Are we headed for a world wide meltdown?

[Tiny]

Originally Posted by Why_Yes_I_Do

Interesting article out about the Fed. Basically, the normally dove-ish types on the Fed see a need to up the rates to get a handle on this 'transitory' issue.

What stood out to me was their observation that the current inflation tends to impact the lower income folks disproportionately as it is manifested in the everyday things like food, fuel, home, and rental price increases - which are the mainstay expenses for them..

Very true. Last time I looked the CPI was running higher than inflation in wages, so people are losing purchasing power. Not only that but the lower income folks are more likely to have their savings in things like bank deposits. Right now with inflation at 8% and interest rates at 2% or less, they’re losing ground

[texassapper]

Originally Posted by Tiny

the lower income folks are more likely to have their savings in things like bank deposits. Right now with inflation at 8% and interest rates at 2% or less, they’re losing ground

For the Democrats, that's a feature not a bug.

[Texas Contrarian]

Originally Posted by CaptainMidnight

For it should be plain for everyone to see that almost every elemental piece that makes up the macroeconomy is in much, much worse shape than it was three years ago.

Originally Posted by lustylad

Hmmm... would you kindly elaborate on that? I don't doubt that the pandemic wreaked a lot of havoc, but it hit some sectors of the economy harder than others and it's unclear to me how much damage is permanent versus fixable. Airlines, hospitality, cruise lines etc. got whacked. Big Pharma, online shopping, virtual platforms like zoom all cashed in. Now that the pandemic is segueing into an endemic, the trends should be reversing.

But you say "almost every elemental piece" of the macroeconomy is much, much worse off today. How do you define "elemental" and which specific industries are you referring to?

I'll try to hit some key highlights by way of making a few observations, while trying to stick with trends that were existent prior to the inception of Vladimir's hyperkinetic, 21st century version of Stalin's Holomodor. (After which many trends look much worse, needless to say.)

But first:

Originally Posted by Tiny

The federal debt held by the public as a % of GDP, inflation, and current account deficit as a % of GDP are all up sharply compared to three years ago. Real interest rates are ridiculously low, maybe the lowest they've been in the history of the USA.

The Fed is faced with a dilemma. Keep interest rates low, so we potentially end up with out-of-control inflation. Or jack them way up, in which case we potentially go into a severe recession and interest payments on the federal debt explode.

Like you Lusty Lad, I'm not sure exactly what Captain Midnight means by "elemental piece", but we sure don't look to be in as good of shape as we did back in 2019.

Were I even lazier than I actually am, I might decide that a good place for me to start would be to follow the example of one Joseph Robinette Biden Jr., an experienced practitioner of the fine art of plagiarism, and simply copy & paste those lines. Because that posts hits the nail squarely on the head with regards to the very biggest issues of all.

The economy is burdened by trillions of dollars more in debt than three years ago, though the debt-accumulation trajectory then was already bad enough, and well beyond sustainable without continuing and severe monetary distortions. This will likely be an impediment to growth for years to come.

The Fed is indeed in a trap, caught between the need to "medicate" the economy and the need to cease enabling congress's and the administration's frighteningly out-of-control spending binges.

Demand in large swaths of the durable goods sector has been weakening for several months now. Quill Intelligence (an analysis shop run by Danielle DiMartino Booth in Dallas) just put out an interesting graph showing that inventory levels have been rising faster than the new orders book for four of five months.

The consumer discretionary sector has also been weakening since late 2021 according to a number of analysts.

What about the homebuilding industry? It's been on fire since the start of the pandemic, although it has weakened just a bit lately and homebuilding stocks have corrected enough that Barron's just put out a piece saying they're now in bargain territory. I doubt it, as I believe that a disproportionate number of sales expected to occur in the 2020-2024 period were pulled back into (mostly) 2021, and home affordability indexes are cratering in the face of rising interest rates.

Remember, 30-year fixed rates dropped to about 2.75% during the pandemic for good-credit buyers and stayed near that level for a while.

