Inflation Nation, Con't

Fed Chair Jerome Powell, in his annual speech from the Fed Conference in Jackson Hole, Wyoming (the most unequal city in America, mind you) warned that while the risk of inflation is down, the rate hikes might not be over for 2023, and that even if they are, interest rates will stay at 5%+ for the foreseeable future.

 

Jerome H. Powell, the chair of the Federal Reserve, pledged during a closely watched speech that his central bank would stick by its push to stamp out high inflation “until the job is done” and said that officials stood ready to raise interest rates further if needed.

Mr. Powell, who was speaking Friday at the Federal Reserve Bank of Kansas City’s annual Jackson Hole conference in Wyoming, said that the Fed would “proceed carefully” as it decided whether to make further policy adjustments after a year and a half in which it had pushed interest rates up sharply.

But even as Mr. Powell emphasized that the Fed was trying to balance the risk of doing too much and hurting the economy more than is necessary against the risk of doing too little, he was careful not to take a victory lap around a recent slowing in inflation. His speech hammered home one main point: Officials want to see more progress to convince them that they are truly bringing price increases under control.

“The message is the same: It is the Fed’s job to bring inflation down to our 2 percent goal, and we will do so,” Mr. Powell said, comparing his speech to a stern set of remarks he delivered at last year’s Jackson Hole gathering.

Central bankers have lifted interest rates to a range of 5.25 to 5.5 percent, up from near-zero as recently as March 2022, in a bid to cool the economy and wrestle inflation lower. They have been keeping the door open to the possibility of one more rate increase, and have been clear that they expect to leave interest rates elevated for some time.

Mr. Powell kept that message alive on Friday.

“We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” he said.

But the Fed chair noted that “at upcoming meetings we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks,” and that officials would “decide whether to tighten further or, instead, to hold the policy rate constant and await further data.”

That suggests that central bankers are not determined to raise interest rates at their upcoming meeting in September. Instead, they might wait until later in the year — they have meetings in November and December — before making a decision about whether borrowing costs need to climb further. Striking a patient stance would give officials more time to assess how the moves they have already made are affecting the economy.

“I think this does pave the way for a pause at the September meeting, and leaves their options open after,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “We’re close to the top, we may be there, and they’re going to move carefully.”

Mr. Powell made clear that the Fed was not in a rush to raise rates again, but he remained cautious about the risk of further inflation.

Price increases have come down notably in recent months, to around 3 percent as measured by the Fed’s preferred gauge. That is still higher than the Fed’s 2 percent inflation goal, though it is down sharply from a 7 percent peak last summer.

And there are signs of stubbornness lingering under the surface. After stripping out food and fuel for a look at the underlying trend, the central bank’s preferred inflation gauge is still running at about twice the Fed’s goal.

“The process still has a long way to go, even with the more favorable recent readings,” Mr. Powell said. “We can’t yet know the extent to which these lower readings will continue or where underlying inflation will settle over coming quarters.”

That is partly because the Fed is trying to assess how much its policy adjustments are really weighing on the economy and, through it, inflation.

The Fed’s higher borrowing costs have been cutting into demand for cars and houses by making auto loans and mortgages more expensive, and they are probably discouraging business expansions and cooling the job market.

But it is unclear just how severely the Fed’s current policy setting is weighing on the economy. Rates are much higher than the level that most economists think is necessary to keep the economy growing below its potential run rate, but such estimates are subject to error.

“There is always uncertainty about the precise level of monetary policy restraint,” Mr. Powell acknowledged Friday.

 

So, there's that.

 

Still, we're at the point where Powell and the Fed are feathering the brakes and not slamming on the pedal like they were last year. We may actually make it through this without a crippling recession.

 

Or not, if House Republicans in the Freedom Caucus crash the economy in the next six weeks, which is certainly something that might happen. Then again, when these clowns are begging Trump not to start another insurrection, all bets are off.

 

It's 2008 All Over Again, Con't

The 2023 version of the 2008 Big Bank Casino Bonanza is nowhere near over, as California regional bank First Republic has finally failed over the weekend, with the FDIC seizing the bank's remaining assets to sell to Jaime Dimon and JPMorgan Chase.

 

Federal regulators have seized First Republic Bank and sold it to JPMorgan Chase Bank in a deal aimed at quelling renewed weakness in the nation’s banking industry.

In a statement issued early Monday, the Federal Deposit Insurance Corp. said that all depositors of First Republic Bank will become depositors of JPMorgan and will have full access to their deposits.

