“”If central bankers can’t figure out how to return to the (relatively) effective policy regime of the Great Moderation, the public should consider major institutional changes.””
Changes are probably needed, but the thought of our Congress actually making meaningful reforms is laughable.
Especially with people like McConnell and Feinstein, Grassley, Bernie, Hoyer et. al. in Congress. Octogenarians who won't get out of the way. The Internet is a bunch of tubes-Ted Stevens
Dr. Salter seems to ignore the impact of fiscal deficits on inflation. The Fed is stuck with rather blunt tools to offset the effects of ongoing overspending by Congress and the administration. The market could likely manage lending better if the Fed took a long vacation.
We are way past the "manage lending better" phase. When you have to borrow debt to pay the interest, the only question becomes, how long before the stink becomes too repulsive to endure?
Is this a joke? How is "targeting" a certain level of inflation, or economic growth by a central bank any different from the central planning fallacy of a Communist regime? Didn't work for Russia - why would it work here? Or did it - their wealth is concentrated in a very small part of the population, and that's where we're headed too.
The main reason it works longer and differently than it did on Soviet Russia is because they weren't in charge of the "world's reserve currency" that had infected every nook and cranny of the world of finance.
Coming off the dollar will be one helluva bout of DTs for the entire global economy. The dollar bill is the greatest virus the world has ever known. Once infected, regular boosters of debt are constantly required.
Is inflation subsiding? Or are fewer people buying fewer things.......but at much elevated prices?
First of all, you can't raise the COST (interest rates) on the biggest mountain of debt the world has ever known and pretend you are bringing down inflation. Inflating the cost of the biggest mountain of debt is the equivalent of raising inflation on everyone.
Secondly, the biggest inflation driver on the planet is ENERGY. And we are about to see a major uptick in the price of energy in the second half of this year and for all of 2024. There is no more SPR to raid. By the end of this year demand is going to be 3 million bpd higher than supply.
I doubt .5% of the population has any comprehension on what that is going to do to the cost of energy and general inflation going forward. All that "green energy" bullshit is about to come to a heard. People are going to realize that it is a joke and that they have been lied to. That the whole " "climate change" debacle was just a hail Mary to try and get the world to use less energy by choice before it was forced onto them.
There are so many numbers to throw out there to illustrate how tight the energy supply is right now, but I will share just this one to give you an idea of what is really staring us in the face.
The US uses 20 million barrels a day. We are currently pumping around 12 mbpd. That means we have to buy out around 8 mbpd.......every day. Here is an example of how that works. In the US, we burn 369,000,000 gallons of gasoline.......every day. There are 20 gallons of gasoline in a refined barrel of oil. So we have to refine 18.5 million barrels a day just to meet day to day gasoline demand. We only have 18 mbpd of refinery capacity in the US. So we have to buy refined product to meet gasoline, diesel, and jet fuel needs.
Now, if we went from our usual 20 mbpd oil usage to say, 18 mbpd. What do you think the price of gasoline at the pump would be? If gasoline went to $6 a gallon, what do you think that would do to inflation and the economy? Who would care what rates were when gasoline was $6 a gallon? What if it goes to $8 a gallon?
Please don't waste my time talking about how a "recession" would kill oil demand and bring prices down. That's like saying people just sitting around would pay less for oxygen than people that are playing sports. Oil is the oxygen of the world's economy. They can't print it. And the rest of the world is demanding more and more with each passing year. The US is 5% of the world's population. I am sure that if we decide we don't need some of the oil on the market, there are plenty of other countries that will snap it up.......at a fair price.
One more point of "trivia." 70 out of 1,000 Chinese own a car. They currently use around 16 million barrels per day. The projections are that by 2030, 210 out of 1,000 will own a car. That would require another 12 million barrels per day. Where is that going to come from? They sure as hell aren't going to be able to pump it out of the ground. There are only two choices: they stop growing due to lack of additional available energy, or they get it from someone who is currently using it.
