INFLATION--FED's cutting rates again...

[Monahorns]

Headline inflation by this measure (preferred by Fed over the CPI) is now down to 3.0%. Moving forward inflation will be under 3% with a shallow recession happening now or soon. Unfortunately higher prices will be with us forever.

Fed's Favorite Inflation Indicator Slides To 30 Month Lows, Savings Rate Ticks Higher | ZeroHedge

Think of this. If the Fed was really going to execute their policy of keeping an AVERAGE of 2% inflation then they will have to bring inflation into the negative for YEARS to get us back to that metric. How quickly they ignore their own "rules".

 

[mchammer]

Think of this. If the Fed was really going to execute their policy of keeping an AVERAGE of 2% inflation then they will have to bring inflation into the negative for YEARS to get us back to that metric. How quickly they ignore their own "rules".

I don’t think that is their mandate to have an average 2% inflation rate after the fact. Also Fed doesn’t control fiscal policy so what you wish to happen isn’t even possible.

 

[Monahorns]

I don’t think that is their mandate to have an average 2% inflation rate after the fact. Also Fed doesn’t control fiscal policy so what you wish to happen isn’t even possible.

They state what their targets are. Previously they stated that they target a 2% inflation. They changed that a year or so ago to an average of 2% inflation over some time range. I don't remember what, maybe a 2 or 5 year moving average. Regardless of what the Fed CAN do. They make claims that they can. I agree with you. But Fed reps claim to turn knobs in order to control inflation, employment, etc.

The purpose of the switch from 2% target to 2% average was to allow inflation to go above 2% for a while. But now with such large inflation, the new policy would constrain them in the opposite direction. My question was will they constrain themselves or ignore it since that don't really want to create negative inflation (even though they should).

 

[Chop]

Since 1977, the Federal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates" — what is now commonly referred to as the Fed's "dual mandate." [I count 3 goals, so it should be the Fed's 'triple mandate.']

The Federal Reserve's

 

[Monahorns]

Since 1977, the Federal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates" — what is now commonly referred to as the Fed's "dual mandate." [I count 3 goals, so it should be the Fed's 'triple mandate.']

The Federal Reserve's

I think the Fed claims that by moderating interest rates they can maximize employment and minimize inflation. They changed their policy defining what "stable prices" prices means from a target to an average.

 

[mchammer]

Since 1977, the Federal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates" — what is now commonly referred to as the Fed's "dual mandate." [I count 3 goals, so it should be the Fed's 'triple mandate.']

The Federal Reserve's

The problem to solve (I.e., manage the economy) with those 3 mandates has zero degrees of freedom (you may recall this concept from your engineering classes). In other words, it’s economically impossible to mandate or move independently all 3 - you can manipulate any 2, but the 3rd one will be result of the other 2. Thus, it’s a dual mandate in practice.

 

[Monahorns]

The problem to solve (I.e., manage the economy) with those 3 mandates has zero degrees of freedom (you may recall this concept from your engineering classes). In other words, it’s economically impossible to mandate or move independently all 3 - you can manipulate any 2, but the 3rd one will be result of the other 2. Thus, it’s a dual mandate in practice.

The reality is that the Fed can't do any of it. What they can do is facilitate government spending and power growth. They are the hand maiden of state power, no more no less. This is the traditional American viewpoint. Our generation doesn't believe that anymore because we have been propagandized since 1913.

The only stable money is commodity money, or at least money at a set supply, or a very slowly growing supply, which can't be manipulated. With stable money and entrepreneurs the economy will grow as much as humanly possible. Without minimum wage laws the market process eliminates unemployment.

 

[Chop]

Any one of the 3 factors could influence either, or both, of the others.

It's a balancing act.

 

[Chop]

Any one of the 3 factors could influence either, or both, of the others.

It's a balancing act.

And typically, the President and Congress use their (a)moral suasion and pulpits to push the Fed towards easing off and keeping interest rates low(er)--favoring full employment over the other goals of the Fed. That's how it's usually been in the past.

This is one of the main reasons we made the Fed independent of politicians (once they're nominated and confirmed). If they were directly under the power of Congress or the President, we could easily end up like Latin America with money that's way too easy, and inflation much higher.

 

[mchammer]

Any one of the 3 factors could influence either, or both, of the others.

It's a balancing act.

There are only 2 independent variables, not 3.