The deal involved a “highly competitive bidding process,” the FDIC said in its statement, but it did not say what JPMorgan is paying to purchase First Republic.

Under the deal, JPMorgan acquires “substantially all” First Republic assets and agrees to assume responsibility for all of its deposits, including those above the federal insurance limit of $250,000 per account. First Republic had about $229.1 billion in assets and $103.9 billion in deposits.

JPMorgan personnel are now reaching out to First Republic customers, CEO Jamie Dimon said.

Federal regulators approached JPMorgan about bidding on First Republic’s assets, said Jeremy Barnum, JPMorgan’s chief financial officer. The bank “did not seek out this deal,” Barnum told reporters Monday.

Dimon reiterated that the broader banking system was sound and said the deal would stabilize the system after the country’s third bank failure in two months. Still, Dimon acknowledged that as interest rates continue to rise, the economy is not immune to consequences or stress.

“Hopefully people will be properly prepared for it,” Dimon said.

In March, JP Morgan was one of the banks that put billions of dollars into beleaguered First Republic, as regulators and the industry scrambled to contain a crisis that had led to the failures of Silicon Valley Bank and Signature Bank. Barnum said the ultimate demise of First Republic wasn’t a sign that that effort failed. Rather, it helped buy time “when time was needed.”

JP Morgan is not assuming First Republic’s corporate debt or preferred stock, it said in a statement.

First Republic’s failure is expected to cost the FDIC about $13 billion, the agency said. The money will come from the FDIC’s deposit insurance fund, which insured banks pay into every quarter.

First Republic’s 84 offices in eight states will reopen as branches of JPMorgan, and depositors will be able to access all of their money when they open Monday.

The closure and sale of First Republic comes seven weeks after the abrupt failure of Silicon Valley Bank in California prompted an extraordinary federal rescue effort aimed at averting a wider financial crisis.

Unlike SVB, which failed in a matter of days, First Republic has been wobbling for weeks. The delay gave regulators and industry executives time to evaluate the bank and prepare for its demise.

 

The difference between SVB's failure in March and First Republic this morning is that the big investors were given time to make an orderly exit and even profit from First Republic.

 

Everyone's acting like this is the end of the performance rather than the coda to the first movement of the symphony where the second biggest bank failure in US history just happened. 

If the Fed raises interest rates even more to slow down the inflation train, more of this will happen. And if the GOP causes a debt default on America's credit, all bets are off even in the Big Casino.

It's going to be a wild summer.

Last Call For Recession, Receding

We're not in a recession, folks. We're just in a booming economy, because we have a Democratic president, and a hateful, garbage media.

 

The U.S. economy finished 2022 in solid shape even as questions persist over whether growth will turn negative in the year ahead.

Fourth-quarter gross domestic product, the sum of all goods and services produced for the October-to-December period, rose at a 2.9% annualized pace, the Commerce Department reported Thursday. Economists surveyed by Dow Jones had expected a reading of 2.8%.

The growth rate was slightly slower than the 3.2% pace in the third quarter.

Stocks turned mixed following the report while Treasury yields were mostly higher.

Consumer spending, which accounts for about 68% of GDP, increased 2.1% for the period, down slightly from 2.3% in the previous period but still positive.

Inflation readings moved considerably lower to end the year after hitting 41-year highs in the summer. The personal consumption expenditures price index increased 3.2%, in line with expectations but down sharply from 4.8% in the third quarter. Excluding food and energy, the chain-weighted index rose 3.9%, down from 4.7%.

While the inflation numbers indicated price increases are receding, they remain well above the Federal Reserve’s 2% target.

Along with the boost from consumers, increases in private inventory investment, government spending and nonresidential fixed investment helped lift the GDP number.

A 26.7% plunge in residential fixed investment, reflecting a sharp slide in housing, served as a drag on the growth number, as did a 1.3% decline in exports. The housing drop subtracted about 1.3 percentage points from the headline GDP number.

Federal government spending rose 6.2%, due largely to an 11.2% surge on nondefense outlays, while state and local expenditures were up 2.3%. Government spending in total added 0.64 percentage points to GDP.

Inventory increases also played a significant role, adding nearly 1.5 percentage points.

“The mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter went on,” wrote Andrew Hunter, senior U.S. economist for Capital Economics. “We still expect the lagged impact of the surge in interest rates to push the economy into a mild recession in the first half of this year.”

