If the Atlanta Fed’s GDPNow nowcast is to be believed, after languishing near zero growth for most of the third quarter, in the past few days the US economy is now showing growth for the third quarter of 2.3%.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 2.3 percent on October 3, down from 2.4 percent on September 30. After this morning’s construction spending release from the US Census Bureau and the Manufacturing ISM Report On Business from the Institute for Supply Management, a decrease in the nowcast of third-quarter real personal consumption expenditures growth from 1.0 percent to 0.7 percent was slightly offset by an increase in third-quarter real gross private domestic investment growth from -4.2 percent to -4.1 percent.
Of course, this probably means that September inflation is going to come in higher than in August.
PNK - have read some conclude that the Fed's clear absence from action and even comment on the world's chaos is a sign they are committed to their rate hikes and their ostensible fight against inflation (or as some would contend, their fight against the WEF/Davos crowd). Is that a fair read, or do you have a different view?
The Fed's immediate gain from the interest rate hikes is a stronger dollar--which pulls capital in from abroad (and given the government's unwillingness to rein in spending, the Fed quite possibly realizes that the capital influx is what will keep the US system afloat while inflation sorts itself out).
While doing a bit of reading on Volcker earlier I came across a summary of some his congressional testimony and other commentaries on his rate hike strategy--and one of the observations Volcker himself made was that Fed interventions alone would not bring down inflation with any rapidity. Essentially Volcker himself confirmed what I have suggested in my Substack more than once--that the narrative of Volcker "crushing" inflation was a load of narrative horse hockey. Even Volcker apparently didn't believe that.
The catch 22 for the global financial system is that the other central banks have to either move in conjunction with the Fed or watch their currencies weaken, and then watch capital flow from their economies to the the US. Europe has had negative interest rates for years (a lunatic idea if there ever was one), which means the European governments are even more addicted to cheap money than the US. Raising interest rates in this environment upsets every applecart imaginable, so the nations of the world have two choices: raise rates, crash their stock markets, and then their economies, or keep rates low, watch their currencies depreciate, spiking inflation which then crashes their economies.
Heads the world's central banks lose; tails the world's central banks don't win.
This was the same reality Volcker and the US Treasury faced in the mid 80s, which led to the Plaza Accords to bring a measure of equilibrium to interest rates worldwide and stop currency depreciations against the dollar. Of course, that came too late for the Latin American countries, which were already imploding under unsustainable foreign debt.
Whether the Fed is "committed" to the fight against inflation is, I think, immaterial. The currency situation means the Fed at a minimum can't lower interest rates at this point, not without sacrificing the dollar's current advantage as the strongest currency on the table (remember, at this point strength among fiat currencies is relative; the dollar is "strong" because it is appreciating against most of the world's major currencies).
The difference between now and the 80s is that Powell is no Volcker, but neither is Lagarde at the ECB, neither is Andrew Bailey at the Bank of England, and neither is Haruhiko Kuroda of the Bank of Japan. The banks are being led by midgets at a time when the need to be led by giants.
PNK - have read some conclude that the Fed's clear absence from action and even comment on the world's chaos is a sign they are committed to their rate hikes and their ostensible fight against inflation (or as some would contend, their fight against the WEF/Davos crowd). Is that a fair read, or do you have a different view?
The Fed's immediate gain from the interest rate hikes is a stronger dollar--which pulls capital in from abroad (and given the government's unwillingness to rein in spending, the Fed quite possibly realizes that the capital influx is what will keep the US system afloat while inflation sorts itself out).
While doing a bit of reading on Volcker earlier I came across a summary of some his congressional testimony and other commentaries on his rate hike strategy--and one of the observations Volcker himself made was that Fed interventions alone would not bring down inflation with any rapidity. Essentially Volcker himself confirmed what I have suggested in my Substack more than once--that the narrative of Volcker "crushing" inflation was a load of narrative horse hockey. Even Volcker apparently didn't believe that.
The catch 22 for the global financial system is that the other central banks have to either move in conjunction with the Fed or watch their currencies weaken, and then watch capital flow from their economies to the the US. Europe has had negative interest rates for years (a lunatic idea if there ever was one), which means the European governments are even more addicted to cheap money than the US. Raising interest rates in this environment upsets every applecart imaginable, so the nations of the world have two choices: raise rates, crash their stock markets, and then their economies, or keep rates low, watch their currencies depreciate, spiking inflation which then crashes their economies.
Heads the world's central banks lose; tails the world's central banks don't win.
This was the same reality Volcker and the US Treasury faced in the mid 80s, which led to the Plaza Accords to bring a measure of equilibrium to interest rates worldwide and stop currency depreciations against the dollar. Of course, that came too late for the Latin American countries, which were already imploding under unsustainable foreign debt.
Whether the Fed is "committed" to the fight against inflation is, I think, immaterial. The currency situation means the Fed at a minimum can't lower interest rates at this point, not without sacrificing the dollar's current advantage as the strongest currency on the table (remember, at this point strength among fiat currencies is relative; the dollar is "strong" because it is appreciating against most of the world's major currencies).
The difference between now and the 80s is that Powell is no Volcker, but neither is Lagarde at the ECB, neither is Andrew Bailey at the Bank of England, and neither is Haruhiko Kuroda of the Bank of Japan. The banks are being led by midgets at a time when the need to be led by giants.
Elections are only weeks away.
“Is it real or is it Memorex?”
“October surprise?” or legerdemain?
It’s all manipulated isn’t it?. All of it.