How are we going to pay for all this shit?

Just within the last day we've seen our esteemed Slumberer-in-Chief rail against the Fed, saying it needs to get on the ball and do something about all this inflation.

Well, yes -- at least insofar as the Fed effected all the bond-buying that enabled Congress to pass (and Joey to sign) the additional multitrillion-dollar spending measures that replaced estimated loss wage and salary income several times over.

Perhaps it's useful to ask a couple of "what if" questions.

For instance, what if the Fed begins tightening right into the jaws of the inevitable withdrawal of massive fiscal surge spending? What if demand for durable goods in large swaths of the economy is already weakening? (It is, actually.)

What if tightening pushes the 10y UST yield above 3% during the next 12-18 months? (It's been as high as about 3.2% on a couple of post-GFC occasions.)

That would imply 30-year fixed mortgage rates pushing 5%.

They're already climbing:

https://www.mortgagenewsdaily.com/ma...rates-02162022

What if this causes the housing market, one of the key drivers of growth during the last two years, to weaken markedly in the face of rising rates?

What if this is the fakest economic "expansion" or "recovery" in US history and simply rests on a foundation of soft sand? (Well, this is surely the most medicated, stimulated economy in memory.)

What if about 20% of S&P 500 companies are essentially "zombies" incapable of handing debt service coverage and still throwing off enough free cash flow to remain viable on a sustained basis in a semi-normalized yield curve environment? (Another fund manager whose opinion I respect put out a note recently saying exactly that.)

That's why I think the probability is very high that within a year the Fed will be under great pressure to pivot back to accommodation as the economy weakens, especially if influential members of Congress start getting upset about a possible market selloff.

(Asset price support is the Fed's tacit "third mandate.")

What if we trade in the current inflation run rate for a big slowdown or even a recession commencing in late 2022 or 2023?

What if middle class and working class Americans are even more unhappy about that?

.

Captain Midnight....I think your what it's are spot on.

This gent was on CNBC today and was wondering similar.

https://www.rosenbergresearch.com/

Perhaps you didn't notice, but we're talking about inflation now. If you want to compare dim-retards versus Republicans on that metric, be my guest!

You can start by comparing the inflation records of Jimmy Carter and your pal Ronnie! Who was the Chicken Little and who put the fire out? Originally Posted by lustylad

Jesus....Carter installed the Fed Chairman. Reagan almost fired him before the 1984 election if he raised rates.

https://www.businessinsider.com/rona...-trump-2018-10

For a expert economist you sure seem dumb AF concerning the history of events.

Jesus....Carter installed the Fed Chairman. Reagan almost fired him before the 1984 election if he raised rates.

https://www.businessinsider.com/rona...-trump-2018-10

For a expert economist you sure seem dumb AF concerning the history of events. Originally Posted by WTF

do you really think the Fed is "independent"? are you that naive?


what is the Fed, really? tell us sparky.

And what happens when Pelosi and husband can't trade stocks any more because of a new law that might pass and get caught holding worthless paper ....... he said sarcastically.


My tiny 401k looks like a freakin roller coaster. Wonder what it feels like to lose billions in one day as was the case with META

And what happens when Pelosi and husband can't trade stocks any more because of a new law that might pass and get caught holding worthless paper ....... he said sarcastically.


My tiny 401k looks like a freakin roller coaster. Wonder what it feels like to lose billions in one day as was the case with META

Facebook's parent company Meta has suffered a meteoric plunge of 26.4 percent, yanking other tech stocks down along with it. The decline erased $230 billion from the company's valuation in a single day, making it the biggest one-day loss for a US company.Feb 4, 2022

Originally Posted by HedonistForever

The stock price drop of Meta was based on its not making its earning per share estimate. I was glad too. Invested 20K in the now significantly cheaper stock. I presume they will be back at a minimal 300 per share very soon and I will have made nearly 8K in a couple of months from a simple transaction. Love how our capitalism works.

Jesus....Carter installed the Fed Chairman. Reagan almost fired him before the 1984 election if he raised rates.

https://www.businessinsider.com/rona...-trump-2018-10

For a (sic) expert economist you sure seem dumb AF concerning the history of events. Originally Posted by WTF

For an old fuck who lived through the Carter-Reagan years, you sure seem handicapped by a faulty memory of events.

Yes, Carter appointed Paul Volcker in August 1979 (barely 3 weeks after his famously dismal "malaise" speech flopped) out of desperation after his first Fed Chairman, G. William Miller, proved to be as feckless and incompetent as Carter was.

