Business surveys published on Friday indicate that economic activity in Europe declined sharply in September, raising the risk of recession in one of the world’s industrial powerhouses as governments grapple with surging prices and disruptions from Moscow’s attack on Ukraine.
With Asian economies also struggling with rising interest rates and weakening exports, this leaves the U.S. as the only large economy showing a degree of resilience.
Don't worry, though! The Fed is doing its level best to wreck the US economy too. Pretty soon every region in the world will be collapsing.
But at least inflation rates will come down. Maybe we'll even be able to add deflation to our list of economic disasters.
Evidently the Left learned effectively nothing from the errors of the 1970s in re their continued wishful thinking, inflation denialism/minimalisation.
Dude, money inflation has stopped and is declining. Excess inventory and slowed sales are reversing prices in the 3rd quarter. The dollar unlike the euro is at a 20 year high making credit cheap. Let's also note back to school was a success.
Your point is dead. Are you a retard????
Apparently, the Right has learned nothing from decades of wealth inequality. Or is that your intended outcome?
High inflation is bad when it exceeds wage growth. Inflation in general is good for debtors since it reduces the real value of debt. Since middle class consumption drives the economy, you'd think you'd want the middle class to have more disposable income to spend.
But since right wing economics isn't actually about growing the economy, and instead it's about privileging the rents of people with capital, they try to eliminate inflation so their bond coupons don't devalue.
morrospy - respectfully, inflation as a vehicle to reduce income inequality is both politically destructive (meaning voters dislike inflation) and sociologically problematic (high inflation is bad for savers including seniors).
I THINK we need sustained growth, with low and stable inflation. As a reminder the average American, adjusted for inflation, earned less last year...not good
Sustained growth, stable inflation, wages that beat inflation are all
good goals. But the question is how do you achieve that in our current unusual moment? And is the '70s really the right parallel in our history for determining behavior now ? Inflation was high for much of that decade at the same time as unemployment was also quite high; the stagflation people talk about. But unemployment right now is half what it was then and inflation is barely higher and would appear (too soon to tell for sure) to be coming down. I think it's fair to note that team transitory has been wrong for the past year but the inflationistas were wrong for over a decade.
RZM - COVID presented a once in a lifetime challenge. While I don't think the Fed has an easy task, as I state above, I do believe that high inflation is politically destructive and sociologically damaging. Frankly, it does not really matter what I think, the actions of the Fed speak for themselves....
The impact of higher Fed Funds will be slower growth/possibly negative growth and higher unemployment. So I don't take higher Fed rates lightly.
This is a recurring comment of yours. Plz elaborate. What was driving inflation of the 70's ? What's driving it now ? In short , can you explain exactly what you think the errors of the 70's were and how that pertains to the situation right now ? Thanks in advance.
Is it inflation panic (as in an over hyped concern) or is it real inflation, gas constraints in Europe and some other 'real' challenges?
Eh, gas?????? Nope.
yes natural gas supply is a major challenge now in western Europe.
Maybe not
Kevin you’re going off the deep end here man
The only economic indicator that signaled the need for this latest rate hike was the anti-Biden "sentiment" reported in the financial press as "inflation panic."
Kevin minimized inflation too much. That doesn't mean maximizing it is the right answer. The prior hikes were called for. This isn't.
It's like the Fed can't see what's about to happen in Europe.
Nothing is happening in Europe.
It's hard to find an anonymous comment that is going to be the stupidest one I read all day this early in the morning, but you've done it.
You keep on telling the story.
You are feeding a troll.
You need beating up. No longer post you will.
Kevin, interest rates are still below average. Once again Europe is irrelevant and Asian exports were already down. The article is trying to tell a story that does not exist.
Europe is irrelevant? Opinion discarded.
They are going to have to find as much replacement as possible for Russian gas. They will need dollars to do so. You may have noticed the Euro is at a very, very low exchange versus the dollar and will go lower.
So if by "Europe is irrelevant" you mean you favor a very bad outcome for Ukraine because Europe's economy collapses and we threw them an anchor instead of a lifeline, then yeah. It will be irrelevant because it will be Putin's bitch.
Now tell us why you really want interest rates raised.
I could care less about nominal rate hikes. The political will will be gone soon enough as each month yry inflation drops. Europe is fixing natural gas prices as we speak and there is enough to last the winter. If they really want it, take their effing soldiers and "take it".
