Connect with us

Spread & Containment

Financial Conditions Butt Heads With Borrowing Conditions

At last week’s FOMC meeting, Jerome Powell said, "We think financial conditions are weighing on the economy."

His comments seem sensible, given the following:




At last week’s FOMC meeting, Jerome Powell said, “We think financial conditions are weighing on the economy.”

His comments seem sensible, given the following:

  • The Fed is reducing its balance sheet (QT).
  • The Fed Funds rate is at its highest level in over 15 years.
  • Mortgage rates are about 7%, 3-4% above pre-pandemic levels.
  • Credit card interest rates are 20% or more.
  • Auto loans range between 7% and 10%
  • Consumer loan growth, excluding the pandemic, is down to levels last seen over ten years ago.
  • Outstanding Commercial & Industrial (C&I) loans are declining.

Powell’s statement indicates that financial conditions are tight. However, they are easy based on the Fed’s definition of financial conditions. If Powell doesn’t appreciate the difference between financial and borrowing conditions, we must assume most investors do not either.

As we will explain, there is a big difference between financial and borrowing conditions. Equally worth considering is that the current combination of easy financial conditions and tight borrowing conditions makes monetary policy difficult for the Fed to balance.   

What Are Financial Conditions?

The St. Louis Federal Reserve defines financial conditions as follows:

Measures of equity prices (also commonly referred to as stock prices), the strength of the U.S. dollar, market volatility, credit spreads, long-term interest rates, and other variables.”

Financial conditions tend to be easy when investors are optimistic and speculative. Let’s look at the four critical measures in the St. Louis Fed definition to understand why financial conditions are easy today.

Equity Prices: The S&P 500 is up 38% since 2023 and 10% through the first three months of 2024.

U.S. Dollar: The dollar index has been relatively flat since 2023 and the year to date.

Market Volatility: The VIX volatility index has been hovering between 12 and 15 this year. That is about one standard deviation below the average VIX reading of 19.32 over the last 35 years.

Credit Spreads: The BBB investment grade yield is only 1% above a comparable maturity Treasury. Such is the tightest spread since the 1990s.

Long-Term Interest Rates: Long-term interest rates have been significantly higher than average over the past few years and at levels last seen before the financial crisis in 2008. However, they are about 1% lower than their peak last year.

Equity prices, market volatility, and credit spreads point to very easy financial conditions, and we might also characterize their levels as speculative.

The dollar has had little effect on financial conditions as it has been relatively stable.

Long-term interest rates point to tighter financial conditions, albeit easing over the past six months.

The bottom line is that financial conditions are easy in large part because robust sentiment in the equity and credit markets more than offsets higher interest rates.

As shown below, our proprietary SimpleVisor Sentiment indicator is at its maximum level, and the CNN Fear & Greed Index is closing in on extreme greed.

simplevisor sentiment gauge
cnn fear and greed sentiment guide

What Are Borrowing Conditions?

Unlike financial conditions, borrowing conditions are far from easy. The two graphs below highlight the financial stress on consumer and corporate borrowers.

consumer loan interest rates

Credit card interest rates are over 20% and about 5% above the highest in the past 24 years. Mortgage and auto loan interest rates are up to levels not seen in at least fifteen years.

The following graph shows that 90-day commercial paper loans and yields on BBB-rated corporate bonds are at their highest levels since the financial crisis.

commercial paper and BBB rated interest rates

What Can And Can’t The Fed Manage?

The Fed plays a crucial role in directing financial and borrowing conditions. At times, like today, financial and borrowing conditions can be at odds with each other, which makes the Fed’s job of managing monetary policy more difficult.

The market’s perception of the Fed’s stance, hawkish or dovish, and more importantly, forecasts of how they may change policy can heavily impact market sentiment and financial conditions.

For instance, a strong correlation exists between QE and higher stock returns, lower volatility, and tighter credit spreads. The relationship occurs in part due to the psychology of investors. However, it’s also a function of the liquidity the Fed creates when conducting QE. For similar reasons, lower rates are thought to be beneficial for markets.

fed qe vs s&P 500

The Fed has a heavier hand in determining borrowing conditions. By managing its Fed Funds rate, the Fed sets the tone for long-term interest rates and significantly influences shorter-term rates. Further, QE and QT can add or subtract liquidity from the markets, directly affecting the supply and demand of liquidity available to all markets.

Powell’s Predicament

Financial conditions have eased considerably as investors priced out the odds of rate increases and have started pricing in rate cuts. The combination of lower interest rates and possibly less QT, coupled with robust economic growth, is the goldilocks scenario driving investors’ sentiment higher. This occurs despite extremely tight borrowing conditions and a hawkish monetary policy.