 

If we have another situation in 2023 like we did in the first half of last year with negative GDP turning positive the second half, we're going to still be good. Yes, interest rates are going to slow the GDP. The Fed is still the Fed, and it will raise rates until inflation is smashed under 2%. That's going to take another 6-12 months.

We'll see how much pain the labor market goes through. I want to believe that the economy won't slide into a real hardcore recession, but with the House GOP ready to completely collapse us into a recession over the debt ceiling, all bets are off.

Last Call For Ridin' With Biden, Con't

Friday's strong job numbers and the latest news that inflation is moderating is good news for the country and for President Biden heading into 2023.

The price of gasoline is dropping like a rock. Chicken wings are suddenly a bargain. And retailers drowning in excess inventory are looking to make a deal.


After more than a year of high inflation, many consumers are finally starting to catch a break. Even apartment rents and car prices, two items that hammered millions of household budgets this year, are no longer spiraling out of control.

Global supply chains are finally operating normally, as more consumers spend more on in-person services like restaurant meals and less on goods like furniture and computers that come from an ocean away. The cost of sending a standard 40-foot container from China to the U.S. West Coast is $1,935 — down more than 90 percent from its September 2021 peak of $20,586, according to the online freight marketplace Freightos.

The moderation in inflation is just beginning to appear in government statistics. In October, the Federal Reserve’s preferred price gauge, the personal consumption expenditures index, posted its smallest monthly increase since September of last year, and is up 6 percent over the past 12 months. The better-known consumer price index is rising at an annual rate of 7.7 percent, down from 9.1 percent in June.

“The worst of the inflation is behind us,” said Steven Blitz, chief U.S. economist for TS Lombard in New York. “The question is where does inflation settle?”

The Fed has been raising interest rates sharply since March in a bid to get inflation back to its 2-percent price stability target. Fed Chair Jerome H. Powell on Wednesday noted signs of progress, but said it was far too early to claim victory. Friday’s stronger-than-expected jobs report, which showed wages rising too quickly for policymakers’ tastes, only underscored the point. The central bank does not expect to reach its inflation goal until 2025.

“It will take substantially more evidence to give comfort that inflation is actually declining. By any standard, inflation remains much too high,” Powell told an audience at the Brookings Institution.

Still, there are clear signs of improvement in merchandise prices, as consumers resume their pre-pandemic spending patterns. Excluding volatile food and energy prices, goods prices rose in October by 5.1 percent, down from a 12.3 percent annual rate in February.

But as goods prices begin cooling, pressure is building on services. Rising demand and limited supply — think short-staffed restaurants — has services inflation running at an annual 6.7 percent rate, more than twice the year-ago figure.

“The expectation is that goods prices will continue to disinflate. But services inflation will more gradually slow and will be much stickier,” said Kathy Bostjancic, chief economist at Nationwide.

 

So we're nowhere near being out of the woods yet, but we're past the halfway point. Whether or not we can get through without the economy slamming into recession ditch in the next year or so is the real battle. I have to believe that if Trump were still in charge, we'd already be in a recession. 

We'll see how things go, but I'd much rather have Biden's team in charge of the economy. Fed Chair Jerome Powell, well, we'll see.

Last Call For It's A Gas, Gas, Gas Con't

Gasoline prices have fallen sharply since Election Day, but the news behind that price drop at the pump isn't exactly great.

 

The cost of gasoline is falling so fast that it is beginning to put real money back in the pockets of drivers, defying earlier projections and offering an unexpected gift for the holidays.

Filling up is now as cheap as it was in February, just before Russia’s invasion of Ukraine touched off a global energy crisis. AAA reported the average nationwide price of a gallon of regular Wednesday was $3.50, and gas price tracking company GasBuddy projected it could drop below $3 by Christmas. And all of that relief probably helped drive robust shopping over Thanksgiving weekend.

“People are realizing that they might be back to spending $50 to fill their tank instead of $80,” said Emma Rasiel, a professor of economics at Duke University. “It is the main signal consumers notice on inflation. It is the one thing they are likely to track, how much it has gone up or down, because every week they need to fill up their car.”

But Rasiel cautioned that less-expensive gas can also give consumers the wrong idea. Prices of other goods and services are much less volatile, and there is no indication that this moment of more-affordable fuel is pushing the cost of other things down.

