US Gross National Debt Jumps $723 billion in 12 Weeks, Yellen ‘Very Worried about Sustainability of US Debt Trajectory’

But only a few lost souls in Congress care. Even as lawmakers are trying to cobble together a tax-cut bill that would cut revenues by $1.5 trillion over ten years, the gross national debt has spiked $723 billion over the past 12 weeks since Congress suspended the ‘debt ceiling.’ It just hit $20.57 trillion, or 105% of GDP.
Over the past six years, since November 2011, the gross national debt has surged nearly 40%, or by $5.8 trillion. Back in 2011, gross national debt amounted to 95% of GDP. Before the Financial Crisis, it was at 63% of GDP. There are no signs that the relentless rise in the debt is slowing down. On the contrary – the tax cuts are going to steepen the curve:
***
In the chart above, note the last three debt-ceiling fights – the flat lines in 2013, 2015, and 2017, followed each time by an enormous spike when the debt ceiling was lifted or suspended, and when the ‘extraordinary measures’ with which the Treasury keeps the government afloat were reversed.

This post was published at Wolf Street on Nov 30, 2017.

Did Janet Yellen Just Recommend Buying Bitcoin

Janet Yellen’s last semi-annual testimony before Congress as Fed Chair has just concluded, and as usual it was filled with long-winded platitudes, which were enough to make the blood of anyone actually listening to her slow-motion drawl, come to a boil.
For one, Yellen’s hypocrisy hit bitcoinian levels when she had the temerity to say that she is ‘very disturbed’ about the trend toward rising inequality, noting that the central bank only has a ‘blunt tool’ that can’t be used to target certain groups. She’s right: the “blunt tool”, also known as a money printer, is can – and has – been repeatedly used to target a certain group: the ultra wealthy, i.e., the 0.1%, those who as Credit Suisse showed two weeks ago, have never been wealthier.
And just to make sure all your blood has boiled over, Yellen added that the Fed is very focused on ‘very disturbing long-term trends’ in inequality adding that “our own focus”’ is on taking those trends and studying them… and making them bigger than ever she should have also added.
Demonstrating her extensive skills of pointing out the obvious, Yellen also said that ‘we’re suffering from slow productivity growth,’ and there should be a focus on how that can be improved. It appears that the Fed is unaware that most employees spend several hours a day on Facebook, LinkedIn and SnapChat; it also appears that the Fed is unaware that most employers are aware of this, and is why there has been so little wage growth to “reward” this collapse in productivity.

This post was published at Zero Hedge on 29, 2017.

Walking in Their Footsteps: Powell Will Maintain Status Quo at Fed

It looks like Trump’s pick to chair the Federal Reserve plans to walk in the footsteps of his predecessors.
In other words, we can expect the legacy of Ben Bernanke and Janet Yellen to continue unbroken. That means a continuation of interventionist monetary policy, artificially low interest rates into the foreseeable future, and plenty of quantitative easing when the time comes.
Yes. The new boss looks a lot like the old boss.
Jerome Powell testified before the Senate Banking Committee on Tuesday. The New York Times described it as a ‘relatively placid affair.’
Maintaining the status quo doesn’t set off too many fireworks.
Democrats seem OK with the pick. Interestingly, the people who were against Powell when he was an Obama appointee are OK with him now that he’s a Trump appointee.
Some Democrats have indicated they might oppose the nomination. But, importantly, Mr. Powell drew little opposition from conservative Republicans who opposed both his nomination as a Fed governor in 2012 and his reappointment in 2014. Senator Dean Heller, a Nevada Republican who voted against Mr. Powell both times, said he was trying to get to yes.’

This post was published at Schiffgold on NOVEMBER 29, 2017.

Dollar Jumps As Yellen Goes Full Bernanke: Warns “Asset Valuations Are High” But Risk Is “Contained”

Yes, departing Fed chair Janet Yellen used the ‘c’ word…
Federal Reserve Chair Janet Yellen, in prepared remarks ahead of what may be her last appearance before Congress as head of the central bank, somewhat gloated at the steadily brightening picture for the U. S. economy she has left behind for Jay Powell (while downplaying the risks of financial instability).
‘The economic expansion is increasingly broad based across sectors as well as across much of the global economy,” Yellen said in prepared testimony to the bicameral Joint Economic Committee on Wednesday in Washington. ‘I expect that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the job market will strengthen somewhat further, supporting faster growth in wages and incomes.”

