% this year.

The dollar is crushing all comers. The greenback is up by 5.5% since mid-August on a trade-weighted basis, partly because the Fed is raising rates but also because investors are backing away from risk. Across Asia, governments are intervening to resist the depreciation of their currencies. In Europe Britain has poured the fuel of reckless fiscal policy on the fire, causing it to lose the confidence of investors. And as bond yields surge, the euro zone’s indebted economies are looking their most fragile since the sovereign-debt crisis a decade ago.

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Posted in * Economics, Politics, America/U.S.A., Credit Markets, Currency Markets, Economy, Euro, European Central Bank, Federal Reserve, Globalization, Stock Market

(Telegraph) Ambrose Evans-Pritchard–Are Overzealous central banks making another horrible mistake, so (we should) batten down the hatches?

The world can kiss goodbye to an economic soft landing. Western central banks are on a misguided mission to restore their damaged credibility, tightening monetary policy violently after the post-pandemic recovery has already wilted and output is nearing contractionary levels.

Britain’s fiscal blitz has the luck of timing. It is a counter-cyclical stimulus, cushioning some of the blow, even if it risks rattling bond vigilantes, and even if it is wasteful in subsidies for the affluent.

Critics say the energy bailout will cap inflation in the short run but stoke more inflation in the long run, to which one can only reply, like Keynes, that in the long run we are all dead. World events are going to wash over such quibbling with a torrential deflationary force.

The central banks are pushing through with triple-barrelled rate rises after the inflation fever has broken; after the commodity boom has deflated; and after key monetary indicators on both sides of the Atlantic have turned negative. They are prisoners of lagging indicators.

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Posted in * Economics, Politics, America/U.S.A., Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, England / UK, Euro, Europe, European Central Bank, Federal Reserve, Globalization, The Banking System/Sector

(NYT front page) The Fed Intensifies Its Battle Against Inflation

Federal Reserve officials, struggling to contain the most rapid inflation in 40 years, delivered a third big rate increase on Wednesday and projected a more aggressive path ahead for monetary policy, one that would lift interest rates higher and keep them elevated longer.

The Fed raised its policy interest rate by three-quarters of a percentage point, boosting it to a range of 3 to 3.25 percent. That’s a significant jump from as recently as March, when the federal funds rate was set at near-zero, and the increases since then have made for the Fed’s fastest policy adjustment since the 1980s.

Even more notably, policymakers predicted on Wednesday that they would raise borrowing costs to 4.4 percent by the end of the year and forecast markedly higher interest rates in the years to come than they had previously expected. Jerome H. Powell, the Fed chair, warned that those moves would be painful for the U.S. economy — but said curbing growth to contain price increases was essential.

“We have got to get inflation behind us,” Mr. Powell said during his post-meeting news conference. “I wish there were a painless way to do that; there isn’t.”

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Posted in * Economics, Politics, Economy, Federal Reserve

(NYT front page) Federal Reserve Makes Another Supersized Rate Increase to Tame Inflation

The Federal Reserve continued its campaign of rapid interest rate increases on Wednesday, pushing up borrowing costs at the fastest pace in decades in an effort to wrestle inflation under control.

Fed officials voted unanimously at their July meeting for the second supersized rate increase in a row — a three-quarter-point move — and signaled that another large adjustment could be coming at their next meeting in September, though that remains to be decided. The decision on Wednesday puts the Fed’s policy rate in a range of 2.25 to 2.5 percent.

The central bank’s brisk moves are intended to slow the economy by making it more expensive to borrow money to buy a house or expand a business, weighing on the housing market and economic activity more broadly. Jerome H. Powell, the Fed chair, said during a news conference after the meeting that such a cool-down was needed to allow supply to catch up with demand so that inflation could moderate.