Even as the plunge in prices at the pump helps fuel a national holiday shopping spree, it is a reflection of the financial strain consumers and businesses are confronting worldwide. Prices are going down because demand for oil and gas is falling as countries brace for recession, coronavirus outbreaks in China threaten major financial disruption and drivers cut back on gas-guzzling as they try to save money to cover skyrocketing mortgage payments and stock market losses.

Earlier worries that sanctions on Russian oil would create a shortage in supply and send prices soaring toward the end of the year have, for now at least, given way to ailing economies and jittery financial markets.

“We’re heading into serious recession in Europe and further economic slowdown in the U.S. as people struggle with high interest rates and worry about their personal wealth and savings,” said Ben Cahill, an energy security analyst at the Center for Strategic and International Studies. “Add it all up and it creates a bleak picture for oil demand. Prices are reflecting that.”

Also helping keep prices low at the moment are some key U.S. oil refineries that returned to churning out gasoline after months of being out of commission for maintenance and repairs.

But just as big a factor is the turmoil in China. As its leaders signal that new coronavirus lockdowns are imminent, touching off protests throughout the country, the expected economic fallout has turned oil traders bearish.

China alone accounted for 16 percent of global oil demand last year, according to the research firm Capital Economics, which projects its purchase of oil will drop by 1 million barrels per day in December as coronavirus infections spread. The effect of such a drop on global oil markets is considerable, reducing the price of Brent crude by as much as $10 a barrel, or more than 10 percent.

 

So the Russian oil doomsday scenario hasn't come to pass quite yet, but the global economy is headed for some bad times in 2023. How hard the landing is going to be is still up in the air, but at least gas prices are headed back under $3 for a while. 

Diesel out here in the Midwest is still $4.50-$5 a gallon though, so that's still costing consumers more at checkout. Still, gas prices here in KY are below $3 in several counties.

Beshear also applauds gas prices dropping across the state. ^AH pic.twitter.com/OkQuwvG56l

— Bluegrass Politics (@BGPolitics) December 1, 2022

We'll see what the Fed decides to do with interest rates later this month.

Ridin' With Biden, Con't

No, we're not in a recession and we really haven't been. You have Biden mistaken for Trump when we lost 20 million jobs.

 

The U.S. economy grew at a 2.6% annual rate from July through September, snapping two straight quarters of contraction and overcoming high inflation and interest rates just as voting begins in midterm elections in which the economy’s health has emerged as a paramount issue.

Thursday’s better-than-expected estimate from the Commerce Department showed that the nation’s gross domestic product — the broadest gauge of economic output — grew in the third quarter after having shrunk in the first half of 2022. Stronger exports and consumer spending, backed by a healthy job market, helped restore growth to the world’s biggest economy at a time when worries about a possible recession are rising.

Consumer spending, which accounts for about 70% of U.S. economic activity, expanded at a 1.4% annual pace in the July-September quarter, down from a 2% rate from April through June. Last quarter’s growth got a major boost from exports, which shot up at an annual pace of 14.4%. Government spending also helped: It rose at a 2.4% annual pace, the first such increase since early last year, with sharply higher defense spending leading the way.

 

That's the good news. The not as good news:

Housing investment, though, plunged at a 26% annual pace, hammered by surging mortgage rates as the Federal Reserve aggressively raises borrowing costs to combat chronic inflation. It was the sixth straight quarterly drop in residential investment.

Overall, the outlook for the overall economy has darkened. The Fed has raised interest rates five times this year and is set to do so again next week and in December. Chair Jerome Powell has warned that the Fed’s hikes will bring “pain” in the form of higher unemployment and possibly a recession.

“Looking ahead, risks are to the downside, to consumption in particular, as households continue to face challenges from high prices and likely slower job growth going forward,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a research note.

With inflation still near a 40-year high, steady price spikes have been pressuring households across the country. At the same time, rising loan rates have derailed the housing market and are likely to inflict broader damage over time. The outlook for the world economy, too, grows bleaker the longer that Russia’s war against Ukraine drags on.

The latest GDP report comes as Americans, worried about inflation and the risk of a recession, have begun to vote in elections that will determine whether President Joe Biden’s Democratic Party retains control of Congress. Inflation has become a signature issue for Republican attacks on the Democrats’ stewardship of the economy.

Economists noted that the third-quarter gain in GDP can be traced entirely to the surge in exports, which added 2.7 percentage points to the economy’s expansion. Export growth will be difficult to sustain as the global economy weakens and a strong U.S. dollar makes American products pricier in foreign markets.