This post was published at Zero Hedge on Nov 29, 2017.

US Futures, World Stocks, Bitcoin All Hit Record Highs

US equity futures continued their push higher into record territory overnight (ES +0.1%), and the VIX is 1.5% lower and back under 10, after yesterday’s blistering surge in US stocks which jumped 1%, the most since Sept. 11, following Powell’s deregulation promise, ahead of today’s 2nd estimate of U. S. Q3 GDP which is expected to be revised up. U. S. Senate Budget Committee sent the tax bull to the full chamber to vote, and on Wednesday Senators are expected to vote to begin debating the bill. It wasn’t just the S&P: MSCI’s all-country world index was at yet another record peak after all four major Wall Street indexes notched up new highs on Tuesday. Finally, completing the trifecta of records, and the biggest mover of the overnight session by far, was bitcoin which topped $10,000 in a buying frenzy which saw it go from $9,000 to $10,000 in one day, and which is on its way to rising above $11,000 just hours later.
In macro, the dollar steadies as interbank traders and hedge funds fade its rally this week; today’s major event will be testimony by outgoing Fed chair Janet Yellen after Powell said there is no sign of an overheating economy; the euro has rallied on strong German regional inflation while pound surges on Brexit bill deal news; yields on 10-year gilts climb amid broad bond weakness; stocks rise while commodities trade mixed.
In Asia, equity markets were mixed for a bulk of the session as the early euphoria from the rally in US somewhat petered out as China woes persisted (recovered in the latter stages of trade). ASX 200 (+0.5%) and Nikkei 225 (+0.5%) traded higher. Korea’s KOSPI was cautious following the missile launch from North Korea, while Shanghai Comp. (+0.1%) and Hang Seng (+-0.2%) initially remained dampened on continued deleveraging and regulatory concerns before paring losses into the latter stages of trade. Notably, China’s PPT emerged again with Chinese stock markets rallied in late trade, with the CSI 300 Index of mainly large-cap stocks paring a drop of as much as 1.3% to close 0.1% lower. The Shanghai Composite Index rose 0.1%, swinging up from a 0.8% loss, with property and materials companies among the biggest gainers on the mainland. The Shanghai Stock Exchange Property Index surged 3.8%, the most since August 2016. The Shenzhen Composite Index was little changed, after a 1.2% decline, while the ChiNext gauge retreated 0.4%, paring a 1.5% loss. In Hong Kong, the Hang Seng Index was little changed as of 3 p.m. local time, while the Hang Seng China Enterprises Index fell 0.3%Stocks in Europe gained, following equities from the U. S. to Asia higher as optimism over U. S. tax reform and euro-area economic growth overshadowed concerns about North Korea’s latest missile launch. The Stoxx 600 gained 0.8%, reaching a one-week high and testing its 50-DMA. Germany’s DAX, France’s CAC, Milan and Madrid were all up between 0.5 and 0.7% and MSCI’s all-country world index was at yet another record peak after all four major Wall Street indexes notched up new highs on Tuesday. ‘It seems to me markets are still trading on the theory that the glass is half full,’ said fund manager Hermes’ chief economist Neil Williams.

This post was published at Zero Hedge on Nov 29, 2017.

The Yellen Put – Friend Or Foe?

The term ‘Greenspan Put’ was coined after the stock market crash of 1987 and the subsequent bailout of Long Term Capital Management in 1998. The Fed under Chairman Alan Greenspan lowered interest rates following the fabled event of default and life continued.
The idea of the Greenspan Put was that lower interest rates would cure the market’s woes. Unfortunately, the FOMC has since fallen into a pattern whereby longer periods of low or even zero interest rates are used to address yesterday’s errors, but this action also leads us into tomorrow’s financial excess. As one observer on Twitter noted in an exchange with Minneapolis Fed President Neel Kashkari:
‘Central Bankers are much like the US Forest Service of old. Always trying to manage ‘nature’ and put out the little brush fires of the capitalist system, while they seem incapable of recognizing they are the root cause of major conflagrations as a result.’
When the Federal Open Market Committee briefly allowed interest rates to rise above 6% in 2000, the US financial system nearly seized up. Long-time readers of The Institutional Risk Analyst recall that Citigroup (C) reported an anomalous spike in loan defaults that sent regulators scrambling for cover. The FOMC dropped interest rates at the start of 2001 – nine months before the 911 terrorist attacks – and kept the proverbial pedal to the metal until June of 2004.