ADVE

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Posted in * Economics, Politics, Economy, Federal Reserve

(Economist) Brad DeLong asks what America can learn from its past bouts of inflation

But there are two risks of a hard landing. One thing to fear is that the inflation episode today is like that of 1920. Back then the problem would have passed on its own, but the Fed tightened too much in response. There are no indications of overtightening yet, but then there wouldn’t be: the effects of the roughly two-percentage-point rise in both nominal and inflation-indexed ten-year Treasury rates since December 2021 will not begin to show in the real economic data until 2023.

The second risk is that this is indeed like the 1970s, and so it is imperative to scotch any expectations of an inflationary spiral before they are even formed. Turn on the news, and there is constant chatter that likens our situation to that of the 1970s, with suggestions to hedge against inflation.This may reflect the tendency of social and professional media towards clickbait, but it could nonetheless shift expectations. There is little indication so far of such a shift in the prices of long-term bonds. Possibly it is imprudent to place too much weight on this particular harbinger alone.

Most of the time I think it would be great fun to be a member of the fomc. Not today. The risks inherent within our current situation are immense. And misjudgments caused by a failure to listen to the right signals would be devastating.

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Posted in America/U.S.A., Economy, Federal Reserve, History

(Telegraph) Ambrose Evans-Pritchard–The US recession is here, and central banks are still fighting the last war

The US is either in recession already, or probably will be by early autumn. This has sweeping consequences for the world’s dollarised financial system, for commodity demand, and for global inflation.

The New York Federal Reserve’s internal model is flashing an 80pc risk that the US economy will enter a sustained contraction in the second half of this year, much sooner than presumed just weeks ago. The chances of a “soft landing” have dropped to 10pc. If so, you can stop worrying about an inflationary spiral.

The institution’s “dynamic stochastic general equilibrium” model (DSGE) points to an outright fall in GDP of 0.6pc this year and a further fall of 0.5pc next year. It likens the current picture to the 1990 recession under George Bush senior, triggered by the First Gulf War.

Monetarists think the DSGE model understates the danger since it entirely ignores the role of money in the economy. It treats the abrupt switch from extreme quantitative easing to extreme quantitative tightening – a $2.4 trillion reversal, annualised – as mostly background noise. This New Keynesian blind spot on how QE works (through the banking multiplier) has misled the Fed before, and may be misleading the Fed now.

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Posted in * Economics, Politics, America/U.S.A., Economy, Federal Reserve

(Bloomberg Top) US Faces a Fed-Triggered Recession That May Cost Biden a Second Term

Soaring prices are hurting Americans. The cure is going to hurt, too. It may take a recession to stamp out inflation — and it’s likely to happen on President Joe Biden’s watch.

A downturn by the start of 2024, barely even on the radar just a few months ago, is now close to a three-in-four probability, according to the latest estimates by Bloomberg Economics.

On Wednesday the Fed delivered its biggest interest-rate hike in almost three decades, as it takes the fight against inflation into overdrive. When central bankers try this hard to slow the economy down, they often end up tipping it into outright reverse.

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Posted in * Economics, Politics, America/U.S.A., Economy, Federal Reserve

(NYT Op-ed) [Former Fed Chair] Ben Bernanke–Inflation Isn’t Going to Bring Back the 1970s

None of this implies that the Fed’s job will be easy. The degree to which the central bank will have to tighten monetary policy to control our currently high inflation, and the associated risk of an economic slowdown or recession, depends on several factors: how quickly the supply-side problems (high oil prices, supply-chain snarls) subside, how aggregate spending reacts to the tighter financial conditions engineered by the Fed and whether the Fed retains its credibility as an inflation fighter even if inflation takes a while to subside.

Of these, history teaches us, the last may be the most important. Inflation will not become self-perpetuating, with price increases leading to wage increases leading to price increases, if people are confident that the Fed will take the necessary measures to bring inflation down over time.