Currently, the Fed does not want financial conditions to ease further as the wealth effect of strong markets can have an inflationary impulse. They could hike rates or even talk of increasing rates to weigh on financial conditions. However, with tight borrowing conditions and the potential that the lag effect of prior rate hikes will ultimately cause a recession, they appear to be in no man’s land.   

As we share below, on a real basis, the Fed’s policy stance is the tightest it has been in fifteen years.  

fed real monetary policy graph

Another Fed Predicament Coming Soon

Sentiment and liquidity drive markets in the short run. Both have supported higher stock prices and mania-like trading in AI stocks and cryptocurrencies.

However, that could be changing. As we note in Liquidity Problems, excess liquidity is rapidly draining from the financial system. The Fed knows the situation and may be called upon to deal with a liquidity shortfall. QT reductions and/or lower rates would ease liquidity concerns. But, doing so, especially if the economy stays robust and market sentiment is strong, would risk further easing of financial conditions, which in turn may keep inflation sticky at current levels. 


The Goldilocks economy, coupled with the end of the rate hiking cycle, has investors giddy, which eases financial conditions. Ironically, while some of the easiest financial conditions in the last ten years have existed, borrowing conditions remain very tight. 

The Fed must balance these two conditions, which is difficult as they can counteract each other. Threading the eye of this needle may prove problematic given that inflation remains too high and, more recently, is showing some signs of being sticky. 

The post Financial Conditions Butt Heads With Borrowing Conditions appeared first on RIA.

Read More

Continue Reading

Spread & Containment

ARPA-H awards Columbia researchers nearly $39M to develop a living knee replacement

A team of researchers from Columbia University Irving Medical Center (CUIMC) and Columbia Engineering has been awarded up to a $38.95 million contract…



A team of researchers from Columbia University Irving Medical Center (CUIMC) and Columbia Engineering has been awarded up to a $38.95 million contract from the Advanced Research Projects Agency for Health (ARPA-H) to build a living knee replacement from biomaterials and human stem cells, including a patient’s own cells. ARPA-H is a federal funding agency that funds transformative biomedical and health research breakthroughs, rapidly translating research from the lab to applications in the marketplace. 

Credit: ARPA-H

A team of researchers from Columbia University Irving Medical Center (CUIMC) and Columbia Engineering has been awarded up to a $38.95 million contract from the Advanced Research Projects Agency for Health (ARPA-H) to build a living knee replacement from biomaterials and human stem cells, including a patient’s own cells. ARPA-H is a federal funding agency that funds transformative biomedical and health research breakthroughs, rapidly translating research from the lab to applications in the marketplace. 

The Award

The award, part of the ARPA-H’s Novel Innovations for Tissue Regeneration in Osteoarthritis (NITRO) program, will support the development of NOVAJoint, a revolutionary biocompatible, low-cost, patient-specific knee joint replacement. This high-risk project builds upon more than two decades of collaborative musculoskeletal research at Columbia in engineering and medicine, and promises to offer a transformative solution for the more than thirty million people in the U.S. who suffer from osteoarthritis. NITRO is the first Health Science Futures specific program under the new ARPA-H agency, established by the Biden Administration.

The project is led by Clark T. Hung, Professor and Vice Chair of the Department of Biomedical Engineering and Professor of Orthopedic Science (in Orthopedic Surgery) at Columbia Engineering, and Nadeen O. Chahine, Associate Professor of Biomedical Engineering in the Department of Orthopedic Surgery at Columbia University Vagelos College of Physicians and Surgeons, leaders in tissue regeneration and orthopedic research.

“ARPA-H is a hugely important endeavor that could bring about a breakthrough in personalized and patient-specific solutions,” said Shih-Fu Chang, Dean of Columbia Engineering. “As society seeks to address the challenge of population aging, such collaborative approaches combining engineering and medicine will help improve conditions for those with osteoarthritis and many other musculoskeletal conditions.”

“We saw during the COVID pandemic just how fast science can move when teams of researchers are given the support and resources to work together,” said Katrina Armstrong, Dean of the Faculties of Health Sciences and the Vagelos College of Physicians and Surgeons, and Executive Vice President for Health and Biomedical Sciences, Columbia University. “By focusing Columbia’s expertise in biomedical engineering and orthopedic surgery onto a single goal, this funding from ARPA-H has the potential to rapidly revolutionize the way we treat osteoarthritis and the way we do biomedical research in the future.” 

Impact of Osteoarthritis

Osteoarthritis is a degenerative joint disease that is the most common type of arthritis. It gradually worsens over time as cartilage, the specialized connective tissue that covers the ends of bones, wears down, leading to pain, stiffness, and loss of mobility. Osteoarthritis is already the third most common type of disability and has an estimated economic burden of more than $136 billion per year. It disproportionately affects women, the elderly, certain racial/ethnic minorities, and those with lower socioeconomic status. The prevalence of knee osteoarthritis has been rising due to aging of the population, increasing rates of joint injury, and, significantly, obesity.

