The auto sector isn’t nearly as important and crucial to growth as it used to be (witness none other than the 2015-16 downturn), but it remains a large segment of US industry. Thinking recession or the like is right now getting too far ahead. For the time being, the most that might be reasonably assumed is that this serious economic drag is likely to continue for some time if to some unknown degree. The downturn as far as autos is already nine months old and inventories are still as bloated as ever, and record sales incentives could not change that.
The reality is that after 3-massive Federal Reserve driven “Quantitative Easing” programs, a maturity extension program, bailouts of TARP, TGLP, TGLF, etc., HAMP, HARP, direct bailouts of Bear Stearns, AIG, GM, bank supports, etc., all of which total more than $33 Trillion, the economy grew by just $2.64 Trillion, or a whopping 16.7% since the beginning of 2009. The ROI equates to $12.50 of interventions for every $1 of economic growth. Not a very good bargain.
Federal Reserve officials are looking under the hood of their most basic inflation models and starting to ask if something is wrong. Minutes from the July 25-26 Federal Open Market Committee meeting showed a revealing debate over why the economy isn’t producing more inflation in a time of easy financial conditions, tight labor markets and solid economic growth. The central bank has missed its 2 percent price goal for most of the past five years. Still, a majority of FOMC participants favor further rate increases. The July minutes showed an intensifying debate over whether that is the right policy response.
Since when do underlings get to chime in on whom their next boss should be? That’s just what William Dudley, the president of the Federal Reserve Bank of New York, did in an interview with the Associated Press this week. His fairly strong recommendation of Gary Cohn, President Donald Trump’s economic adviser and apparent favorite for the position, was especially egregious since Cohn used to be president at Goldman Sachs, where Dudley essentially spent most of his career as chief economist and partner. The Fed chair is appointed by the US president. Dudley should stick to monetary policy and regulating big banks. As a matter of central-bank independence and integrity, he has no business opining on future candidates.
Cryptocurrency is an independent, digital currency that uses cryptology to maintain privacy of transactions and control the creation of the respective currency. While not recognized as legal tender, cryptocurrencies are becoming more popular for legal and illegal transactions alike. Bitcoin (BTC), developed in 2009, is the most popular of the cryptocurrencies. It accounts for over half the value of the more than 750 cryptocurrencies outstanding. In this article we refer to cryptocurrencies generally as BTC, but keep in mind there are differences among the many offerings. Also consider that, while BTC may appear to be the currency of choice, Netscape and AOL shareholders can tell you that early market leadership does not always translate into future market dominance.
The stock market’s relentless rally to records may soon be facing a key test. A number of indicators point to a steady, halting deterioration of some of the factors that have helped Wall Street equities score a steady stream of all-time highs. Peek beneath the hood of the action, and market technicians point to some unsightly problems within the market’s machinery. Here are a few.
The modern model for monetary policy almost has to be the opposite, if for no other reason than there is no money in it. It is almost entirely an expectations management exercise, therefore by that nature it must be loud and obvious (too loud and obvious since 2007, of course, conclusively proving only that there is no money in monetary policy and thoroughly undermining expectations). Officials like Ben Bernanke hoped that by being more transparent it would lead to better appreciation for what the Fed was doing and more robust expectations as a result (rather than the opposite).
What do you know, long about Wednesday, August 16, 2017, House Minority Leader Nancy Pelosi (D-Cal) discovered that the United States Capitol building was infested with statues of Confederate dignitaries. Thirty years walking those marbled halls and she just noticed? Her startled announcement perked up Senator Cory Booker (D- NJ) who has been navigating those same halls only a few years. He quickly introduced a bill to blackball the offending statues. And, of course, the congressional black caucus also enjoyed a mass epiphany on the bronze and stone delegation of white devils.
The GOP’s failure to pass a long-promised Obamacare repeal and replacement bill has left the entire Republican legislative agenda back on its heels. They haven’t accomplished much this session and they’re running out of time to show real progress. In fact, if the GOP were a football team, this would be a 3rd down and 11 kind of situation. But to take that football analogy a bit further, the good news for the Republican team is that they now have a great pass play drawn up that can get them a big score.
Corporate debt in China has soared to $18 trillion, or 169% of GDP, the largest pile of corporate debt in the world, according to the worried Bank for International Settlements. The OECD has warned about it earlier this year. The New York Fed warned about this debt boom in February and that it could lead to a “financial crisis,” but that authorities have many tools to control it. The IMF regularly warns about China’s corporate debt, broken-record-like, and did so again a few days ago, lambasting the authorities for their reluctance to tamp down on the growth of debt. The “current trajectory,” it said, “could eventually lead to a sharp adjustment.”