Connect with us

Government

Danielle DiMartino Booth: Powell “wants to break the back of the market psyche”

Earlier this year, the combination of prolonged ultra-loose economic policy, broken supply chains and the tumultuous geopolitical landscape led to rocketing…

Published

on

Earlier this year, the combination of prolonged ultra-loose economic policy, broken supply chains and the tumultuous geopolitical landscape led to rocketing inflation in the United States, a country that had struggled to keep its head above the self-selected 2% target.

Facing eye-watering, four-decade highs in the CPI, Governor Powell began hiking rates in March. Since then, the Fed has raised the benchmark fed funds rate by 300 bps, settling on a corridor of 3% – 3.25% this month.

In last week’s meeting, the Fed raised rates by 75 bps for the third consecutive time, thrice the standard rate of monetary tightening.

As reported previously on Invezz, the latest CPI data registered a disappointing 8.3% with core inflation being above expectations.

Given the rate of rising prices, Krishna Guha, Vice-Chairman of Evercore ISI and previously, an Executive Vice President at the New York Fed, believes that,

The Fed has to do more on rates.

Although the Fed’s 75 bps hike was widely expected, the FOMC’s announcement at the September meeting shook markets as the S&P 500 plummeted to below 3,700 levels, tremendous volatility gripped the treasury market and the DXY sped to 114.0 at the time of writing.

The key driver for the panic was the Fed’s Summary of Economic Projections and in particular, the much-awaited dot-plot.

Source: Federal Reserve

Essentially, the dot-plot shows the opinion of each FOMC member as well as the presidents of each Fed bank, on where they think the Federal Funds rate should be headed.  To the dismay of the markets, rates appear to be on track to tighten by another 125 bps during this calendar year itself, i.e., is expected to reach 4.25-4.5% in the December meeting.

The plot further suggests that Fed leadership is expecting to hike in 2023 before settling near 5%.

This graph requires caution while interpreting and is only reflective of the opinions of the individual Fed participants. As announced many times before, the Fed is a data-driven institution, which means new developments could alter this path.

Do note that the dots are positioned at the mid-point of a range, and do not indicate a precise target rate.

Geoff Dennis, independent emerging markets commentator, adjunct Assistant Professor at St. Mary’s College of California, and previously Head of Global Emerging Markets Strategy at UBS in Boston, noted,

There was no need for the Fed to signal so overtly that Fed Funds would be raised by another 75 basis points (in the) next meeting before a potential slowdown to a 50 bps hike in the last meeting of 2022…. inflation is not accelerating; it is falling on both core and headline, just less rapidly than the market was assuming.

Source: US Bureau of Labor Statistics

In the most recent CPI data, high core inflation of 0.6% had caused the market to panic, even though there were four previous readings of above 0.6 – 0.7% in 2022.

What about the lag?

It is well-known that monetary policy transmission does not occur instantly in any economy. There is a lag between the Fed’s decision-making and the unravelling of the full impact on the ground.

The Federal Reserve Bank of San Francisco states that,

The lags can vary a lot, too. For example, the major effects on output can take anywhere from three months to two years. And the effects on inflation tend to involve even longer lags, perhaps one to three years, or more.

The difficulty is that with its emphasis on accelerated rate hikes, the Fed could quite conceivably hike too hard, too fast, and trigger an economic recession, or even worse.

For instance, Lacy Hunt, Chief Economist at Hoisington Investment Management Company said,

Inflation rate has clearly peaked and is heading downward.

However, some eminent names are in support of the Fed’s move to continue tightening.

Former Dallas Fed President Richard Fisher did not mince his words,

…they got work to do. The business of the landing, hard or soft, the greater evil is inflation if you’re a central banker.

Guha concurs, arguing that,

I think the Fed has no choice but to err in the direction of doing a bit too much because the cost of allowing high and variable inflation to become embedded in the US economy is greater, significantly than the cost of causing a recession…

Most interestingly, he believes that the Fed can bring prices in line with an acceptable trajectory in the medium to long run, noting:

…on a two to three-year time horizon and beyond, the Fed owns inflation in the US, period. 

Somewhat contrary to Fisher’s and Guha’s stance, the Fed itself appears to be reluctant to acknowledge the rising probability that a recession could occur at all.