The clinical gold standard treatment for knee joints ravaged by pervasive OA or traumatic injury is a total joint replacement using prosthetic implants made of metal and plastic. Although knee replacement is widely successful, there are some major drawbacks to these conventional materials. There can be life-changing complications and limitations of current artificial knee replacements, including infection, loosening, hardware failure, stiffness, abnormal kinematics (i.e., the way a knee moves), instability, and persistent pain. Historically, knee replacements have had a limited lifespan with a portion failing at 15 to 20 years due to plastic wear or implant loosening. This means that younger patients may need one or even two revision implants. The demand for total knee replacements is projected to grow by 673% — 3.48 million procedures from 2005 to 2030 — with total knee revisions projected to grow 601% between 2005 to 2030. 

NOVAJoint — a living solution to ravaged knees

With the ARPA-H award, the researchers propose to design NOVAJoint to address the urgent, unmet clinical need for a permanent solution for patients with advanced OA where a conventional knee replacement is indicated. The project’s goal is to develop a replacement knee of regenerated living cartilage and bone that integrates seamlessly with the native bone and restores pain-free joint function. Since cells are required to regenerate and maintain this living implant, the team will create two versions of NOVAJoint: a version that uses patient’s own cells and one that uses donor cells. The researchers expect NOVAJoint to substantially extend the implant life, reducing complications, and to become a permanent and final procedure for the treatment of osteoarthritis of the knee.  With an aggressive timeline, in the first two years, the team will create the first prototypes before moving into preclinical and clinical studies in the final three years, including a Phase 1 safety clinical trial in the final year.

Though the first NOVAJoint is still in development, many of the technologies and scientific discoveries necessary to create the joint have already been developed and validated by Columbia researchers through funding from the National Institutes of Health, National Science Foundation, Department of Defense, and institutional support.

“The ARPA-H NITRO program has enabled us to leverage our innovative technologies and expertise to solve one of the most difficult challenges in biomedical engineering,” said Hung, a groundbreaking researcher in musculoskeletal regeneration.

The Collaborators

The NOVAJoint team will fabricate a living knee replacement using modern manufacturing techniques and capitalizes on the critical mass of musculoskeletal researchers at Columbia with collective expertise in biomechanics, biomaterials, stem cells, and orthopedic surgery from across the School of Engineering and Applied Science, Vagelos College of Physicians and Surgeons and College of Dental Medicine, building on a decades-long history of collaboration between the Departments of Orthopedic Surgery and Biomedical Engineering. The project team is multidisciplinary, with scientific leadership from faculty in the Departments of Biomedical Engineering, Mechanical Engineering, Orthopedic Surgery, and Dental Medicine. Co-PIs and Task Leads include Treena Arinzeh, Professor of Biomedical Engineering; Gerard Ateshian, Andrew Walz Professor of Mechanical Engineering and Professor of Biomedical Engineering;  Alice Huang, Associate Professor of Bioengineering (in Orthopedic Surgery); and Roshan Shah, Russell A. Hibbs Associate Professor of Orthopedics (in Orthopedic Surgery) and Director of Complex Reconstruction; Chang Lee, Associate Professor of Craniofacial Engineering (in Dental Medicine).

Working with the Columbia team is James L. Cook, William & Kathryn Allen Distinguished Chair in Orthopaedic Surgery, University of Missouri, who will lead preclinical testing. Drs. Cook and Shah will also lead the clinical trial, which will be recruiting patients at both universities. The team is partnering with New York Stem Cell Foundation and New York Blood Center for GMP manufacturing of NOVAJoint.

“This is a big challenge, but by creating a large and experienced team that works well together and can be focused on one goal, we expect to succeed,” said Chahine, a leader in orthopedic research. “NOVAJoint will mark a major milestone in the field of regenerative medicine and orthopedic surgery, and has the potential to revolutionize musculoskeletal treatments of the many joints that degenerate with age or injury.”

Equity and Commercialization

In addition to the advancement in science, equity and commercialization are key pillars to the programmatic success of this project. Part of NITRO’s vision is to establish a clear path to commercialization, which is a prerequisite for successful clinical translation and impact of disruptive technologies such as NOVAJoint. ARPA-H has a firm commitment to equitable healthcare access for all, irrespective of race, ethnicity, gender/gender identity, sexual orientation, disability, geography, employment, insurance, and socioeconomic status.