The Fed’s greater policy independence, its willingness to take responsibility for inflation and its record of keeping inflation low for nearly four decades after the Great Inflation, make today’s Fed much more credible on inflation than its counterpart in the ’60s and ’70s. The Fed’s credibility will help ensure that the Great Inflation will not be repeated, and Mr. Powell and his colleagues will put a high priority on keeping that credibility intact.

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Posted in * Economics, Politics, America/U.S.A., Economy, Federal Reserve, History

(FT top) US set for recession next year, economists predict

The US economy will tip into a recession next year, according to nearly 70 per cent of leading academic economists polled by the Financial Times.

The latest survey, conducted in partnership with the Initiative on Global Markets at the University of Chicago’s Booth School of Business, suggests mounting headwinds for the world’s largest economy after one of the most rapid rebounds in history, as the Federal Reserve ramps up efforts to contain the highest inflation in about 40 years.

The US central bank has already embarked on what will be one of the fastest tightening cycles in decades. Since March it has raised its benchmark policy rate by 0.75 percentage points from near-zero levels.

The Federal Open Market Committee gathers once again on Tuesday for a two-day policy meeting, at which officials are expected to implement the first back-to-back half-point rate rise since 1994 and signal the continuation of that pace until at least September.

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Posted in America/U.S.A., Economy, Federal Reserve

(NYT) Ben Bernanke Sees ‘Stagflation’ Ahead

….he also suggests it is possible the nation could be in for a period of “stagflation,” a word Mr. Bernanke says was invented in the 1970s.

“Even under the benign scenario, we should have a slowing economy,” he said. “And inflation’s still too high but coming down. So there should be a period in the next year or two where growth is low, unemployment is at least up a little bit and inflation is still high,” he predicted. “So you could call that stagflation.”

He is particularly aware that runaway inflation can quickly become a political issue — possibly putting the Federal Reserve in the cross-hairs of the public — in a way that even unemployment doesn’t evoke. “The difference between inflation and unemployment is that inflation affects just everybody,” he said. “Unemployment affects some people a lot, but most people don’t respond too much to unemployment because they’re not personally unemployed. Inflation has a social-wide kind of impact.”

Mr. Bernanke appears to be somewhat concerned about the credibility of the Federal Reserve in the public consciousness, especially given the aggressive approach that he took in 2008 and that Mr. Powell continued during the pandemic. “I had this fantasy conversation in my head between Jay Powell and William McChesney Martin, where I think Martin probably would have had apoplexy or something because of the different things that intervening chairs have done,” he said, referring to Mr. Martin, the chair of the Federal Reserve from 1951 to 1970.

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Posted in * Economics, Politics, Economy, Federal Reserve

(NYT front page) The Federal Reserve Confronts Why It May Have Acted Too Slowly on Inflation

Some Federal Reserve officials have begun to acknowledge that they were too slow to respond to rapid inflation last year, a delay that is forcing them to constrain the economy more abruptly now — and one that could hold lessons for the policy path ahead.

Inflation began to accelerate last spring, but Fed policymakers and most private-sector forecasters initially thought price gains would quickly fade. It became clear in early fall that fast inflation was proving to be more lasting — but the Fed pivoted toward rapidly removing policy support only in late November and did not raise rates until March.

Several current and former Fed officials have suggested in recent days that, in hindsight, the central bank should have reacted more quickly and forcefully last fall, but that both profound uncertainty about the future and the Fed’s approach to setting policy slowed it down.

Officials had spent years dealing with tepid inflation, which made some hesitant to believe that rapidly rising prices would last. Even as they became more concerned, it took the Fed’s large group of policymakers time to come to an agreement on how to respond. Another complicating factor was that the Fed had made clear promises to markets about how it would remove support for the economy, which made adjusting quickly more difficult.

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Posted in * Economics, Politics, Economy, Federal Reserve

(NYT) U.S. National Debt Tops $30 Trillion as Borrowing Surged Amid Pandemic

America’s gross national debt topped $30 trillion for the first time on Tuesday, an ominous fiscal milestone that underscores the fragile nature of the country’s long-term economic health as it grapples with soaring prices and the prospect of higher interest rates.

