Until the government stops spending money it doesnt have, inflation will always be lurking
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Until the government stops spending money it doesnt have, inflation will always be lurking
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TheEye
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In 2008 the Prime rate was so low the introduction of Quantitative Easing occurred. So the precedent doesn’t go very far back. Just because it hasn’t happened doesn’t mean it won’t. I wouldn’t be surprised to see more QT in the future. I am amazed at how many people thought restoring the Prime rate back to historic norms could only end in disaster.
As bad as the US budget deficit is, we are doing quite well compared to the rest of the world. If the voter base wants to elect a fiscally responsible president, then we will see a change but I don’t foresee that happening until the problem hits people right in the wallet.
mr.h
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No one on this board has ever, to my knowledge, called for an increase of tax revenue. Not even for companies and corporations that make millions and do not pay federal taxes. We cannot cut the debt with just cuts to discretionary spending and we never seem to cut the waste of mandatory spending.
We are definitely better off than the rest of the world, but we continue to decrease government revenue while increasing government spending. A fiscally responsible president can not control the whole of Congress, who owes their donors.
The only responsible answer is term-limits which will not happen anytime soon.
In the meantime, I remain an optimist in regards to the market. The economic numbers don’t lie.
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The FED has been around for 110 years. In those 110yrs, have they ever increased rates and had a soft landing?
TheEye
Mario and Dan are upgrades. Period.
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No. However, you have to ignore everything preceding QE.
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mr.h
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Biden Plans To Cut Deficit By $2.6 Trillion — By Making The IRS Paperless? Janet Yellen Explains.
AJ Fabino Benzinga16 hours ago
U.S. Treasury Secretary Janet Yellen commended an initiative this week by the IRS that is projected to dwindle the federal deficit by $2.6 trillion over the next decade.
mr.h
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| USD | Average Hourly Earnings (MoM)(Jul) | 0.4% | 0.98 | 0.3% | 0.4% | |||||
| 08:30 | USD | Average Hourly Earnings (YoY)(Jul) | 4.4% | 1.36 | 4.2% | 4.4% | ||||
| 08:30 | USD | Average Weekly Hours(Jul) | 34.3 | -1.25 | 34.4 | 34.4 | ||||
| 08:30 | USD | Labor Force Participation Rate(Jul) | 62.6% | - | - | 62.6% | ||||
| 08:30 | USD | Nonfarm Payrolls(Jul) | 187K | -0.21 | 200K | 185K | ||||
| 08:30 | USD | U6 Underemployment Rate(Jul) | 6.7% | - | - | 6.9% | ||||
| 08:30 | USD | Unemployment Rate(Jul) | 3.5% | -0.74 | 3.6% | 3.6% |
payrolls at 187,000…Goldilocks…like butter
hourly earnings remain high..
participation rate flat.
Do you think the FED just does QE vs rate cuts? They did QE in the spring during the peak of the banking failures. Balance sheet is down from 8.9T to 8.2T even with the 400B QE in the spring. I bet they would love to keep at this rate (8.7-8.2 since March) of around 1.5T per year. It would still mean 4 years of QT just to get to 0.
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mr.h
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Post covid, everything changed..
Disagree. QE was around before. Fiscal over spending has been around for decades. Thus, we are talking about global economics changing and that has been in the works for many years.
TheEye
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To save banks from failing? Probably. But that’s if that even happens. Consider the fact that we are talking about occasional pauses and quarter point hikes vs. the huge hikes we saw a year ago today. I don’t think as many banks will be caught flat footed like we saw with Silicon Valley.
Honestly, I don’t think cuts to the prime rate or QE will be all that necessary for another year at least. Come this December I am guessing inflation could hit the Fed’s target of 2%. Just consider what prices were in Dec 2022 vs. what they will be at the end of this year.
So with the Fed no longer hiking, I am looking for a stronger economy that no longer fears the Fed. The consumer will still be cautious, which will also control future inflation.
All this to say, we are still feeling the effects of the 2008 monetary policy. We’ve been doing the dance for a while. The piper will need to he paid. Not through another recession, we did that already. Through QT and historically normal prime rates.
The 10 year is at 4.03, the 30 year is 4.20, and then we have this:
www.barrons.com
Oil Prices Notch Sixth Straight Weekly Gain
Oil prices had their longest winning streak in more than a year. The gains have been aided by Saudi Arabia’s decision to continue curtailing its production into the fall.
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The core issue is too much spending. If you taxed billionaires 100% of their WEALTH, i.e. expropriated it, the debt would still be $25 Trillion. @UMFarArcher posted a summary of all of the taxes that already exist.
TheEye
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Dana Carvey did an HW Bush cold open on SNL talking about having to “R- R- Raise taxes” and Clinton did another tax hike in his presidency. All this coupled with Newt and his hatchet to spending led to the end of the budget deficit.
mr.h
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Not just billionaires. How about corporations that pay NO federal taxes?
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It still wouldnt be enough. Raising taxes on the rich and corporations might be a good campaign slogan, but its not sound economic policy. When any business is doing poorly, the first thing you do is cut spending, not raise it.
Also, we live in a global economy. Many corporations have fled the US (especially under Obama) because of high US taxes. Its similar to taxpayers leaving the high tax states to move to the lower tax states.
In summary, look past the catchy campaign slogans and take into account economic reality.
mr.h
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Not one thing will be enough. We need revenue, cuts and downsizing, and it will take decades for such a staggering amount. But everything needs to be on the table and it must be bi-lateral with States and parties getting involved.
APPL took a beating, but will come back strong with AI…jmo
Aapl being down is no biggie. They are commenting on weak iPhone and iPad sales last quarter, but no one knowingly tries buying models before the new one comes out. New model is next month. I expect a blowout quarter.
So ... if Trump is elected agin in 2024, what can we expect? Spending wildly as was the case in his first term, or successfully cutting the budget in a truly meaningful way. He says he won't touch "entitlements," so my money would be on more of the same.
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