This post was published at Zero Hedge on Nov 27, 2017.

“Very Close To Irrational Exuberance”: Asian Equities Break Above All-Time High As Hang Seng Clears 30,000

Following the new all-time high in US equities, the MSCI Asia Pacific Index broke through its November 2007 peak to make an all-time high in Wednesday’s trading session. This was something we noted could happen yesterday in ‘SocGen: Asian Equities Are So Awesome, A China Minsky Moment Is ‘Manageable’. The dollar weakened slightly after outgoing Fed Chairman, Janet Yellen, cautioned against interest rates rising too quickly in one of her last Q&As at NYU on Tuesday evening. The MSCI Emerging Market Index hit its highest level in six years and the Shanghai Composite rose 0.5% despite the lack of a net liquidity injection from the PBoC.
As Bloomberg notes, Asian stocks headed for a record close for the second time this month as the regional benchmark gauge surpassed its 2007 peak, led by energy and industrial stocks after U. S. equities continued their bounce from a two-week slide.
The MSCI Asia Pacific Index rose 0.7 percent to 172.70 as of 1:01 p.m. in Hong Kong. The gauge passed its 2007 closing high on an intraday basis on Nov. 9 but didn’t hold the level. Japan’s Topix index climbed for a second day Wednesday, rising 0.4 percent, after its worst week in seven months. Hong Kong’s benchmark Hang Seng Index breached the 30,000 level for the first time in a decade, boosted by China banks and energy stocks.
‘Anyone who missed the rally probably wonders if it is too late to join the party,’ Andrew Swan, head of Asian and global emerging markets equities at BlackRock Inc., said in a statement Wednesday. ‘We don’t believe it is.’

This post was published at Zero Hedge on Nov 22, 2017.

Asian Stocks Smash Records; Dollar Slides As Crude Surges To July 2015 Highs

Global shares hit another record high on Wednesday, propelled higher by what increasingly more call (ir)rational exuberance, and investors’ unflagging enthusiasm for tech stocks. That said, S&P futures are unchanged the morning before Thanksgiving (at least before the market open ramp), as are European stocks (Stoxx 600 is flat), despite the euphoria in the Asian session which saw the MSCI Asia Pac index hit a new all time high…

… as oil jumped, rising as much as $1.15 to $57.98/bbl, the highest since July 2015, following yesterday’s API report which showed crude stocks fell another 6.4mmbbls and a Keystone pipeline outage shaprly tightened the market, while the dollar fell after Janet Yellen warned against raising rates too fast and the euro gained amid new moves to end Germany’s political impasse.

This post was published at Zero Hedge on Nov 22, 2017.

Yellen Confirms She Will Step Down When New Fed Chair Sworn In

Federal Reserve Chair Janet Yellen says she will step down once her successor is sworn into the office, resolving a key question as to whether she would stay on in a diminished role.
Yellen could technically stay on as a governor even after stepping down as the institution’s leader, because her term as governor does not end until January 31, 2024.
Her decision to leave will give Trump an additional spot to fill on the Fed’s seven-person Board of Governors in Washington, which already has three openings.
Yellen resignation letter – notably proclaiming everything is awesome…
Economy ‘is close to achieving the Federal Reserve’s statutory objectives of maximum employment and price stability,’Yellen says in letter.

This post was published at Zero Hedge on Nov 20, 2017.