 

The problem is a real recession, the job-losing and market-crashing kind, is still a very real possibility, and given the rapid rise in interest rates by Jerome Powell and the Fed, that may only be a matter of time.  Luckily, we're nearing the point where inflation is dropping.

Thursday’s report offered some encouraging news on inflation. A price index in the GDP data rose at a 4.1% annual rate from July through September, down from 9% in the April-June period — less than economists had expected and the smallest increase since the final three months of 2020. That figure could raise hopes that the Fed might decide it can soon slow its rate hikes.

 

I hope that this continues. More rate hikes will eventually crash the economy, that's a guarantee.

Job-A-Palooza, Con't

The "Are we in a recession?" nonsense was ended thunderously in the negative with Friday's spectacular July jobs report.

 

America’s employers added a stunning 528,000 jobs last month despite raging inflation and anxiety about a possible recession, restoring all of the positions lost in the coronavirus recession. Unemployment fell to 3.5%, the lowest level since the pandemic struck in early 2020.

There were 130,000 more jobs created in July than there were in June, and the most since February.

The red-hot jobs numbers from the Labor Department on Friday arrive amid a growing consensus that the economy is losing momentum. The U.S. economy shrank in the first two quarters of 2022 — an informal definition of recession. But most economists believe the strong jobs market has kept the economy from slipping into a downturn.

Friday’s surprisingly strong report will undoubtedly intensify the debate over whether America is in a recession or not.

“Recession – what recession?” wrote Brian Coulton, chief economist at Fitch Ratings, after the numbers came out. “The U.S. economy is creating new jobs at an annual rate of 6 million – that’s three times faster than what we normally see historically in a good year. ‘’

Economists had expected only 250,000 new jobs in July.

 

GDP may have slowed down, but jobs are roaring ahead. Is it possible that Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell might actually know what they are doing? 

We'll see.

Indepen-Dunce Week: Deflater Meister

The Wall Street Journal notes that commodity prices that spiked in April and May have actually dropped all the way below March numbers now that the Fed is putting on the brakes.

A slide in all manner of raw-materials prices—corn, wheat, copper and more—is stirring hopes that a significant source of inflationary pressure might be starting to ease.

Natural-gas prices shot up more than 60% before falling back to close the quarter 3.9% lower. U.S. crude slipped from highs above $120 a barrel to end around $106. Wheat, corn and soybeans all wound up cheaper than they were at the end of March. Cotton unraveled, losing more than a third of its price since early May. Benchmark prices for building materials copper and lumber dropped 22% and 31%, respectively, while a basket of industrial metals that trade in London had its worst quarter since the 2008 financial crisis.

Many raw materials remain historically high-price, to be sure. And there are matters of supply and demand behind the declines, from a fire at a Texas gas-export terminal to better crop-growing weather. Yet some investors are starting to view the reversals as a sign that the Federal Reserve’s efforts to slow the economy are reducing demand.

“Moderating commodity prices are clear evidence that inflation is cooling,” said Louis Navellier, chief investment officer at Reno, Nev., money manager Navellier & Associates.

 

Now, whether or not that means inflation is cooling or the entire economy is cooling is the question.  The Atlanta Fed clearly seems to indicate that the answer is the latter.

A Federal Reserve tracker of economic growth is pointing to an increased chance that the U.S. economy has entered a recession.

Most Wall Street economists have been pointing to an increased chance of negative growth ahead, but figure it won’t come until at least 2023.

However, the Atlanta Fed’s GDPNow measure, which tracks economic data in real time and adjusts continuously, sees second-quarter output contracting by 2.1%. Coupled with the first-quarter’s decline of 1.6%, that would fit the technical definition of recession.

“GDPNow has a strong track record, and the closer we get to July 28th’s release [of the initial Q2 GDP estimate] the more accurate it becomes,” wrote Nicholas Colas, co-founder of DataTrek Research.

The tracker took a fairly precipitous fall from its last estimate of 0.3% growth on June 27. Data this week showing further weakness in consumer spending and inflation-adjusted domestic investment prompted the cut that put the April-through-June period into negative territory.

One big change in the quarter has been rising interest rates. In an effort to curb surging inflation, the Fed has jacked up its benchmark borrowing rate by 1.5 percentage points since March, with more increases likely to come through the remainder of the year and perhaps into 2023.