The breach of that threshold, which was revealed in new Treasury Department figures, arrived years earlier than previously projected as a result of trillions in federal spending that the United States has deployed to combat the pandemic. That $5 trillion, which funded expanded jobless benefits, financial support for small businesses and stimulus payments, was financed with borrowed money.

The borrowing binge, which many economists viewed as necessary to help the United States recover from the pandemic, has left the nation with a debt burden so large that the government would need to spend an amount larger than America’s entire annual economy in order to pay it off.

Some economists contend that the nation’s large debt load is not unhealthy given that the economy is growing, interest rates are low and investors are still willing to buy U.S. Treasury securities, which gives them safe assets to help manage their financial risk. Those securities allow the government to borrow money relatively cheaply and use it to invest in the economy.

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Posted in Budget, Ethics / Moral Theology, Federal Reserve, Politics in General, The National Deficit, The U.S. Government, The United States Currency (Dollar etc)

(FT) Gillian Tett om why we need to watch trucking costs fully to understand the US inflation problem

When America’s Bureau of Labor Statistics released data this month showing that consumer price inflation had surged to 7 per cent, many investors were shocked. No wonder: this marks the fastest jump since 1982.

But here is another number that should spark concern: 17 per cent. That was the annual inflation rate for overall trucking costs last month, according to a (deeply buried) section of the bureau’s data. For the long-haul trucking sector, the number was even scarier: 25 per cent.

That is bad news for business — and consumers — given that almost three-quarters of freight in America is moved by trucks. Or to put it another way, if you want to understand what lies behind that scary 7 per cent inflation number, don’t just track raw material, energy or cross-border shipping costs; watch those oft-ignored truckers too.

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Posted in America/U.S.A., Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, Travel

(WSJ) Central Banks Worry Omicron Could Sustain Inflation

The Omicron variant is circling the globe, closing borders and sparking new restrictions on economic activity. Yet central banks, instead of loosening monetary policy to prop up their economies as they did at the start of the pandemic, are moving to unwind stimulus and raise interest rates.

The moves reflect a new thinking among policy makers about the pandemic’s economic effects: Central-bank officials worry that rather than simply threatening to curtail economic growth, a surge in Covid-19 cases could also prolong high inflation.

In the past week, the Federal Reserve, the Bank of England and the European Central Bank all moved to tighten monetary policy in response to inflation concerns.

When the pandemic first became widespread, in early 2020, governments locked down their economies. Consumer spending fell sharply, employers shed workers and prices fell. Within a few months, the rise of e-commerce and remote working allowed the economy in many developed countries to recover rapidly. With mass vaccinations, that recovery has continued this year.

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Posted in * Economics, Politics, Economy, Federal Reserve, Health & Medicine

(WSJ) The Economic Rebound From Covid-19 Was Easy. Now Comes the Hard Part.

The global economy’s comeback from last year’s deep contraction is approaching a delicate juncture, as policy makers and executives grapple with the bumpy transition from the post-pandemic reopening to a more normalized pace of growth.

Central banks in the U.S. and elsewhere are trying to chart a path that will curb inflation but not choke off growth as they navigate the process of weaning economies off the extraordinary measures—including rock-bottom interest rates and enormous bond-buying programs—deployed to support their economies.

The surge in U.S. consumer demand over the past year—turbocharged by trillions in stimulus—has ricocheted outward and caused disruptions to global supply chains that are now worsening and may stretch through 2022, say executives. The resulting higher prices and the struggle to secure raw materials and labor are piling the pressure on some companies and weighing on major economies such as Germany.

Meanwhile, China is in the midst of an ambitious effort to reform its economy, including reining in household and corporate debt, particularly in the country’s housing market, clamping down on the technology sector and pursuing ambitious climate goals—factors that could slow growth there and globally.