Why Core Inflation is Rising & What it Means for Fed Rate Hikes

Yellen was right to brush off ‘transitory’ factors of ‘low’ inflation.
Consumer prices, as measured by CPI for October, rose 2.0% year-over-year. A month ago, CPI increased 2.2%. The Fed’s inflation target is 2%, but it doesn’t use CPI, or even ‘Core CPI’ – which excludes the volatile food and energy items. It uses ‘Core PCE,’ which usually runs lower than CPI, and if there were an accepted measure that shows even less inflation, it would use that. But it does look at CPI, and there was nothing in today’s data to stop the Fed from raising its target rate in December.
The Core CPI rose 1.8%, up a tad from September’s 1.7% increase. Core CPI has been above 2% for all of 2016 and through March 2017. In the history of the data going back to the 1960s, Core CPI had never experienced ‘deflation.’ But when Core CPI rates retreated in the spring through August, along with other inflation measures, a sort of panic broke out in the media:

This post was published at Wolf Street on Nov 15, 2017.

White House Considering Mohamed El-Erian For Fed Vice Chair

In what will come as a big surprise to many Fed watchers, moments ago the WSJ reported that among other candidates, Mohamed El-Erian, former deputy director of the IMF, former head of the Harvard Management Company, Bill Gross’ former partner at Pimco until the duo’s infamous falling out, and one of the few people who – together with John Taylor – actually deserve the nomination, is being considered for the Fed Vice Chairman role. DJ also added that Kansas banking regulator Michelle Bowman is also being considered. From the WSJ:
The White House is considering economist Mohamed El-Erian as one of several candidates to potentially serve as the Federal Reserve’s vice chairman, according to a person familiar with the matter.
The process of selecting the Fed’s No. 2 official began this month after President Donald Trump nominated Fed governor Jerome Powell to succeed Fed Chairwoman Janet Yellen when her term expires next February.
The WSJ adds that there is a broad range of candidates under consideration for post, and that the White House will focus on monetary policy experience for post.

This post was published at Zero Hedge on Nov 14, 2017.

Key Events In The Coming Week: Taxes, Inflation, Yellen, Draghi, Kuroda And Brexit

This week’s economic calendar features several key data releases and Fedspeak. The main data release in US include: CPI inflation, retail sales, industrial production, housing data and monthly budget statement. We also get the latest GDP and CPI reading across the Euro Area; the employment report in the UK and AU, Japan GDP, China IP, retail sales and FAI. In Emerging markets, there are monetary policy meetings in Indonesia, Chile, Egypt and Hong Kong.
Market participants will also want to pay close attention to tax reform progress in Washington. The House Ways and Means Committee had voted along party lines (24-16) to deliver its bill to the full House. The Senate Finance Committee’s proposal was also revealed last week and is slated for markup this week. Both versions are essentially opening gambits by the two chambers and the hard work begins when the two bills are ‘reconciled’. As a reminder, the Senate version is likely to be closer to the final version. In our view, there is a decent chance that some version of tax reform can be achieved, but this is likely to be a Q1 event and there are numerous potential stumbling blocks along the way.
With respect to the data, October inflation and retail sales reports are the main focus. Tuesday, DB expects headline PPI (+0.1% forecast vs. +0.4% previously) to moderate following a spike in gasoline prices last month due to hurricane-related supply disruptions. However, core PPI inflation (+0.2% vs. +0.1%) should firm. Analyst will focus on the healthcare services component of the PPI, as this is an input into the corresponding series in the core PCE deflator – the Fed’s preferred inflation metric. Recall that healthcare has the largest weighting in the core PCE.

This post was published at Zero Hedge on Nov 13, 2017.

Goldman’s Top Strategist Reveals The Two Biggest Risks To The Market Today

The past few months have been a very nervous time at Goldman Sachs, and not just because Gary Cohn wasn’t picked to replace Janet Yellen as next Fed chair.
Back in September, Goldman strategist Peter Oppenheimer wrote that the bank’s Bear Market Risk Indicator had recently shot up to 67%, prompting Goldman to ask, rhetorically, “should we be worried now?” The simple answer, as shown in the chart below, is a resounding yes because the last two times Goldman’s bear market risk indicator was here, was just before the dot com bubble and just before the global financial crisis of 2008.

This post was published at Zero Hedge on Nov 10, 2017.