 

If the Atlanta Fed tracker is right, we're in a recession now, Jerome Powell and the Fed have already overreacted, and further rate hikes are only going to make things worse. 

Just in time for the actual Biden Boom to become the "Biden Recession" all over the TV, heading into 2022 campaign season.

Powell-ing Through Inflation

The markets believe Fed Chair Jerome Powell will announce a 75-basis point hike in interest rates on Wednesday instead of 50 as the reality of trying to stop runaway corporate greed and price hikes falls on his shoulders.

 

Just one month ago, Federal Reserve chairman Jerome Powell said that the central bank was not "actively considering" raising interest rates by three-quarters of a percentage point to fight inflation. But after Friday's consumer price index report showed inflation is rising faster than expected, Wall Street is worried that Powell may have to change his tune. 

Stocks plunged Friday and were down sharply again Monday across the globe. The yield on the benchmark US 10-year Treasury bond rose to 3.27%, the highest level since November 2018. 

Investors are nervous because the Fed could be heading into uncharted territory. A three-quarter point rate increase would certainly show that the Fed is really worried about inflation. 

But a move of that magnitude, although not unprecedented, is exceedingly rare. The last time the Fed hiked rates by 75 basis points was in the Alan Greenspan era: November 1994.  

To be sure, the market still has some doubts that the Fed will be that aggressive at this Wednesday's meeting. According to fed funds futures listed on the CME, traders are pricing in a 60% chance that the central bank will raise rates by only a half point. But expectations for a three-quarters-of-a-point increase have gone up from just 3% a week ago to 40% now. 

Economists at Barclays think the Fed will announce a three-quarter-point hike Wednesday "to reinforce credibility and get ahead of inflationary pressures. The broader game plan will likely be to raise rates as expeditiously as possible." 

Jefferies economists have also now joined the 75 basis point camp, saying in a report over the weekend that "inflation isn't peaking, it isn't even plateauing. It is still accelerating, and it will likely do so again in June." 

The Jefferies economists added that even though "the Fed hates surprising the market ... the sharp increase in inflation expectations" is "an escape clause and gives Powell an out."

 

I would bet on the 75-point hike, and more in the future, and since the real cause of "inflation" is record profiteering by corporations, the rate hikes are going to stop the Biden Boom in its tracks.

 

Things are going to get bad in the months ahead.  

The Worst-Case Scenario, Con't

Another 6.6 million new jobless claims means almost 17 million Americans have filed for unemployment in the last three weeks, and there's no indication this pace is slowing at all.

Jobless rolls continued to swell due to the coronavirus shutdown, with 6.6 million Americans filing first-time unemployment claims in the week ended April 4, the Labor Department reported Thursday. 

That brings the total over the past three weeks to more than 16 million.

The most recent number represents a decline of 261,000 from a week ago, which was revised up by 219,000 to nearly 6.9 million. 

The ongoing surge in filings for unemployment insurance has been exacerbated by the expansion of those who can file claim. The CARES Act has expanded the group to include the self-employed and independent contractors. 

Prior to the social distancing efforts used to combat the coronavirus spread, the jobs market had been strong. In the six-month period prior to a shutdown that has taken offline much of the U.S. economy’s capacity, nonfarm payroll growth had averaged 221,000 a month. 

However, March saw a decline of 701,000 that only began to measure how deeply the virus had impacted the employment situation.

Jerome Powell and the Federal Reserve have finally stepped in with the $2.2 trillion "Main Street" lending program created by the CARES bill for local government and business loans to help keep cities and towns functioning.

The Federal Reserve on Thursday released long-awaited details regarding its Main Street business lending program and several other initiatives it is undertaking to backstop the reeling U.S. economy. 

Under provisions outlined for the first time, the loans would be geared toward businesses with up to 10,000 employees and less than $2.5 billion in revenues for 2019. Principal and interest payments will be deferred for a year.

The Fed said the programs would total up to $2.3 trillion and include the Payroll Protection Program and other measures aimed at getting money to small businesses and bolstering municipal finances with a $500 billion lending program. 

“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” Fed Chair Jerome Powell said in a statement. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.” 

The Main Street loans would be a minimum of $1 million and a maximum of either $25 million or an amount that “when added to the Eligible Borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the Eligible Borrower’s 2019 earnings before interest, taxes, depreciation, and amortization,” whatever is less, according to a Fed release. 

The Fed will purchase up to $600 billion in loans.