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Posted in * Economics, Politics, Economy, Federal Reserve

(NYT front page) Inflation Warning Signs Flash Red, Posing Challenge for Washington

The Federal Reserve’s preferred gauge of inflation climbed in August at the quickest pace in 30 years, data released on Friday showed, keeping policymakers on edge as evidence mounts that rapidly rising prices are poised to last longer than practically any of them had expected earlier this year.

The numbers come at a pivotal moment, as inflationary warning signals abound. Used car prices show signs of picking up again, costs for raw goods like cotton and crude oil are increasing and companies continue to experience pain from persistent supply chain disruptions.

That is stoking fears in Washington and on Wall Street that although rapid price gains will eventually fade, the adjustment could drag on for months. A longer burst of inflation raises the chances that consumers will change their expectations and behavior, paving the way for more permanent price increases.

It is a high-stakes juncture for policymakers. The Fed is preparing to withdraw some of its support for the economy soon, but it would prefer to do so only gradually, given the millions of Americans who remain out of work. The White House is trying to pass two big policy packages at the core of President Biden’s economic agenda, and Republicans have begun wielding every new inflation data point as an argument against more federal spending.

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Posted in Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, House of Representatives, Politics in General, President Joe Biden, Senate, The U.S. Government

(WSJ) Fed’s Powell Says U.S. Faces ‘Tragic’ Risks From Doing Too Little to Support Economy

Federal Reserve Chairman Jerome Powell warned of potentially tragic economic consequences if Congress and the White House don’t provide additional support to households and businesses disrupted by the coronavirus pandemic.

“The expansion is still far from complete,” Mr. Powell said in his strongest remarks to date on the subject, delivered to a virtual conference of private-sector economists Tuesday. “At this early stage, I would argue that the risks of policy intervention are still asymmetric. Too little support would lead to a weak recovery, creating unnecessary hardship.

By contrast, the risks of providing too generous relief are smaller, he said. “Even if policy actions ultimately prove to be greater than needed, they will not go to waste,” he said.

A few hours after Mr. Powell spoke, President Trump said he was suspending negotiations with congressional Democrats over steps to extend unemployment benefits that lapsed in July and to provide additional aid to hard-hit businesses, cities and states.

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Posted in Anthropology, Economy, Ethics / Moral Theology, Federal Reserve, Health & Medicine, Politics in General

Federal Reserve Chairman Jerome Powell Interviewed Last night on 60 Minutes

PELLEY: And when you say things, people listen. And Wall Street didn’t want to hear that this was going to take longer than their hopes indicated?

POWELL: I was really calling out a risk that I think is an important one for people to be cognizant of, and that is the risk of longer-run damage to the economy. And really, the good news is that we have the tools to limit that longer-run damage by continuing to provide support to households and businesses as we get through this. And that was really my message.

PELLEY: It was meant to be a signal to Capitol Hill to tell lawmakers the economy needs a great deal more support?

POWELL: That was a part of my remarks this morning. I also wanted to just talk more at length about the longer-run dangers and commit the Fed to really stay in this fight as long as we need to as well….

PELLEY: Has the Fed done all it can do?

POWELL: Well, there’s a lot more we can do. We’ve done what we can as we go. But I will say that we’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have. So there’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.

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Posted in * Economics, Politics, America/U.S.A., Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, House of Representatives, Labor/Labor Unions/Labor Market, Office of the President, Politics in General, Poverty, President Donald Trump, Senate, The U.S. Government

(NYT) A Rebounding Economy Remains Fragile for Many

The eye-popping improvement in economic fortunes last year raises the question: If incomes are up and poverty is down, why is Donald J. Trump’s message of economic decay resonating so broadly?

The answer is in plain sight. While the economy finally is moving in the right direction, the real incomes of most American households still are smaller than in the late 1990s. And large swaths of the country ”” rural America, industrial centers in the Rust Belt and Appalachia ”” are lagging behind.