The Stock Market Has Gone Up More Than 5 Trillion Dollars Since Donald Trump Was Elected

One year ago we witnessed the greatest miracle in political history, and since that time we have also witnessed one of the greatest miracles in financial history. On November 8th, 2016 the Dow closed at 18,332.74. On Wednesday, it closed at 23,563.36. U. S. stocks have increased in value by about 5.4 trillion dollars since Donald Trump was elected, and I don’t think that we have seen anything quite like this ever before. So does Donald Trump deserve the credit for this unprecedented stock market run? Many experts are at least giving him part of the credit…
Greg Valliere, chief global strategist at Horizon Investments, says outgoing Federal Reserve chair Janet Yellen deserves ‘much of the credit’ because the Fed’s policy of low interest rates has helped maintain a good economy and ‘favors stocks over other investments.’
But Trump, he adds, ‘gets some credit for establishing a pro-business climate in Washington.’ Trump also gets kudos for rolling back business regulations and pushing for a big tax cut for U. S. corporations, which investors say will boost corporate profitability.
Without a doubt, a Trump victory was a good thing for the financial markets, but politicians need to be careful not to take too much credit for soaring stock prices.
Because if they take credit when stocks go up, then they also have to be willing to take the blame when they go down.

This post was published at The Economic Collapse Blog on November 8th, 2017.

JOLTS: Hiring Slides To Lowest In 6 Months As Job Openings Remain Near All Time High

After a burst of record high job openings which started in June and eased modestly in August, today’s September JOLTS report – Janet Yellen’s favorite labor market indicator – showed another modest increase in job openings across most categories in the hurricane-affected month, with the total number rising fractionally 6.090MM to 6.093MM, above the 6.091MM estimate, resulting in an unchanged Sept. job opening rate of 4%. Still, after nearly two years of being rangebound between 5.5 and 6 million, the latest job openings number confirms that there may be a “breakout” about what was the previous resistance level, as increasingly more jobs remain unfilled in a labor market where skill shortages and labor imbalances are becoming structural.
The number of job openings was little changed for total private and for government. Job openings increased in professional and business services (+156,000), other services (+52,000), state and local government education (+36,000), and federal government (+15,000). Job openings decreased in accommodation and food services (-111,000) and information (-28,000). The number of job openings was little changed in all four regions. Now if only employers could find potential employees that can pass their drug test…
Comment on the impact from the hurricanes, the BLS said that “Hurricane Irma made landfall in Florida during September, the reference month for the preliminary estimates in this release. All possible efforts were made to contact and collect data from survey respondents in the hurricane-affected areas. A review of the data indicated that Hurricane Irma had no discernible effect on the JOLTS estimates for September.”

This post was published at Zero Hedge on Nov 7, 2017.

GOP Tax Plan Increases the Most Insidious Tax

Last Thursday, congressional Republicans unveiled their tax reform legislation. On the same day, President Trump nominated current Federal Reserve Board Governor Jerome Powell to succeed Janet Yellen as Federal Reserve chair. While the tax plan dominated the headlines, the Powell appointment will have much greater long-term impact. Federal Reserve policies affect every aspect of the economy, including whether the Republican tax plan will produce long-term economic growth.
President Obama made history by appointing the first female Fed chair. President Trump is also making history: If confirmed, Powell would be the first former investment banker to serve as chairman of the Federal Reserve. Powell’s background suggests he will continue Janet Yellen’s Wall Street-friendly low interest rates and easy money policies.
Powell is an outspoken opponent of the Audit the Fed legislation. In 2015, Powell delivered an address at Catholic University devoted to attacking Audit the Fed. Like most Fed apologists, Powell claims the audit would compromise the Fed’s independence and allow Congress to control monetary policy. However, like all who make this claim, Powell cannot point to anything in the text of the audit bill giving Congress any power over the Federal Reserve. Powell’s concerns about protecting the Fed’s independence are misplaced, as the Fed has never been free of political influence. The Fed has a long history of bowing to presidential pressure to tailor monetary policy to help advance the president’s political and policy agenda.

This post was published at Ludwig von Mises Institute on November 6, 2017.