Terms would see an interest rate equal to the Fed’s Secure Overnight Financing Rate, currently 0.01%, plus 250-400 basis points with a four-year maturity.

This includes the Payroll Protection Program loans to keep employees paid through the pandemic, but considering we've already seen 16 million people file for unemployment, who knows where actual job losses are.  It's a mess and coming up on Easter weekend means more delays in getting this money out.

We could see that 16 million double by the end of the month.  Social distancing measures are going to require months, and right now this government is nowhere near being able to handle months of five or six million new jobless claims per week.

We need a US Marshall Plan on New Deal steroids, and we needed it 30 days ago.  America's current for-profit model of basic necessities -- food, shelter, water, power, internet, health care -- is done.  It won't survive another six weeks.

I don't know what will replace it.  But if the Trump regime has its way, it'll be the ultimate in Laffer Curve idiocy.

Republican economist Art Laffer, an architect of the Reagan era tax cuts that paved the way for historic budget deficits in the United States, has a plan to rejuvenate today’s pandemic-crippled economy.

Tax non-profits. Cut the pay of public officials and professors. Give businesses and workers who manage to hold on to their jobs a payroll tax holiday to the end of the year.

What about the extra aid funneled to newly jobless workers by the $2.3 trillion fiscal rescue package? Such government spending, Laffer told Reuters in an interview, will only serve to deepen the downturn and slow the recovery.

“If you tax people who work and you pay people who don’t work, you will get less people working,” Laffer said. “If you make it more unattractive to be unemployed, then there’s an incentive to go look for another job faster.”

Laffer’s unconventional plan isn’t just an academic exercise. First of all, he says he has presented it to his contacts at the White House. They include presidential economic advisor Larry Kudlow, who considers Laffer a mentor.

Laffer is also being floated in influential right-wing circles as a good candidate to head a proposed new industry task force aimed at re-opening the U.S. economy as soon as possible. “Bring in the minds like Art Laffer,” Sean Hannity, the Fox News host said April 6 of the proposed task force.

Trump tweeted his support for the new economic task force on April 4, calling it a “good idea.” He hasn’t yet mentioned Laffer, but on Tuesday reiterated his support for a payroll tax cut, saying it would be a “fantastic time” to deliver it.

Trump awarded Laffer the Presidential Medal of Freedom last year.

Every one of these ideas Laffer has is designed to destroy Medicare, Medicaid, and Social Security for good by starving it out and forcing Americans to work until they die.

Which, if this keeps up, will be much sooner rather than later.
This

Trump Goes Viral, Con't

There is a panic component, and a mistrust component to COVID-19, especially in the markets.  The Federal Reserve has dusted off the 2008 playbook, starting with cutting interest rates back to zero as Fed Chairman Jerome Powell puts on his Helicopter Ben Bernanke hat and is dropping $700 billion on the markets.

The Big Casino is open for business again, gang!

The Federal Reserve, saying “the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” cut interest rates to essentially zero on Sunday and launched a massive $700 billion quantitative easing program to shelter the economy from the effects of the virus.

The new fed funds rate, used as a benchmark both for short-term lending for financial institutions and as a peg to many consume rates, will now be targeted at 0%-0.25% down from a target range of 1% to 1.25%.

Facing highly disrupted financial markets, the Fed also slashed the rate of emergency lending at the discount window for banks by 125 bps to 0.25%, and lengthened the term of loans to 90 days.

The markets said "Thanks, I hate it" and immediately went limit down on futures, because the Fed agreeing to blowing all of its ammo this early in the proceedings (when the economy was in record low unemployment/record high markets territory just 30 days ago) now has everyone truly scared.

Powell added that the Fed would be "patient" before raising interest rates again thanks to COVID-19's massive downward effects on the economy.

But nobody's buying it (quite literally, everyone is selling it off).  Trump's press conference yesterday was an absolute disaster.  Again. Nobody believes him anymore, and the markets absolutely tanked as a result.  The Dow was down 12% this morning, some 2,700 points, when trading resumed after the circuit breaker kicked in at the open.

Now the Trump regime is blaming the market losses on "foreign disinformation".

The Trump administration is alleging that a foreign disinformation campaign is underway aimed at spreading fear in the country amid the coronavirus pandemic, three U.S. officials said Monday.

On Sunday, federal officials began confronting what they said was a deliberate effort by a foreign entity to sow fears of a nationwide quarantine amid the virus outbreak. Agencies took coordinated action Sunday evening to deny that any such plans were put in place, as they tried to calm a nation already on edge by disruptions to daily life caused by the virus.