“We ain’t feeling too much of all that economic growth that I heard was going on, patting themselves on the back,” said Ralph Kingan, the mayor of Wright, Wyo. “It ain’t out in the West.”

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Posted in * Economics, Politics, * International News & Commentary, America/U.S.A., Anthropology, Economy, Ethics / Moral Theology, Federal Reserve, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

(Bloomberg) Most Federal Reserve Officials Saw June Hike Likely If Economy Warrants

Federal Reserve policy makers indicated that a June interest-rate increase was likely if the economy continued to improve, boosting market expectations they will act next month.

“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the committee’s 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June,” according to minutes of the Federal Open Market Committee’s April 26-27 meeting released Wednesday in Washington.

Officials were divided over whether those conditions were likely to be met in time. “Participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting,” the minutes stated.

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Posted in * Economics, Politics, Credit Markets, Currency Markets, Economy, Federal Reserve, Personal Finance, Stock Market, The U.S. Government

(Telegraph) Anthony Evans-Pritchard This is a global stock market rout worth celebrating

We toiling workers can allow ourselves a wry smile. For most of the last eight years the owners of wealth and inflated assets have had things their own way, while the real economy has been left behind.

The tables are finally turning. The world may look absolutely ghastly if your metric is the stock market, but it is much the same or slightly better if you are at the coal face.

The MSCI index of world equities has fallen almost 20pc since its all-time high in May of 2015, implying a $14 trillion loss of paper wealth. Yet the world economy has carried on at more or less the same anemic pace, and the OECD’s global leading indicators show no sign that it is suddenly rolling over now.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Asia, China, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Energy, Natural Resources, Ethics / Moral Theology, Euro, Europe, European Central Bank, Federal Reserve, Foreign Relations, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, Stock Market, The U.S. Government, Theology

(Telegraph) Ambrose Evans-Pritchard: the Fed will have to reverse gears fast if anything goes wrong

[The data in the economic background paints]…a very murky picture. This is the first time the Fed has ever embarked on tightening cycle when the ISM gauge of manufacturing is below the boom-bust line of 50. Nominal GDP growth in the US has been trending down from 5pc in mid-2014 to barely 3pc.

Danny Blanchflower, a Dartmouth professor and a former UK rate-setter, said the US labour market is not as tight as it looks. Inflation is nowhere near its 2pc target and the world economy is still gasping for air. He sees a 50/50 chance that the Fed will have to pirouette and go back to the drawing board.

“All it will take is one shock,” said Lars Christensen, from Markets and Money Advisory. “It is really weird that they are raising rates at all. Capacity utilization in industry has been falling for five months.”

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Posted in * Culture-Watch, * Economics, Politics, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, Foreign Relations, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, The Banking System/Sector, The U.S. Government, Theology

(FT) US industrial heartland frets as Federal Reserve rate rise looms

If the Federal Reserve proceeds as expected and raises US interest rates for the first time in almost a decade on Wednesday it will be an affirmation of what Janet Yellen and her fellow policymakers see as the strength of the US recovery.

It will also be at odds with what many in the US’s industrial economy are seeing.

From manufacturing behemoths like Caterpillar and Deere & Co to companies supplying the industrial sector the common theme in recent months has been that, thanks to a strong dollar and a collapse in commodity prices, tough times are back. Some are going so far as to declare the arrival of an industrial recession.

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Posted in * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

(FT) Martin Wolf–America’s labour market is not working

Back in 1991, the proportion of US prime-age men who were neither in work nor looking for it was just 7 per cent. Thus the proportion of vanished would-be workers has risen by 5 percentage points since then. In the UK, the proportion of prime-aged men out of the labour force has risen only from 6 per cent to 8 per cent over this period. In France, it has gone from 5 to 7 per cent. So supposedly sclerotic French labour markets have done a better job of keeping prime-aged males in the labour force than flexible US ones. Moreover, male participation rates have been declining in the US since shortly after the second world war.