Ron Paul Rages: GOP Plan Increases The Most Insidious Tax

Last Thursday, congressional Republicans unveiled their tax reform legislation. On the same day, President Trump nominated current Federal Reserve Board Governor Jerome Powell to succeed Janet Yellen as Federal Reserve chair.
While the tax plan dominated the headlines, the Powell appointment will have much greater long-term impact. Federal Reserve policies affect every aspect of the economy, including whether the Republican tax plan will produce long-term economic growth.
President Obama made history by appointing the first female Fed chair. President Trump is also making history: If confirmed, Powell would be the first former investment banker to serve as chairman of the Federal Reserve. Powell’s background suggests he will continue Janet Yellen’s Wall Street-friendly low interest rates and easy money policies.

This post was published at Zero Hedge on Nov 6, 2017.

NY Fed President Bill Dudley Retiring

The Federal Reserve’s “smooth transition” from Janet Yellen to Jay Powell is set for a major speedbump.
Just two short days after Donald Trump confirmed what weekly trial balloons had reported for weeks, namely that Janet Yellen is being replaced with most “dovish” alternative possible in the face of former Carlyle partner and 5 year Fed governor Jerome Powell, the person who according to some is even more instrumental to Fed policy than Janet Yellen, NY Fed president Bill Dudley is reportedly leaving.
***
Late on Saturday evening, CNBC’s Steve Liesman reported that Fed vice chairman Bill Dudley, a former Goldman managing director and chief economist, not to mention a key figure in “the unprecedented government response to the financial crisis”, is set to join Janet Yellen among the ranks of the unemployed (if only until he hits the speaking circuit and writes a book explaining that the Fed is the cause of the world’s problems) and announce his retirement as soon as next week.

This post was published at Zero Hedge on Nov 5, 2017.

Yellen’s Poor Legacy – and Powell’s Challenges

The appointment of Jerome Powell as the new chair of the Federal Reserve must be interpreted by the markets as a sign of continuity. He is not the hawk that many market participants feared and neither holds a dovish and dangerous stance.
Yellen’s mandate has been widely criticized by many investors and economists. She inherited an economy where unemployment was at the Fed’s target levels, inflation was picking up and growth was strengthening, and yet she unnecessarily delayed raising rates and reducing the balance sheet for too long. The president’s confidence, despite nice words, was broken for months. The Trump team criticized the Federal Reserve for delaying the announced rate hikes ahead of the elections, but criticism intensified when Yellen raised cautionary messages about the economy after the nomination. Considered an ‘acknowledged dove’, she was criticized for delaying much-needed rate hikes, despite markets at all-time highs, yields at multi-decade lows, inflation rising and unemployment at 5%, and some hinted this was an ‘order’ from the Obama administration. Now that we see that the latest figures show a growth of 3% of the US economy, the critical voices have increased, accusing the now ex-president of the Federal Reserve of being unnecessarily dovish, ignoring the mounting risks in financial markets and not getting the diagnosis right.

This post was published at Ludwig von Mises Institute on Nov 3, 2017.

Trump Picks ‘Safe’ Choice to Lead the Federal Reserve: 5 Questions Answered

Editor’s note: Markets breathed a sigh of relief after President Donald Trump named Jerome Powell his pick to be the next chair of the Federal Reserve. If confirmed, Powell – considered a ‘safe’ choice – would take over from current Chair Janet Yellen in February, becoming one of the world’s most powerful people. So what’s the big deal? Economist Greg Wright explains why who leads the US central bank matters to us all.
What Does the Fed Do?
The Federal Reserve oversees all banks and financial institutions based in the US, including branches of foreign companies, and also sets US monetary policy.
The main way it does the latter is through its target interest rate. This benchmark influences the pace of economic growth, the level of employment and the price of goods, services, and assets around the world. As the engine behind the world’s most important economy, the Fed’s influence is hard to overstate.
As a result, the Fed affects the likelihood that you – and millions of others around the world – will keep your job, will be able to afford a new home and will be able to retire when you want. And while most Fed decisions are made by a seven-member Board of Governors, the chair’s voice is by the far the most important. For this reason, the Fed chair is sometimes referred toas the ‘second-most-powerful person in the world’ – after the US president.

This post was published at FinancialSense on 11/03/2017.