No, Reagan never considered firing Volcker. To the contrary, he re-appointed him to a second 4-year term as Fed Chairman in 1983. And Volcker was entirely independent. In 1984, he actually raised the Fed Funds rate to a peak of 11.5% in August. That was barely 2 months before the 1984 election, which Reagan won in a landslide.

But I'll throw you a bone... here's an example of Jimmy Carter's team trying to trample all over the Fed's independence... take a look at what the WaPo was reporting back in July 1978:

"President Carter's chief economic adviser (Charles Schultze) warned yesterday that pursuit of a tighter money policy by the Federal Reserve Board could threaten the nation's economic growth...

Schultze's warning followed sharp criticism Wednesday of recent Federal Reserve actions raising interest rates by Robert Strauss, who heads the White House anti-inflation program."

Ain't that groovy? Jimmy the Peanut Farmer put a political hack in charge of his White House anti-inflation program, and the guy lashes out publicly at the Fed for taking actions... to slow inflation!

https://www.washingtonpost.com/archi...-172fb65caf3b/

But let's try to keep it simple, wtf. The original question was - which President did a better job of controlling inflation? The first thing a curious, rational, objective person (economist or not) would do is LOOK UP THE FUCKING CPI DATA. Here's a quick snapshot for you:

Inflation rate 1976 = 5.7%
Inflation rate 1980 = 13.5%
Inflation rate 1984 = 4.3%
Inflation rate 1988 = 4.1%

So Jimmy Carter more than doubled the rate of Consumer Price Inflation during his 4 years in office. Ronnie Reagan came in and slashed it by 2/3 during his first term in office, then kept the rate at low single-digit levels throughout his second term as well.

https://www.minneapolisfed.org/about...ce-index-1913-

But wtf, it really doesn't bother me that your memory is so weak and diminished. It looks like our current Somnambulator-in-Chief is as cognitively impaired as you are. If Biden had a decent memory, he wouldn't be foolishly repeating Jimmy Carter's mistakes, on steroids. Joey is ensuring that his place in history will be as damaged and short-lived as the Peanut Farmer. On the bright side, at least Jimmy will be able to welcome another dim-retard into the Failed Presidents club. Misery loves company, and all that.

You can start by comparing the inflation records of Jimmy Carter and your pal Ronnie! Who was the Chicken Little and who put the fire out? Originally Posted by lustylad

Both were Chicken Littles. Paul Volker put out the fire.

Both were Chicken Littles. Paul Volker (sic) put out the fire. Originally Posted by Chung Tran

Riiiigght!

Here's the chungy/wtf Rule of Thumb

Dimocrat Presidents get full credit for positive economic trends, zero blame for negative trends.

Republican Presidents get zero credit for positive economic trends, and all the blame for negative trends.

That's why neither of you partisan hacks is invited to call balls and strikes at the annual Congressional baseball game.

Just within the last day we've seen our esteemed Slumberer-in-Chief rail against the Fed, saying it needs to get on the ball and do something about all this inflation.

Well, yes -- at least insofar as the Fed effected all the bond-buying that enabled Congress to pass (and Joey to sign) the additional multitrillion-dollar spending measures that replaced estimated loss wage and salary income several times over.

Perhaps it's useful to ask a couple of "what if" questions.

For instance, what if the Fed begins tightening right into the jaws of the inevitable withdrawal of massive fiscal surge spending? What if demand for durable goods in large swaths of the economy is already weakening? (It is, actually.)

What if tightening pushes the 10y UST yield above 3% during the next 12-18 months? (It's been as high as about 3.2% on a couple of post-GFC occasions.)

That would imply 30-year fixed mortgage rates pushing 5%.

They're already climbing:

https://www.mortgagenewsdaily.com/ma...rates-02162022

What if this causes the housing market, one of the key drivers of growth during the last two years, to weaken markedly in the face of rising rates?

What if this is the fakest economic "expansion" or "recovery" in US history and simply rests on a foundation of soft sand? (Well, this is surely the most medicated, stimulated economy in memory.)

What if about 20% of S&P 500 companies are essentially "zombies" incapable of handing debt service coverage and still throwing off enough free cash flow to remain viable on a sustained basis in a semi-normalized yield curve environment? (Another fund manager whose opinion I respect put out a note recently saying exactly that.)

That's why I think the probability is very high that within a year the Fed will be under great pressure to pivot back to accommodation as the economy weakens, especially if influential members of Congress start getting upset about a possible market selloff.

(Asset price support is the Fed's tacit "third mandate.")

What if we trade in the current inflation run rate for a big slowdown or even a recession commencing in late 2022 or 2023?

What if middle class and working class Americans are even more unhappy about that?

. Originally Posted by CaptainMidnight

I read this and I'm just thinking FUCK. It sounds like a hopeless situation.

