Both the headline and core rates of PCE inflation were up last month:
On a conventional year-over-year basis, headline PCE was up 2.3% and core PCE was up 2.8%. Both are higher than they were in September. Sadly, this is the kind of news likely to convince the Fed that "the fight against inflation isn't over," and therefore they should hold off on further interest rate cuts.
This is a shocking development. Who could have known that inflation in the PCE would come in a little below the CPI for the same month?
https://fred.stlouisfed.org/graph/fredgraph.png?g=1BMyz
Nevertheless I will bet (even money) that when the PCE inflation for November comes out it will be a little below CPI inflation. Any takers?
Of course this news will clearly indicate to the Fed that they must change course from what they were planning when the CPI came out a couple of weeks ago.
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Let me take this opportunity to wish everyone a Happy Thanksgiving
May the food be great, and the mood jovial around your tables.
Kevin take a day off
I'm glad you survived the great Turkey culling of 2024! (wouldn't want you to be processed by an illegal ali.....immigrant, or an underaged worker - or both)
Just wait until the 25% tariffs kick in. You ain't seen nuthin' yet.
Word.
I think they keep interest rates high until housing prices start to seriously dive, which they are in some places but not enough yet. Sells have to be broken from their aspirational attachment to these unsustainable prices.
Democrats should start blaming Trump for this, since the specter of his anticipated reign of terror on the economy (and all else) is the primary driver for this pick up in inflation.
Don't know if that is true, but I really don't care anymore. One lessen from the MAGA GOP is that they blame the other side for any negative event, true or not. Keep repeating until the people start believing. You get very little push back from the media and most of the American electorate are morons anyway (as proven this Nov 5th).
This.
The MSM is crediting Trump with the bump in stock prices, so, yeah, he should definitely get the blame for price hikes.
Prediction: he will get the blame but his voters won't care because he's shipping illegals out by the planeload, fueled by liberal tears.
It's becoming clearer all the time that monetary policy is not affecting inflation. It does serve two purposes, though. It justifies Jerome Powell's salary and prestige, and it pays rich people upwards of a trillion dollars a year in risk free returns.. (Do I need to point out that bondholders are overwhelming rich?)
Monetary policy loses traction when the president elect is dispensing future tariffs with abandon. And, if the executive branch acts as promised, it would be monetary policy that will be the last resort against both galloping inflation and wrenching depression.
If your inflation is really caused by too much money, then monetary policy might help. If it's caused by a shock to supply (pandemic, drought, or war) or by oil cartel or mismanagement of tariffs, probably not.
Or maybe I should say, monetary policy just shifts the pain to people who are thrown out of work by interest rate hikes.
In 2023, the US Treasury paid out $658 billion in net interest (cash interest to investors), is not quite $1T. Moody's / Finch / S&P credit ratings for the US is AA+ / AA+ / AAA (negative outlook), not exactly risk free, especially with the MAGA GOP nutjobs playing with the national debt limit approvals and many of them calling for defaulting on the national debt.
SVB invested a boatload in long T bonds. Ask them if they are a risk free investment.
Without a positive interest rate, at least enough to cover anticipated inflation and the risk of locking up your money for the term of the bonds, why would anyone invest in Treasury bonds/bills?
CBO estimates that Treasury payments will be $892B in 2024. Some of that is paid to other parts of the Government like the SSA, but it doesn't include interest on reserves paid by the Fed, which would be maybe $350B.
And why does a government that prints money need to borrow money (issue bonds) in the first place? (In reality, Treasury securities are just future money, "printed" using the same machinery and out of the same thin air as any other form of fiat money.)
If people want a return on capital, let them do something useful with it.
SVB's problem was liquidity, not risk of non-payment of it's Treasury holdings. The rise in interest rates depressed the market value of the bonds. SVB couldn't sell the bonds to cover the run on deposits and couldn't wait for the Treasury to pay full value at maturity.
Perhaps you can explain how the government can actually fund the $1.8 billion deficit this year without borrowing. When Treasury pays for stuff, like SSI, Medicare, interest, guns, butter, etc., they actually need to transfer funds electronically into people's accounts or write checks that people can cash. The recipient banks expects Treasury to actually send them money.
You are correct that selling bonds is how we "print" the money, since there is only about $55B in paper money actually circulating, How else do you propose they "print" the money? Details please.
SVB's problem was liquidity and the depressed market value of their T-Bond holdings. This term risk is still one of risks of holding long T Bonds, along with tying up you money for many years, and requires a positive yield to compensate for taking the risk. Plus the risk of those MAGA schmucks doing something colossally stupid.
The US Government makes payments simply by marking up ledger entries at the Federal Reserve Bank. It can do this at any time that it chooses, in any amount that it chooses. The Government does not need to “have money” to do this, and there is no condition of deficit or debt that can prevent it from doing this as it chooses. Marking up ledger entries is what people are referring to when they say that the Government “creates money out of thin air.”
There are procedures that the Government follows when it creates money. The procedures are undoubtedly more complicated then they need to be, but the procedures are entirely at the discretion and under the control of the Government. No outside agency has any say. Sometimes the procedures require the creation and sale of Treasury bonds — commonly referred to as borrowing — but that action is simply marking up of different ledger accounts, also at the discretion and under the control of the Government.
Short version: If it wanted to, the Treasury could simply write checks for spending that Congress has authorized, and the Fed just cash the checks, or accept them for deposit.
Beyond the legal issues that such schemes would circumvent the debt ceiling laws, like the Fed running a multi trillion $ payment deficit, or Treasury minting and depositing the proverbial trillion $ coins at the Fed, has any other large, stable, investment grade rated, non authoritarian country ever try to do this in modern times? Try to run a multi trillion $ payment deficit from its central bank in lieu of issuing debt to fund its deficits?
If it hasn't happened yet, maybe there is a good reason for that.
A country that creates money out of thin air can spend more than it taxes, and can do it indefinitely. What I'm asserting is that when you look past the (legally required, but laws can be changed) complications that are commonly referred to as borrowing, that's exactly what's happening. Here and in Japan and the UK, among other places.
Also: Debt ceiling? That's not a debt ceiling, it's a political football.