 

[Chop]

The 1977 Federal Reserve Act set forth a dual mandate of: (1) maximum employment, and (2) stable prices (low-to-moderate inflation).

Speech by Governor Cook on the evolution of the Federal Reserve's employment mandate

 

[Chop]

On a related note, the SCOTUS will hear a case challenging the Constitutionality of the Consumer Financial Protection Bureau's funding under the Dodd-Frank Act. Depending on how the Court rules, and how far they go with it, this could significantly undermine the administrative state (which, in the view of many, exists parallel to and outside of the 3 actual Constitutional branches of government). This is a major Separation-of-Powers case, and the fact the SCOTUS decided to take it up could mean a major shake up in the administrative state.

"The court will now determine the constitutionality of the CFPB’s funding mechanism. Under the Dodd-Frank Act, the CFPB receives its funding through the Federal Reserve System, placing its funding requests outside of the purview of the House and Senate Appropriations committees."

“As Republicans have said for years, the CFPB’s unconstitutional funding structure improperly insulates it from Americans’ representatives in Congress,” said Chairman McHenry. “This problem is compounded when the Bureau is led by a rogue regulator, as it is now. Director Chopra is returning the CFPB to its Obama-era regulation by enforcement approach that harms both consumers and our economy."

"...the Fifth Circuit ruled unanimously in November 2022 that the CFPB’s funding structure violates the Appropriations Clause of the Constitution."

Supreme Court Agrees to Hear CFPB Constitutionality Case

 

[Chop]

Americanprogress.org really has their panties in a twist over this...

"Congress intended for the CFPB to be independent..."

Ummmmm..., yeah, that's the problem...

"The CFPB’s funding is structured similarly to a number of financial regulators such as the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Farm Credit Administration, the Office of Financial Research, and the Federal Housing Finance Agency, whose budgets are mostly derived from fees collected from supervised entities and other investments. The 5th Circuit’s ruling, if upheld, could leave these agencies vulnerable to funding and other legal challenges."


CFPB v. CFSA: How the Supreme Court Could Harm Consumers and Financial Markets

 

[Chop]

Price hikes and spending cooled last month, Fed’s preferred inflation gauge shows | CNN Business

"Some of the latest data on household balance sheets and spending as well as survey data seem to indicate further slowing is indeed on the horizon. Credit card balances are growing, delinquencies are ticking up, student loan payments are back in the mix, wage growth is slowing and painfully high interest rates are making debt dangerously expensive."

 

[Chop]

'People have just rendered a judgment': Inflation erodes Biden's wins

“We do know he is NOT getting credit for good jobs numbers and decent growth BECAUSE of inflation. If unemployment goes up, will Biden get enough credit for deflation that jobs and growth don’t matter to voters? We just don’t know,” Murray said.

C'mon guys; inflation is just one piece of the puzzle... Overall, I'm handling the economy well.

 

[mchammer]

Price hikes and spending cooled last month, Fed’s preferred inflation gauge shows | CNN Business

"Some of the latest data on household balance sheets and spending as well as survey data seem to indicate further slowing is indeed on the horizon. Credit card balances are growing, delinquencies are ticking up, student loan payments are back in the mix, wage growth is slowing and painfully high interest rates are making debt dangerously expensive."

Harder than expected landing coming.

 

[Mr. Deez]

Since 1977, the Federal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates" — what is now commonly referred to as the Fed's "dual mandate." [I count 3 goals, so it should be the Fed's 'triple mandate.']

The Federal Reserve's

So we're trusting monetary policy to people who can't count to 3?

 

[mchammer]

"Inflation Is Your Fault" And Other Self-Loathing Liberal Lies | ZeroHedge

 

[Chop]

"Inflation Is Your Fault" And Other Self-Loathing Liberal Lies | ZeroHedge

From the article: "Inflation is a monetary phenomenon that comes from the expansion of the money supply. We expanded the money supply by double digits over the years during Covid; hence, we find ourselves on the brink of a newfound inflation problem. See if you can spot where the M2 money supply took off:"

And: "If the rubes over at The Atlantic can’t look at this and figure out that inflation is tied directly to the money supply, I don’t know what is going to do it for them."

 

[Chop]

The head of Mexico's Central Bank, Victoria Rodriguez Ceja

She's feeling the pressure to cut rates now.