Now? See link:

https://www.mortgagenewsdaily.com/

https://www.mortgagenewsdaily.com/ma...rates-04052022

The median-income family now has more than just a little bit of difficulty affording a "median-priced" house. If long rates rise further, sales of both new and existing homes could sink precipitously.

Affordability indexes for personal vehicles (cars and light trucks) are cratering as well in the face of shortages, big price increases, and higher interest rates. With tightening financial conditions, you're going to stop seeing a lot of ads for "0%" or near-zero percent car loans offered by the carmakers' financing arms.

Those are just a few of the biggies.

Finally, it's looking like just about every econometrician's analysis shop has put out gradually declining estimates of Q1 GDP. If I recall correctly, consensus forecasts were near or higher that 4% in November-December 2021, but now cluster in the 1.5-2.0% range. (And that was trending before 2/24/22.)

Does any of this appear as though it augurs well for growth going into the second half of 2022 and 2023?

.

[Why_Yes_I_Do]

Now I see why they call you CaptainMidnight instead of CaptainSunshine

I've been getting hammered for several months to refi through my current lender. I was going to consider it because of my favorable equity position and I figured why not remodel a couple additional items, but the qualification hurdles were pretty darned high and tweaky (industry term ;-). BTW: Very high pressure tactics from the Indonesian call hunters.

I decided early on not to do the cash out refi, due the load vs lending rate it would place on my equity. Basically I would not recoup the added load within 3 yrs - my water mark. Anyway, what I noticed with each passing week was the Amount of Savings p/mo & p/yr just kept creeping down and down and down. I still get the occasional call, but no more letters.

Originally Posted by CaptainMidnight

I'll try to hit some key highlights by way of making a few observations, while trying to stick with trends that were existent prior to the inception of Vladimir's hyperkinetic, 21st century version of Stalin's Holomodor. (After which many trends look much worse, needless to say.)

But first:...

[Chung Tran]

The wealthy will feel the slowdown the most. Of course they benefitted most by spiraling asset prices and low interest rates. The poor were fucked already. At least curbing inflation helps them relative to where they are at now. Taxes are not going down for anyone.

[HedonistForever]

Originally Posted by Tiny

Very true. Last time I looked the CPI was running higher than inflation in wages, so people are losing purchasing power. Not only that but the lower income folks are more likely to have their savings in things like bank deposits. Right now with inflation at 8% and interest rates at 2% or less, they’re losing ground

"Losing ground" would imply they had any ground to begin with.


https://www.cnbc.com/2021/08/17/just...s-account.html


Just 30% of the poorest families have a savings account

The median account had $1,010.

Meanwhile, 52% of all U.S. households have a savings account, with the typical account holding $5,000.


Damn!

[Tiny]

Originally Posted by HedonistForever

"Losing ground" would imply they had any ground to begin with.


https://www.cnbc.com/2021/08/17/just...s-account.html


Just 30% of the poorest families have a savings account

The median account had $1,010.

Meanwhile, 52% of all U.S. households have a savings account, with the typical account holding $5,000.


Damn!

Wow! That's crazy. While it goes against my Libertarian instincts maybe Singapore's got the right idea -- force people to save by taking it out of their paychecks.

[Tiny]

Originally Posted by CaptainMidnight

I'll try to hit some key highlights by way of making a few observations, while trying to stick with trends that were existent prior to the inception of Vladimir's hyperkinetic, 21st century version of Stalin's Holomodor. (After which many trends look much worse, needless to say.)

But first:



Were I even lazier than I actually am, I might decide that a good place for me to start would be to follow the example of one Joseph Robinette Biden Jr., an experienced practitioner of the fine art of plagiarism, and simply copy & paste those lines. Because that posts hits the nail squarely on the head with regards to the very biggest issues of all.

The economy is burdened by trillions of dollars more in debt than three years ago, though the debt-accumulation trajectory then was already bad enough, and well beyond sustainable without continuing and severe monetary distortions. This will likely be an impediment to growth for years to come.

The Fed is indeed in a trap, caught between the need to "medicate" the economy and the need to cease enabling congress's and the administration's frighteningly out-of-control spending binges.