Around the time Congress passed Biden's $1.9 trillion American Rescue Plan, Larry Summers was pounding the table, saying "Don't do it!" His main concern was that the stimulus spending was going to far exceed the output gap and stoke inflation. I believe I read that he predicted three possible endings, each with about a 1/3rd probability of occurring,

1. Some kind of a semi-soft landing, where we don't get burned. The Fed manages interest rates and backs away from quantitative easing such that we don't have steep inflation or a deep recession.

2. Inflation goes up like a bat out of hell. (OK, I'm exaggerating, he didn't really say bat out of hell.) The Fed aggressively raises interest rates. That throws us into a nasty recession.

3. Inflation goes up like a bat out of hell. The Fed doesn't react quickly and/or strongly enough. We end up with an extended period of rising prices, and maybe stagflation.

I read your post and think "1" is out the door. We're looking at "2" or "3". Maybe "3" is more likely: the probability is very high that within a year the Fed will be under great pressure to pivot back to accommodation as the economy weakens, especially if influential members of Congress start getting upset about a possible market selloff....What if we trade in the current inflation run rate for a big slowdown or even a recession commencing in late 2022 or 2023? What if middle class and working class Americans are even more unhappy about that?

This is an interesting article which describes Summers' thinking back around February and March of last year. The disagreements between him and Paul Krugman. And the happiness that President Biden has brought into the lives of leftist economists, like James Galbraith of the University of Texas, who are overjoyed that more mainstream economists like Summers have been shut out of the Biden administration in favor of Progressives:

https://www.newyorker.com/news/annal...s-the-stimulus

I read somewhere that Galbraith is pushing for price controls to put an end to inflation. A hell of a lot of good that's done in the past.

The New Yorker article was written before the infrastructure bill was passed. In it an economist affiliated with the Democratic Party said most liberal economists would far prefer an infrastructure bill to handouts like what was in the American Rescue Plan, but they figure it would never get enough Republican support to pass. He said Summers is the only one who disagrees. Well, they were wrong about that. I'm not saying the infrastructure bill was worth passing, just that the guy was wrong.

That's why neither of you partisan hacks is invited to call balls and strikes at the annual Congressional baseball game. Originally Posted by lustylad

Not true. I was invited, but I realized if I got too close to Republicans, I might get shot. I declined.

Not true. I was invited, but I realized if I got too close to Republicans, I might get shot. I declined. Originally Posted by Chung Tran

yeah. you should avoid left-wing extremists ...


BAAHHHHAAAAAAAAA

Keynes said it. He was right, too. We only HAVE to work 15 hours weekly (or less) to maintain the same living standard as the average British worker toiling 40+ hours in 1930. But most people want a much higher living standard today, so we're still putting in full shifts.

https://www.forbes.com/sites/billcon...-aoc-disagree/ Originally Posted by lustylad

Yes, Keynes wrote that. Would AOC actually make up anything? LOL

http://www.econ.yale.edu/smith/econ116a/keynes1.pdf

Just got home and checked in on this thread ... a little tired and don't have time to get to it tonight, but will step in tomorrow and try to address Why_Yes_I_Do's comment about what the hell happens if interest rates rise sharply. Scary!

. Originally Posted by CaptainMidnight

Thanks much! They say you have to get into a woman's head before you can get into her pants. And this is helping me get into Alexandria's head.

Seriously, a 15 hour work week? It does fit in well with the whole AOC/Sanders cradle-to-grave manifesto.

What if about 20% of S&P 500 companies are essentially "zombies" incapable of handing debt service coverage and still throwing off enough free cash flow to remain viable on a sustained basis in a semi-normalized yield curve environment? (Another fund manager whose opinion I respect put out a note recently saying exactly that.) Originally Posted by CaptainMidnight

The Fed's bond-buying binge has compressed and distorted the yield curve, so the risk premium to invest in junk securities is absurdly low. The Fed even started to buy corporate bonds (albeit in much smaller amounts than Treasuries and MBS) directly during its pandemic QE program. What a crazy idea that is! They should stay the hell out of the private debt markets.

A 20% "zombie" rate for the 500 companies in the S&P index is alarming. It means 100 of the largest public firms in the country are only profitable on paper due to Fed-induced artificially low borrowing costs. They should be taking advantage of the stock market boom to issue more equity/de-leverage and get off the fucking zombie list before it's too late.

Not true. I was invited, but I realized if I got too close to Republicans, I might get shot. I declined. Originally Posted by Chung Tran

In case you missed it, look back at posts 1206 to 1214 in this thread. We were discussing your keen analysis of MMT and women.