China is the global economic engine. The Fortune 1000 in the US would be in a world of pain without China's slave labor and manufacturing capacity. Do you think the powerful people that run the Fortune 1000 will do what they can to make sure China gets the oil/energy it needs? Do you think they will have a problem with 5% of the world's population paying $6 at the pump as long as they can keep their corporate machine running to the other 95%?
The debt is bad. The interest is a clear drag that is going to cause damage.........But neither is a pimple on an elephant's butt compared to what a lack of cheap available energy is going to do to the world economy.....in the very near future.
This just in: 89% of consumer borrowing after the 8-fold expansion of the base money supply between 2008 and 2022 is locked in low rates. So are we seeing demand-Push or Wage-Pull or "This time it's different, a la Rogoff and Reinhart? (hint: It probably isn't). But the SWHTF when these rates work their way especially through CRE loans... "No Contagion" eh? Ben, Yellen and JayPow should be on leg irons
It's funny, 12 months ago, the Fed was being blamed for not having done enough regarding inflation as they kept the transitory narrative alive. Now they are being blamed for doing too much, as by slicing up the inflation data, we can see pieces that have fallen below the target. I am not one to cut too much slack to the Fed, but perhaps some can realize it is a very difficult job with imperfect tools. Ultimately, while I believe that the underlying inflation impulse is likely to be with us for a long time going forward, I suspect every one of the pundits decrying their actions would have failed dismally in the chair.
The increased inflation we saw last year was primarily supply driven. Raising interest rates doesn't alleviate supply (it actually worsens it), but works on reducing demand - through slowing down lending and spending. Arguably, inflation would've come down anyway to today's rate (supply issues alleviating) without such aggressive tightening policy. But they did it anyway, and we will only see the results when it actually hit borrowers. The usage of the BTFP by banks, which is anonymous, shows you already who was under water on long duration risk. Apparently most corporates are still running on their Covid-era loans during peak ZIRP.
“”If central bankers can’t figure out how to return to the (relatively) effective policy regime of the Great Moderation, the public should consider major institutional changes.””
Changes are probably needed, but the thought of our Congress actually making meaningful reforms is laughable.
You cannot expect whores to turn on their pimps......especially when the whores are paid so well.
Especially with people like McConnell and Feinstein, Grassley, Bernie, Hoyer et. al. in Congress. Octogenarians who won't get out of the way. The Internet is a bunch of tubes-Ted Stevens
Of course the Pepsi Generation © like MTG, Santos, AOC and numbskulls like Tuberville leave us little hope.
Dr. Salter seems to ignore the impact of fiscal deficits on inflation. The Fed is stuck with rather blunt tools to offset the effects of ongoing overspending by Congress and the administration. The market could likely manage lending better if the Fed took a long vacation.
We are way past the "manage lending better" phase. When you have to borrow debt to pay the interest, the only question becomes, how long before the stink becomes too repulsive to endure?
Is this a joke? How is "targeting" a certain level of inflation, or economic growth by a central bank any different from the central planning fallacy of a Communist regime? Didn't work for Russia - why would it work here? Or did it - their wealth is concentrated in a very small part of the population, and that's where we're headed too.
The main reason it works longer and differently than it did on Soviet Russia is because they weren't in charge of the "world's reserve currency" that had infected every nook and cranny of the world of finance.
Coming off the dollar will be one helluva bout of DTs for the entire global economy. The dollar bill is the greatest virus the world has ever known. Once infected, regular boosters of debt are constantly required.
Is inflation subsiding? Or are fewer people buying fewer things.......but at much elevated prices?
First of all, you can't raise the COST (interest rates) on the biggest mountain of debt the world has ever known and pretend you are bringing down inflation. Inflating the cost of the biggest mountain of debt is the equivalent of raising inflation on everyone.
Secondly, the biggest inflation driver on the planet is ENERGY. And we are about to see a major uptick in the price of energy in the second half of this year and for all of 2024. There is no more SPR to raid. By the end of this year demand is going to be 3 million bpd higher than supply.