I blame Springsteen 2023 concert tickets.
The only thing rating Springsteen ahead of Clapton in my estimation is the Boss isn't antivaxxx, as Slowhand is.
Aside from that, I wouldn't want to know either from Adam in Heaven.
I'm often accused of being a cynical SOB with nothing good to say about anything. Well... see what I mean? Humanity is ready to impoverish itself, wage war on itself, and otherwise sow chaos and discord. We collectively empower people like Putin, Trump, Xi, MBS, Khamenei, Modi and all manner of greater and lesser demagogues, dictators, and terrorist fighters. Our political and economic systems guarantee conflict and exploitation. Organized criminal gangs run drugs and commit mass murder. The merchants of death sell weapons of war to lunatics who slaughter little kids in schools etc.
But hey... my life is still decent for the time being. And our congress is still busy debating the finer points of meaningless policy. So there's that.
Good luck.
And yet, people call you a cynic!
I know!
The suspects are all in their mid- to late teens, but Rabbitt would not release their precise ages. One was arrested late Thursday night at a house in the Detroit area. The other two were arrested in Battle Creek — one on Wednesday and one Thursday.
This is what makes me cynical.
https://www.woodtv.com/news/calhoun-county/bcpd-3-arrested-in-drive-by-killing-of-2-year-old/
Maybe we can make a chart to explain this. Lead exposure! Systemic racism! Tax policy! Police brutality! War on drugs! What is the excuse today?
In Britain, Liz Truss is angling for tax cuts. Because as we all know, tax cuts solve all problems.
/S
Dont forget removing the cap on Banker's bonuses! Because the UK's economic problems are obviously due to not enticing enough bankers to London. What else could it possibly be?
Life ain't nothin' but bitches & rubles.
Inflation is pretty much under control but nobody is listening. There should be a rule that the Fed may not move interest rates 60 days before a federal election like the DOJ rule. I wonder if Powell knows that if he engineers a recession and Trump wins he will be fired and all his interest rates raises will vanish. What I’m saying is that Powell needs to realize that his position is among all other things, political, and that does need to factor in his decision making.
I don't think interest rate moves can have any significant effect on the economy in 60 days. It usually takes many months for rate hikes/cuts to have much effect at all.
If there is any short-term effect, it's the stock market. 401(k)'s are taking a big hit right now (it's the worst year ever for 60/40). Not sure how much that will affect the Nov vote.
I do worry about a change in Congress. A GOP House or Senate would possibly be the most radical party control in our history (much worse than during the Obama or Trump years). Even with a Dem president, GOP may have the tools to wreck the economy. Expect hostage-taking like we've never seen before. Any self-restraint they had in the past is now gone.
There is no "Trump wins". You still don't get it.
No lies detected.
Even Judge Dearie-est ain't buying the bullshit El Jefe is peddling.
I hope Cokedup Werewolf Aileen C chokes on an arepa.
I wonder if Powell knows that if he engineers a recession and Trump wins he will be fired and all his interest rates raises will vanish.
I doubt he "knows" this because predictions aren't facts. It's very likely a recession in on the way. The US economy may indeed have already slid into the early stages of one. But whether or not a Republican beats Joe is mostly a matter of A) whether inflation is tamed or not and, B) whether the coming recession (if it arrives) is mild.
Avoiding recession altogether (ie, a "soft landing" or mere slowdown) would be the most desirable outcome from Biden's point of view. But that's a hard thing to pull off, and, Kevin's nonchalance notwithstanding, it's far from clear lack of decisive action on the part of the Fed will get the job done.
We're likely to see A) more benign inflation numbers in the months ahead (partly thanks to the tightening you're all complaining about); B) the Fed beginning to back off; and, C) after a period of economic weakness for much of 2023, a return to higher growth by year's end, heading into 2024.
At least that's my take. Sure, a horrendous, meat-grinder recession that last for a couple of years is possible, I guess, but I don't think it's likely: with an improvement in supply chains, the next recession is going to be much more of the classic, old-school "Fed taking away the punch bowl" variety, and that suggests an equally old school V-shaped recovery, rather than the "bubble-burst, debt overhang" style recessions we saw in 90-91, 01 and 07-10.
It seems as far as Kevin is concerned it is a case of “The answer is cheap money. Now, what was the question?” and/or “You can pry the cheap money from my cold, dead hands.”