According to Mike Shedlock, an investment advisor for SitkaPacific Capital Management who runs the popular blog MishTalk, monetary policymakers are,

Purposely and wimpishly ducking recession calls, the Fed never directly projects recessions. But from where we are now, their 2022 GDP forecast goes beyond wildly optimistic and implies no recession…. It’s much easier politically to keep hiking rates if you do not forecast a recession, than if you do. 

The Fed needs to think about slowing down

In an interview with Bloomberg, Danielle DiMartino Booth, CEO of Quill Intelligence, and an advisor to the Dallas Fed from 2006 to 2015 claimed that,

…(Jay Powell) knows (that) a year from now we are not going to be so crazy worried about inflation and yet he’s going to keep going.

Echoing Dennis, Hunt and Booth, the Federal Reserve Bank of New York’s Center for Microeconomic Data’s Survey of Consumer Expectations dated September 12th, found that both one-year and three-year-ahead inflation expectations declined steeply, while home price expectations fell below pre-pandemic levels.

As noted in my earlier article, shelter inflation in the US is calculated in a manner that usually causes the index to lag other components of the CPI. With housing accounting for two-fifths of the core CPI and having eased by two-thirds since April 2022, there is likely a lag adjustment period during which reported CPI figures will appear more durable than they are.

An incensed Jeremy Seigel, the Russell E. Palmer Professor Emeritus of Finance at Wharton, University of Pennsylvania, also pointed to falling commodity prices as part of the evidence that consumer prices are easing.

To keep up to date, check out Invezz’s latest research on global commodities.

But then why tighten so hard into a recession?

Knowing that monetary policy is a lagged enterprise and with signs of easing, is the Fed right to keep hiking as aggressively as they are indicating?

Over the weekend, Dennis noted,

 (I) was asked in a media interview if the Fed ‘wanted’ to drive the economy into recession. I said no, but sometimes you wonder… (there is) no reason for policy overkill… the risk of recession has materially increased.

One potential argument for the actions of the Fed is that it is tired of its waning market credibility.

In the run-up to the Fed meeting, despite Powell’s committed rhetoric, and the aggressive hawkishness at the Jackson Hole conference (commentary of which is available in my earlier article), markets still expected the Fed to ultimately capitulate and ease financial conditions, i.e., show weakness in their resolve to tackle high inflation.

This is the reality of the Fed put, the idea that if equity markets and other financial instruments begin to lose value too fast, monetary authorities will step in and provide support with highly accommodative policies no matter what.

As per Mott Capital Management, in a September 18th piece titled, “The Fed Needs to Break the Market at This Week’s Meeting”, fed funds futures markets continued to price in rate cuts before the end of 2023, contrary to Powell’s announcements.

Since the Fed can only take action on short-term rates, aggressive forward guidance would be needed to convince the markets that inflation will be brought down, and kept down at any cost. Where better to signal such intent than the September dot-plot?

Given the Fed’s shaky market credibility, Mott Capital Management argued that the September dot-plot had to communicate that rates would continue to be hiked and would stay high – a goal it seems to have met in an emphatic fashion.

Post the meeting, Booth went on to say:

I think the fed has already told us that they are going too far… It’s not inflation, he’s already seeing signs of disinflation in discretionary goods. We’ve all seen signs of housing turning…and that to me means he (Powell) wants to break the market psyche of the fed is always going to have your back.

To reiterate, Booth believes that Fed hawkishness is not about inflation, or at the least, not just about inflation.

This is an altogether different possibility. The Fed may continue to raise rates not to keep inflation in check, but to convince markets that they will not falter in that quest.

In short, the Fed wants to establish its independence from the market, and drive its own monetary policy in a break from collaborative and responsive central banking over the past decade.

In the recent past, the Fed has been especially weighed down by its inability to reach 2%, its premature policy reversal in 2019, and then its insistence that inflation was transient. To exorcise these ghosts, Powell would have to break the Fed put.

If Booth is correct, expect much more destruction in financial markets in the time to come.

The post Danielle DiMartino Booth: Powell “wants to break the back of the market psyche” appeared first on Invezz.

Read More

Continue Reading

Government

Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

Published

on

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

Read More

Continue Reading

Government

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

Published

on

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

Read More

Continue Reading

Government

Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

Published

on

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

Read More

Continue Reading

Trending