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Despite Narrowing Polls, Model Suggests Midterm Misery For Dems

Despite Narrowing Polls, Model Suggests Midterm Misery For Dems

The last week has seen something odd happening in political polls.

Despite…

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Despite Narrowing Polls, Model Suggests Midterm Misery For Dems

The last week has seen something odd happening in political polls.

Despite a narrative of a red wave in the Midterms, several polls and betting sites have shifted to a considerably tighter race than many expect given the utter disaster that has befallen the average American over the past two years.

According to RealClearPolitics 'Generic Congressional Vote' aggregate survey index, the gap between Republicans and Democrats has narrowed significantly in the last week...

With regard the Senate, PredictIt has seen the odds of Republican control tumble in the last week...

Republican control of the House and the Senate remains the most expected outcome, but is trading at just 52% currently (dramatically lower than the 75% odds in mid-June)...

This change in trend is occurring as President Biden's approval rating remains mired near record lows...

Source: Bloomberg

So what is going on? Are Soros' minions pushing PredictIt around? Did the 'Inflation Reduction Act' really offer hope to Dems?

It's unclear, and of course, polls are fickle. But, as Bloomberg notes, the state of the economy looms large in any US election and historically that spells big trouble for Democrats in November’s midterm vote.

A new study by Bloomberg Economics takes one gauge with a knack of predicting ballot outcomes - the misery index, calculated by adding up the inflation and unemployment rates — and projects it forward through election day.

Source: Bloomberg

The result: Based on past voting patterns, President Joe Biden’s party can expect to lose 30 to 40 seats in the House and a few in the Senate too, easily wiping out razor-thin Democratic majorities.

Democrats are hoping that that anger over abortion and gun laws and the Jan. 6, 2021 riots, but consensus remains that the left faces a significantly uphill battle.

“It’s very difficult to interpret economic numbers right now,” says Larry Bartels of Vanderbilt University.

“In the 2020 presidential election, the huge run-up in income due to the pandemic stimulus implied a Trump landslide, whereas the huge decline in GDP implied a wipe-out. Obviously, the truth was somewhere in between.”

Bear in mind that historically, since the Civil War, the party of the incumbent president has lost an average of 33 seats in mid-cycle house elections.

Additionally, the state-level numbers also make gloomy reading for Democrats. Some key battlegrounds like Ohio and Nevada have misery indexes higher than the national version.

“When everyone is affected,” says Frank Luntz, the pollster, “the electoral impact is compounded.”

Finally, as a reminder, Americans' Consumer Sentiment has never been worse (UMich) and our 'adjusted' Misery Index (avoids the fitting of BLS payrolls data and utilizes labor force participation rates) shows Americans suffering most since Jimmy Carter was president...

Source: Bloomberg

“The reason why the misery index still matters is that it's really genuine misery for so many Americans,” Luntz says.

“Food and fuel inflation is so high and so universal, and impacts every voter in every community in every state.”

So what do you believe America? Suddenly diving poll data or historical precedent and real world misery?

Tyler Durden Mon, 08/01/2022 - 11:05

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Spread & Containment

$265 Billion In Added Value To Evaporate From Germany Economy Amid Energy Crisis, Study Warns

$265 Billion In Added Value To Evaporate From Germany Economy Amid Energy Crisis, Study Warns

A new report published by the Employment Research…

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$265 Billion In Added Value To Evaporate From Germany Economy Amid Energy Crisis, Study Warns

A new report published by the Employment Research (IAB) on Tuesday outlines how Germany's economy will lose a whopping 260 billion euros ($265 billion) in added value by the end of the decade due to high energy prices sparked by Russia's invasion of Ukraine which will have severe ramifications on the labor market, according to Reuters

IAB said Germany's price-adjusted GDP could be 1.7% lower in 2023, with approximately 240,000 job losses, adding labor market turmoil could last through 2026. It expects the labor market will begin rehealing by 2030 with 60,000 job additions.

The report pointed out the hospitality industry will be one of the biggest losers in the coming downturn that the coronavirus pandemic has already hit. Consumers who have seen their purchasing power collapse due to negative real wage growth as the highest inflation in decades runs rampant through the economy will reduce spending. 

IAB said energy-intensive industries, such as chemical and metal industries, will be significantly affected by soaring power prices. 

In one scenario, IAB said if energy prices, already up 160%, were to double again, Germany's economic output would crater by nearly 4% than it would have without energy supply disruptions from Russia. Under this assumption, 660,000 fewer people would be employed after three years and still 60,000 fewer in 2030. 

This week alone, German power prices hit record highs as a heat wave increased demand, putting pressure on energy supplies ahead of winter. 

Rising power costs are putting German households in economic misery as economic sentiment across the euro-area economy tumbled to a new record low. What happens in Germany tends to spread to the rest of the EU. 

There are concerns that a sharp weakening of growth in Germany could trigger stagflation as German inflation unexpectedly re-accelerated in July, with EU-Harmonized CPI rising 8.5% YoY. 

Germany is facing an unprecedented energy crisis as Russian natural gas cuts via the Nord Stream 1 pipeline will reverse the prosperity many have been accustomed to as the largest economy in Europe. 

"We are facing the biggest crisis the country has ever had. We have to be honest and say: First of all, we will lose the prosperity that we have had for years," Rainer Dulger, head of the Confederation of German Employers' Associations, warned last month. 

Besides Dulger, Economy Minister Robert Habeck warned of a "catastrophic winter" ahead over Russian NatGas cut fears.

Other officials and experts forecast bankruptcies, inflation, and energy rationing this winter that could unleash a tsunami of shockwaves across the German economy.  

Yasmin Fahimi, the head of the German Federation of Trade Unions, warned last month:

"Because of the NatGas bottlenecks, entire industries are in danger of permanently collapsing: aluminum, glass, the chemical industry." 