I think this is a fair summary of the current situation:
Weirdly, the market consensus thinks that the Fed is going to raise rates somewhat more, maybe even 125 or 150 basis points, and then, around six or seven months from now, the market expects that they mysteriously are going to start easing. Basically, the idea is that they are going to hike interest rates significantly more, and then they are going to drop them back down. To me, that’s a strange thing to predict because why bother with anything then? If you’re taking rates up and then back down, why bother taking them up? Why not just do nothing? It’s like a six-foot-tall man who’s in shape and weighs 185 pounds saying: «I’m going to put on 100 pounds this holiday season, and then I’ll take it off with a crash diet by Easter.» What’s the point of that? That’s not healthy, it’s very bad.
Another thing going on. Powell says the housing market needs a "difficult correction" to make home prices affordable again. However, it's questionable that the recent steep hikes in mortgage rates will make that happen. High rates mean everyone who bought a mortgage more than a few months ago are "locked in." They can't afford to move because they're paying 3% and don't want to pay 6% or 7%. That sharply reduces the supply of housing on the market, which works against the idea of bringing down prices. Housing was not a healthy market, but the Fed actions may be making it even more unhealthy.
A lot of economic indicators are flashing red. It's nearly impossible to see inflation "persist" in that environment. Deflation may soon be a bigger risk than rising prices.
Nope, the key ones are flashing green. The Stock market fell 33% in 1987. A liar it is and shorted squeezed it will be.
>>They can't afford to move because they're paying 3% and don't want to pay 6% or 7%. That sharply reduces the supply of housing on the market<<
Nice theory. But it never works out that way. Prices are already coming down, and every time we've seen a market correction in the past the supply of buyers in the early stages declines more rapidly than the supply of sellers. This is mostly because first time buyers are very interest rate sensitive, and when they exit en masse (that's also driven by market psychology, of course, not only rate hikes), the market invariably weakens. Remember: there are always people who need or very much want to sell*, and in the early stages of a housing slowdown we often see such sellers rush to market to beat falling prices. Also, time lags in housing development have an effect, too: projects that were just on the drawing board in the hot market of late 2020 in many cases are just hitting the market now. Both of these dynamics tend to exert downward pressure on prices.
*If you really need/want to sell (transfer or retirement or the house is just too damn small now that that the second kid has arrived!), or, say, you bought a long time ago and are sitting on a ton of equity, a hike in rates is going to have limited disincentive effect, especially given the existence of adjustable rates. The rational move is often to do the deal now and refi at a more attractive rate for a fixed 30 a couple years down the road.
The surge in housing had everything to do with COVID and very little to do with the monetary stimulus which is carrying through now. It's really supply and demand compounded by the under building of single family and especially rental units. We have rentals going up all over southern New Jersey. But new housing is scarcer and very expensive. It's really just supply and demand. Not a lot of land left to build on close enough to civilization.
Building materials were up in cost tremendously during COVID but have moderated .
Abolish all taxes except income taxes with no types of income excluded or favored.
For most of the last 67 years, the Fed rate has been higher than it is right now -- https://fred.stlouisfed.org/series/DFF
I want to remind you that for the better part of the prior decade, we were at the ZLB -- something to think about when reflecting on DeLong's book. Functionally, our economy has structurally changed if we have to permanently remain at the ZLB.
You quite literally want to have your cake and eat it. You've argued inertia of the economy we have, that nothing has structurally changed, yet here you are arguing that the economy cannot accommodate a rate level that was unremarkable for most of the last 67 years.
Well said. People have been pointing out for quite a while that when rates are at zero, there's nowhere else to go but up (although I did hear something about negative rates in Canada and Europe, which is insane to me. That was in regards to mortgages though, not sure how that even works.)
The chart shows Fed rates all over the place, in the early sixties it was sub 2% and the last 20 years sub 2%. There is a lot of movement and of course the peak occurred during the Volcker years. If you compare the chart with the inflation chart you barely have correlation except with the Volcker years. Basically what I see it is a lot of experimentation and frankly one must wonder if economic growth was being constrained. The real point is that the rates need to reflect fundamental market conditions and not just allow banks to profit at the expense of everything else. At times, prior to 2000, corporate profits in the money sector exceeded all profits in all other sectors combined, so yes, returning to the “old ways” could be very detrimental to the economy.