What has been happening to participation of prime-aged women is no less striking. In the US, female labour force participation rose strongly until 2000, when it was among the leaders. The US is the only G7 country to experience a sustained decline in the participation rate for prime-aged females since then. Japan, once far behind, has caught up….

The relentless decline in the proportion of prime-aged US adults in the labour market indicates a significant dysfunction. It deserves attention and analysis. But it also merits action.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, America/U.S.A., Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, History, Labor/Labor Unions/Labor Market, Politics in General, The U.S. Government, Theology

(WSJ) Charles Moore–Western countries must honestly face The Middle-Class Squeeze

Since the financial crisis of 2007-08, which Western leader could boast of spreading ownership in any important way? In the U.S. and Britain, the percentage of citizens owning stocks or houses is well down from the late 1980s. In Britain, the average age for buying a first home is now 31 (and many more people than before depend on “the bank of Mom and Dad” to help them do so). In the mid-’80s, it was 27. My own children, who started work in London in the last two years, earn a little less, in real terms, than I did when I began in 1979, yet house prices are 15 times higher. We have become a society of “have lesses,” if not yet of “have nots.”

In a few lines of work, earnings have shot forward. In 1982, only seven U.K. financial executives were receiving six-figure salaries. Today, tens of thousands are (an enormous increase, even allowing for inflation). The situation is very different for the middle-ranking civil servant, attorney, doctor, teacher or small-business owner. Many middle-class families now depend absolutely on the income of both parents in a way that was unusual even as late as the 1980s.

In Britain and the U.S., we are learning all over again that it is not the natural condition of the human race for children to be better off than their parents. Such a regression, in societies that assume constant progress, is striking. Imagine the panic if the same thing happened to life expectancy.

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Posted in * Culture-Watch, * Economics, Politics, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Federal Reserve, Foreign Relations, Globalization, History, House of Representatives, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Office of the President, Pensions, Personal Finance, Politics in General, Senate, Taxes, The U.S. Government, Theology

(WSJ) Mixed Jobs Report Sets Fed Up for Close Call on Rates

U.S. employment growth slowed in August but the jobless rate fell to the lowest level since 2008, a mixed labor-market reading that leaves the Federal Reserve with a challenging decision on whether to raise short-term rates at its September meeting.

Nonfarm payrolls rose a seasonally adjusted 173,000 in August, the Labor Department said Friday. Revisions showed employers added 44,000 new jobs in June and July than previously estimated.

However, the unemployment rate, which comes from a separate survey of U.S. households, fell to 5.1%, from 5.3% the previous month. The unemployment rate is now lower than at any point since 2008 and right in the middle of the Fed’s long-run projections.

The decline in the unemployment rate strengthens the case for an interest rate increase at the Fed’s Sept. 16-17 meeting.

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Posted in * Economics, Politics, Economy, Federal Reserve, Labor/Labor Unions/Labor Market, The U.S. Government

(Wash. Post) Robert Samuelson–are we currently sowing the seeds of the next financial crisis?

The BIS critique goes like this. Low interest rates have sustained the recovery, but the support is fragile. The economy relies too much on debt, which cannot build forever, and artificially high asset prices (stocks, homes, bonds) may someday tumble from unrealistic levels. A new crisis could be severe because governments have already deployed their standard anti-recession tools: cheap credit and big deficits.

The BIS’s most intriguing point is that a new recession or financial crisis might originate with emerging-market countries: China, Brazil, India, Turkey and the like. Although there has been debt repayment in the United States, the opposite has happened in some emerging-market countries, the BIS says. Private firms have assumed dollar loans worth $3 trillion, even though their “debt servicing capacity .”‰.”‰. has deteriorated.” Will defaults follow?

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Posted in * Culture-Watch, * Economics, Politics, Anthropology, Economy, Ethics / Moral Theology, European Central Bank, Federal Reserve, History, Psychology, The U.S. Government, Theology