IAB's report appears to be on point as the German economy seems to be diving head first into an economic crisis. Much of this could've been prevented, but Europe and the US have been so adamant about slapping Russia with sanctions that have embarrassingly backfired. 

Tyler Durden Wed, 08/10/2022 - 04:15

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International

“Anything But A Cashless Society”: Physical Money Makes Comeback As UK Households Battle Inflation

"Anything But A Cashless Society": Physical Money Makes Comeback As UK Households Battle Inflation

The World Economic Forum (WEF) has been…

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"Anything But A Cashless Society": Physical Money Makes Comeback As UK Households Battle Inflation

The World Economic Forum (WEF) has been pushing hard for a 'cashless society' in a post-pandemic world, though physical money has made a comeback in at least one European country as consumers increasingly use notes and coins to help them balance household budgets amid an inflationary storm

Britain's Post Office released a report Monday that revealed even though the recent accelerated use of cards and digital payments on smartphones, demand for cash surged this summer, according to The Guardian. It said branches handled £801mln in personal cash withdrawals in July, an increase of 8% over June. The yearly change on last month's figures was up 20% versus the July 2021 figure of £665mln.

Across the Post Office's 11,500 branches, £3.31bln in cash was deposited and withdrawn in July -- a record high for any month dating back over three centuries of operations. 

The report pointed out that increasing physical cash demand was primarily due to more people managing their budgets via notes and coins on a "day-by-day basis." It said some withdrawals were from vacationers needing cash for "staycations" in the UK. About 600,000 cash payouts totaling £90mln were from people who received power bill support from the government, the Post Office noted. 

Britain is "anything but a cashless society," according to the Post Office's banking director Martin Kearsley.

"We're seeing more and more people increasingly reliant on cash as the tried and tested way to manage a budget. Whether that's for a staycation in the UK or if it's to help prepare for financial pressures expected in the autumn, cash access in every community is critical," Kearsley said.

We noted in February 2021, UK's largest ATM network saw plummeting demand as consumers reduced cash usage. At the time, we asked this question: "How long will the desire for good old-fashioned bank notes last?

... and the answer is not long per the Post Office's new report as The Guardian explains: "inflation going up and many bills expected to rise further – has led a growing numbers of people to turn once again to cash to help them plan their spending." 

So much for WEF, central banks, and major corporations pushing for cashless societies worldwide, more importantly, trying to usher in a hyper-centralized CBDC dystopia. With physical cash back in style in the UK, the move towards a cashless society could be a much more challenging task for elites than previously thought. 

Tyler Durden Wed, 08/10/2022 - 02:45

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International

Something Just Doesn’t Add Up In Chinese Trade Data

Something Just Doesn’t Add Up In Chinese Trade Data

By Ye Xie, Bloomberg markets live commentator and reporter

An unusual discrepancy has…

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Something Just Doesn’t Add Up In Chinese Trade Data

By Ye Xie, Bloomberg markets live commentator and reporter

An unusual discrepancy has showed up in two sets of trade data in China. Depending on which official sources you use, China’s trade surplus, could either be overstated or under-reported by a staggering $166 billion over the past year.

China watchers cannot fully explain the mystery. It’s as if Chinese residents bought a lot of stuff overseas, and instead of shipping the items home, they were kept abroad for some reason.  

China’s exports have been surprisingly resilient, despite a slowing global economy and Covid disruptions. On Monday, General Administration of Customs data showed China’s exports increased 18% in July from a year earlier. In contrast, imports grew only 2.3%, reflecting weak domestic demand.

The result is China’s trade surplus keeps swelling, which has underpinned the yuan by offsetting capital outflows. The surplus over the past year amounted to a record $864 billion, more than double the level at the end of 2019.

But when comparing the Customs data with that from the State Administration of Foreign Exchange (SAFE), a different picture emerges. The SAFE data shows the surplus is growing at a much slower pace -- about 20% less than the customs figure

The two data sets used to track each other closely. SAFE typically reports fewer imports, thus a higher surplus, because it excludes costs, insurance and freight from the value of goods imported, in line with the international standard practice, Adam Wolfe, an economist at Absolute Strategy Research, noted.

The other adjustments that SAFE does include:

  • It only records transactions that involve a change of ownership;
  • It adjusts for returned items;
  • It adds goods bought and resold abroad that don’t cross China’s border, but result in income for a Chinese entity -- a practice known  as “merchanting.”

The relationship between the two data sets has flipped since 2021, as SAFE reported higher imports, resulting in a smaller surplus than the Customs data.

It’s particularly odd because it happened at a time when shipping costs skyrocketed. When SAFE removes freight and insurance costs, it would have resulted in even lower, not higher, imports.

Taken at face value, the discrepancy suggests that somebody in China “bought” lots of goods from abroad, but they have never arrived in China. These transactions would be recorded by SAFE as imports, but not at the Customs office.

Craig Botham at Pantheon Macroeconomics, suspects that Covid-19 may be playing a role here. Foreign firms unable to manufacture in factories elsewhere during the pandemic might have transferred materials to China for assembly, a transaction excluded by SAFE.

Could Chinese buyers overstate their foreign purchases to SAFE, which regulates the capital account, so they can move money out of the country? The cross-border transactions show there was widespread overpaying for imports in 2014-2015, during a period of intense capital flight, but not at the moment, Wolfe pointed out.

Source: Absolute Strategy Research

The bottom line is that there aren’t many good explanations. As Alex Etra, a senior strategist at Exante Data, said, there’s “no smoking gun” to suggest something fishy is going on.

It’s another mysterious puzzle waiting to be solved.

Tyler Durden Tue, 08/09/2022 - 22:28

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