The three U.S. officials did not name the foreign entity they believe to be responsible. They spoke on the condition of anonymity to discuss the sensitive matter.

“Text message rumors of a national #quarantine are FAKE,” tweeted the National Security Council Sunday night. “There is no national lockdown.” The NSC encouraged Americans to follow official government guidance.

The Trump regime is bound and determined to escape any responsibility for this, aren't they?

It won't work, though.  Trump spent the day telling the nation's governors that they were on their own and that they needed to "do more"  Trump especially singled out NY Gov. Andrew Cuomo to attack.

President Trump on Monday chided New York Gov. Andrew Cuomo (D) following a call with governors across the country on the coronavirus, saying the New York governor "has to 'do more.'"

The president swiped at Cuomo in a tweet in which he declared that the teleconference "went very well."

Just had a very good tele-conference with Nations’s Governors. Went very well. Cuomo of New York has to “do more”.— Donald J. Trump (@realDonaldTrump) March 16, 2020

Cuomo, who has at times been sharply critical of the administration's handling of the pandemic, quickly hit back, tweeting that Trump is the one who is "supposed to be the president."

As I said before, Trump is going to dump the blame for this on as many blue state governors as he can, and I'm convinced Fox News State TV will be calling on all of them to resign by the end of the month.

How bad are things? This bad.

Reported US coronavirus cases in March via @CNN:

3/1 - 89
3/2 - 105
3/3 - 125
3/4 - 159
3/5 - 227
3/6 - 331
3/7 - 444
3/8 - 564
3/9 - 728
3/10 - 1,000
3/11 - 1,267
3/12 - 1,645
3/13 - 2,204
3/14 - 2,826
Now - 3,485

— Ryan Struyk (@ryanstruyk) March 16, 2020

The math doesn't lie.  Add at least one zero, if not two, to those numbers for the true figure.

It's going to be bad within weeks, if not days, not months.

Trump's daily COVID-19 "task force" press conference held a few minutes ago in another effort to try to salvage the markets failed spectacularly as the Dow crashed by 3,000 points at closing. He dragged out the experts and finally let them speak, and they basically scared the crap out everyone.

It was needed.  But it came at a price, just like Trump's years of lies and attacking the media.

The grim reality is here.  We're now at a net loss in the markets for the Trump era.  Things are not going to improve soon.

Buckle up, and buckle in.

Here Comes The Repo Man

Remember last week when the Fed had to step in with $53 billion in overnight lending to keep the money markets from imploding?  That problem is continuing, and the Fed has now poured in more than a quarter-trillion dollars last week to keep interest rates from going under and another $105 billion Tuesday.

The Federal Reserve added $105 billion to the nation's financial system on Tuesday in two transactions, seeking to calm money markets and keep interest rates in its intended range. 

The New York Fed continued its streak of market repurchase agreements, or repos, selling $75 billion of overnight repos and $30 billion of repos expiring in 14 days. Banks bid for $80.2 billion in overnight repos and $62 billion in 14-day repos, signaling strong demand in the government-backed investments. 

Last week marked the first time in a decade that the bank had taken such steps to relieve pressure on money markets. The bank offered a total of $278 billion in repos from Tuesday through Friday.

This is a massive economic system alarm bell, and it's happening while Trump is currently got his orange thumb up his ass over Ukraine.

Also last week, the Federal Open Market Committee cut its benchmark interest rate by a quarter of a percentage point, landing in a window of 1.75% to 2%. Fed Chairman Jerome Powell called the repo offerings a temporary action. 

"Funding pressures in money markets were elevated this week, and the effective federal funds rate rose above the top of its target range," he said. 

The Fed's schedule calls for another $75 billion of overnight repos to be sold every business day until October 10, with certain days also offering at least $30 billion worth of 14-day repos.

So the Fed will have added more than one trillion dollars to its asset sheets in four weeks.  The lender of last resort is currently doing just that, and it's the only thing keeping our economy from imploding into a mess right now.

This is on top of impeachment, US troops in Saudi Arabia and the UAE, the Brexit mess in the UK and Israel still unable to form a government.  September 2019 is the month where the wheels came off, guys. I don't know where we're headed from here, but it's not going to be a fun rest of the year, I guarantee it. It definitely feels like 2008 and 1974 had Rosemary's Baby.

I gotta baaaaaaaad feelin' about this...