I doubt .5% of the population has any comprehension on what that is going to do to the cost of energy and general inflation going forward. All that "green energy" bullshit is about to come to a heard. People are going to realize that it is a joke and that they have been lied to. That the whole " "climate change" debacle was just a hail Mary to try and get the world to use less energy by choice before it was forced onto them.
There are so many numbers to throw out there to illustrate how tight the energy supply is right now, but I will share just this one to give you an idea of what is really staring us in the face.
The US uses 20 million barrels a day. We are currently pumping around 12 mbpd. That means we have to buy out around 8 mbpd.......every day. Here is an example of how that works. In the US, we burn 369,000,000 gallons of gasoline.......every day. There are 20 gallons of gasoline in a refined barrel of oil. So we have to refine 18.5 million barrels a day just to meet day to day gasoline demand. We only have 18 mbpd of refinery capacity in the US. So we have to buy refined product to meet gasoline, diesel, and jet fuel needs.
Now, if we went from our usual 20 mbpd oil usage to say, 18 mbpd. What do you think the price of gasoline at the pump would be? If gasoline went to $6 a gallon, what do you think that would do to inflation and the economy? Who would care what rates were when gasoline was $6 a gallon? What if it goes to $8 a gallon?
Please don't waste my time talking about how a "recession" would kill oil demand and bring prices down. That's like saying people just sitting around would pay less for oxygen than people that are playing sports. Oil is the oxygen of the world's economy. They can't print it. And the rest of the world is demanding more and more with each passing year. The US is 5% of the world's population. I am sure that if we decide we don't need some of the oil on the market, there are plenty of other countries that will snap it up.......at a fair price.
One more point of "trivia." 70 out of 1,000 Chinese own a car. They currently use around 16 million barrels per day. The projections are that by 2030, 210 out of 1,000 will own a car. That would require another 12 million barrels per day. Where is that going to come from? They sure as hell aren't going to be able to pump it out of the ground. There are only two choices: they stop growing due to lack of additional available energy, or they get it from someone who is currently using it.
China is the global economic engine. The Fortune 1000 in the US would be in a world of pain without China's slave labor and manufacturing capacity. Do you think the powerful people that run the Fortune 1000 will do what they can to make sure China gets the oil/energy it needs? Do you think they will have a problem with 5% of the world's population paying $6 at the pump as long as they can keep their corporate machine running to the other 95%?
The debt is bad. The interest is a clear drag that is going to cause damage.........But neither is a pimple on an elephant's butt compared to what a lack of cheap available energy is going to do to the world economy.....in the very near future.
This just in: 89% of consumer borrowing after the 8-fold expansion of the base money supply between 2008 and 2022 is locked in low rates. So are we seeing demand-Push or Wage-Pull or "This time it's different, a la Rogoff and Reinhart? (hint: It probably isn't). But the SWHTF when these rates work their way especially through CRE loans... "No Contagion" eh? Ben, Yellen and JayPow should be on leg irons
https://www.wsj.com/articles/what-fed-hikes-much-of-americas-consumer-debt-is-still-riding-ultralow-rates-e10ab199
It's funny, 12 months ago, the Fed was being blamed for not having done enough regarding inflation as they kept the transitory narrative alive. Now they are being blamed for doing too much, as by slicing up the inflation data, we can see pieces that have fallen below the target. I am not one to cut too much slack to the Fed, but perhaps some can realize it is a very difficult job with imperfect tools. Ultimately, while I believe that the underlying inflation impulse is likely to be with us for a long time going forward, I suspect every one of the pundits decrying their actions would have failed dismally in the chair.
you are giving the fed a pass? why?
The increased inflation we saw last year was primarily supply driven. Raising interest rates doesn't alleviate supply (it actually worsens it), but works on reducing demand - through slowing down lending and spending. Arguably, inflation would've come down anyway to today's rate (supply issues alleviating) without such aggressive tightening policy. But they did it anyway, and we will only see the results when it actually hit borrowers. The usage of the BTFP by banks, which is anonymous, shows you already who was under water on long duration risk. Apparently most corporates are still running on their Covid-era loans during peak ZIRP.