"The Bank of Mexico left its reference interest rate at 11.25% on Nov. 9, but softened the tone of its statement"

Mexico Signals Forthcoming Cut After Keeping Rate Unchanged

• 
  
  
  • Banxico changes guidance after holding rate at a record 11.25%
  • [Mexico's] Board has been more hawkish than peers in Latin America (one of the reasons Mexico doesn't end up like Argentina, Bolivia, Venezuela, or Paraguay; they're a cut above most of Latin America--IMHO a cut or two below Chile though...).

Mexico's central bank could "adjust" its interest rates by February or March 2024 if inflation continues to drop, board member Jonathan Heath said on Monday, added that a decline in core prices is especially key to hitting inflation targets.

Mexico central bank could 'adjust' rates in early 2024 if inflation eases, board member says

Bloomberg - Are you a robot? --No, are you?

Mexican Central Bankers Talk About Rate Cuts as Inflation Comes Down

 

[Chop]

"Inflation Is Your Fault" And Other Self-Loathing Liberal Lies | ZeroHedge

There's an element in the so-called intelligentsia (not the hard sciences) in this country that really despises their countrymen--the regular salt-of-the-earth American people.

They hate the common folk, so whatever it is, it must be the fault of said 'regular people.'

 

[mchammer]

Money supply finally getting back to where it needs to be:

The Money Supply Continues Its Biggest Collapse Since The Great Depression | ZeroHedge

 

[Monahorns]

Money supply growth % is trending the right way, but the actual money supply is still way larger than in 2020.

The Money Supply Continues its Biggest Collapse Since the Great Depression | Ryan McMaken

 

[Chop]

Massive Tax Hikes on Alcohol and Sugary Drinks - Watch Dog News

WHO calls for 50% tax hikes on sugary drinks and alcohol.

They're just looking out for what's best for us. I suppose we should thank them...

"Dr. Rüdiger Krech of the WHO argues that taxing unhealthy products can have a positive ripple effect, leading to less disease and providing governments with funds to offer public services. He also notes that in the case of alcohol, higher taxes could help prevent violence and traffic-related injuries."

 

[Chop]

Massive Tax Hikes on Alcohol and Sugary Drinks - Watch Dog News

WHO calls for 50% tax hikes on sugary drinks and alcohol.

They're just looking out for what's best for us. I suppose we should thank them...

"Dr. Rüdiger Krech of the WHO argues that taxing unhealthy products can have a positive ripple effect, leading to less disease and providing governments with funds to offer public services. He also notes that in the case of alcohol, higher taxes could help prevent violence and traffic-related injuries."

(Now if THAT's the Nanny State, maybe we should consider...)

 

[mchammer]

In today’s payroll report, wages are up 4.0% year over year. Likely to drop to 3+% in the next 3-6 months, which isn’t too atypical. Only question for me is soft landing or a recession?

 

[Sangre Naranjada]

Massive Tax Hikes on Alcohol and Sugary Drinks - Watch Dog News

WHO calls for 50% tax hikes on sugary drinks and alcohol.

They're just looking out for what's best for us. I suppose we should thank them...

"Dr. Rüdiger Krech of the WHO argues that taxing unhealthy products can have a positive ripple effect, leading to less disease and providing governments with funds to offer public services. He also notes that in the case of alcohol, higher taxes could help prevent violence and traffic-related injuries."

Time to scrub out the bathtub and start collecting juniper berries.

 

[Monahorns]

Most important chart that shows current reality.

 

[mchammer]

Enough to impact revenue by $320B in one year? If so, that doesn't bode well for the future.

Another confirmation of lower tax revenue:

Budget problems arose after income tax collections dropped 25 percent in the fiscal year 2022–2023—which ended June 30—compared to the year before, according to the report by the Legislative Analyst’s Office.

California Facing Record $68 Billion Deficit, Potential 'Fiscal Budget Emergency': Legislative Analyst | ZeroHedge

 

[Horn6721]

From mc's link "Because of a “severe revenue decline,” California is facing a $68 billion budget deficit "

Who in Texas would vote for Newsome, except Beta?
" Texas Comptroller Glenn Hegar today released totals for fiscal 2022 state revenues, in addition to announcing monthly state revenues for August.

• General Revenue-related revenue for fiscal 2022 totaled $76.47 billion, up 26.4 percent from fiscal 2021.
• All Funds revenue was $183.34 billion, up 7.5 percent from fiscal 2021."