Demand in large swaths of the durable goods sector has been weakening for several months now. Quill Intelligence (an analysis shop run by Danielle DiMartino Booth in Dallas) just put out an interesting graph showing that inventory levels have been rising faster than the new orders book for four of five months.

The consumer discretionary sector has also been weakening since late 2021 according to a number of analysts.

What about the homebuilding industry? It's been on fire since the start of the pandemic, although it has weakened just a bit lately and homebuilding stocks have corrected enough that Barron's just put out a piece saying they're now in bargain territory. I doubt it, as I believe that a disproportionate number of sales expected to occur in the 2020-2024 period were pulled back into (mostly) 2021, and home affordability indexes are cratering in the face of rising interest rates.

Remember, 30-year fixed rates dropped to about 2.75% during the pandemic for good-credit buyers and stayed near that level for a while.

Now? See link:

https://www.mortgagenewsdaily.com/

https://www.mortgagenewsdaily.com/ma...rates-04052022

The median-income family now has more than just a little bit of difficulty affording a "median-priced" house. If long rates rise further, sales of both new and existing homes could sink precipitously.

Affordability indexes for personal vehicles (cars and light trucks) are cratering as well in the face of shortages, big price increases, and higher interest rates. With tightening financial conditions, you're going to stop seeing a lot of ads for "0%" or near-zero percent car loans offered by the carmakers' financing arms.

Those are just a few of the biggies.

Finally, it's looking like just about every econometrician's analysis shop has put out gradually declining estimates of Q1 GDP. If I recall correctly, consensus forecasts were near or higher that 4% in November-December 2021, but now cluster in the 1.5-2.0% range. (And that was trending before 2/24/22.)

Does any of this appear as though it augurs well for growth going into the second half of 2022 and 2023?

.

Great post! Time to batten down the hatches and weather proof our portfolios.

[Why_Yes_I_Do]

Originally Posted by Tiny

-- force people to save by taking it out of their paychecks.

You mean Social Security is optional?!? Medicare too?!? I thought they put that shit in a 'lock box' for our future savings, instead of borrowing to finance whatever wet dream de jour and leave behind a worthless IOU.

[Tiny]

Originally Posted by Why_Yes_I_Do

You mean Social Security is optional?!? Medicare too?!? I thought they put that shit in a 'lock box' for our future savings, instead of borrowing to finance whatever wet dream de jour and leave behind a worthless IOU.

Sorry to break the news to you, but they pulled the wool over your eyes. There is no lock box. We're 20 trillion in debt, not counting what the federal government owes the federal government.

[HedonistForever]

Paul Krugman, "debt means absolutely nothing unless it is a Republican causing it"

[texassapper]

Originally Posted by Tiny

Sorry to break the news to you, but they pulled the wool over your eyes. There is no lock box. We're 20 trillion in debt, not counting what the federal government owes the federal government.

Are you implying the govt. LIED to us???

I'm shocked.



But yeah we're about to see a global meltdown... Africa is going to be starving very soon... and more than normal..

I'm sure we will reprise "we are the world" in a heartbeat... then everyones profile pics will be a starving african kid.

When blacks ask for reparations, we can just show them the starving kids in Africa and tell them, "Bitch, your ancestors already won the lottery by being taken from Africa. You should be thankful you don't live there."

[dilbert firestorm]

california is talking reparations.
https://apnews.com/article/business-...2cb384246e15c4

[texassapper]

Originally Posted by dilbert firestorm

california is talking reparations.
https://apnews.com/article/business-...2cb384246e15c4

They want a lump sum payout, I'm all for it. But the tradeoff has to be an end to all race based set asides. In fact the Federal and state governments as well as private enterprise should be prohibited from asking what race a person is. Same for universities...

You want your 50K or whatever amount it is... fine... the liquor stores and Nike will benefit greatly... but thats the end to the race grift.

Of course it will be argued they need both because... well because the folks who think they need it assume that Blacks are incompetent and incapable of making it on their own.

[1blackman1]

Originally Posted by Tiny

Wow! That's crazy. While it goes against my Libertarian instincts maybe Singapore's got the right idea -- force people to save by taking it out of their paychecks.

Isn’t that exactly what social security is.