“Our goal is to push knee replacement to its next stage of evolution and to create a better solution to osteoarthritis for all Americans. Every day patients ask me about new advancements in knee replacement surgery, hoping for validation of their years of suffering before seeking care,” says Dr. Shah.  “Now I have something to tell them. I think the big orthopedic companies will be watching this project closely, and will be vying for the chance to commercialize NOVAJoint nationally.”

In order to meet these programmatic goals, the team will also be leveraging the expertise and resources of the Irving Institute for Clinical and Translational Research and Columbia Technology Ventures. The NOVAJoint team will include a full-time Equity Officer who will help develop key equity performance indicators. The equity officer will work closely with Rachel C. Shelton, Associate Professor of Sociomedical Sciences at Mailman School of Public Health and co-director of the Irving Institute’s Community Engagement Core Resource (CECR) and Lisa Royse, Department of Orthopedic Surgery, University of Missouri, to foster research conducted in partnership with community stakeholders to better inform the application of scientific findings to clinical and community settings.

The Research Team

The scientific and clinical faculty at Columbia include:

  • Clark Hung, Professor of Biomedical Engineering and Orthopedic Sciences (in Orthopedic Surgery)
  • Gerard Ateshian, Andrew Walz Professor of Mechanical Engineering and Professor of Biomedical Engineering
  • Nadeen Chahine, Associate Professor of Biomedical Engineering (in Orthopedic Surgery)
  • Alice Huang, Associate Professor of Bioengineering (in Orthopedic Surgery)
  • Treena Arinzeh, Professor of Biomedical Engineering
  • Chang Lee, Associate Professor of Craniofacial Engineering (in Dental Medicine) 
  • Roshan Shah, Russell A. Hibbs Associate Professor and Director of Complex Reconstruction at Columbia University
  • Kam Leong, Samuel Y. Sheng Professor of Biomedical Engineering (in Systems Biology)
  • Helen Lu, Percy K. and Vida L.W. Hudson Professor of Biomedical Engineering and Senior Vice Dean of Faculty Affairs and Advancement 
  • X. Edward Guo, Stanley Dicker Professor of Biomedical Engineering and Professor of Medical Sciences (in Medicine)
  • José McFaline-Figueroa, Assistant Professor of Biomedical Engineering
  • Samuel Sia, Professor of Biomedical Engineering, Vice Provost for the Fourth Purpose and Strategic Impact
  • Steve Thomopoulos, Robert E. Carroll and Jane Chace Carroll Laboratories Professor of Biomechanics (in Orthopaedic Surgery and Biomedical Engineering) 
  • Elan Goldwaser, Assistant Professor of Sports Medicine (in the Center for Family and Community Medicine, in Medicine and Orthopedic Surgery) at CUIMC
  • Mildred Embree, Dr. Edwin S. Robinson Associate Professor of Dental Medicine
  • Joanna Smeeton, H.K. Corning Assistant Professor Rehabilitation and Regenerative Medicine Research (in Rehabilitation and Regenerative Medicine) (in Genetics and Development)

Read More

Continue Reading


The Canaries In America’s Coal Mine

The Canaries In America’s Coal Mine

Authored by J.Peder Zane via,

Joe Biden vs. Donald Trump is not the race America…



The Canaries In America's Coal Mine

Authored by J.Peder Zane via,

Joe Biden vs. Donald Trump is not the race America needs, but it is the one we deserve.

A political system that has spit out a race few voters want is the perfect symbol of a nation – and a people – bent to the point of breaking.

Biden vs. Trump appears to be a welcome diversion in a country whose government seems unequipped to face its biggest challenges and whose people are increasingly unwilling to take responsibility for their own problems. Eight months arguing about two angry old men – hearing our own side praise us to the hilt while blaming every woe on the other – is time we don’t have to spend confronting our own difficulties.

Historic declines in life expectancy, jaw-dropping rates of obesity, and rising truancy among students are just a few of the ways we the people are running off the rails.

A few others include:

  • In a Wall Street Journal commentary about post-COVID America, Yale University’s Nicholas Christakis observes how “reckless behavior” is becoming epidemic. “Americans gambled a record $66.5 billion in 2023. Compared with 2019, there has been an 18% increase in fatal accidents involving alcohol and a 17% increase in those involving speeding. Over 500 Americans are dying every day from alcohol-related deaths, a 30% increase. Sexually transmitted diseases are rising across the nation, too.”

  • Jonathan Haidt reports in the Atlantic that “rates of depression and anxiety in the United States – fairly stable in the 2000s – rose by more than 50 percent in many studies from 2010 to 2019. The suicide rate rose 48 percent for adolescents ages 10 to 19. For girls ages 10 to 14, it rose 131 percent.” A CNN and Kaiser Family Foundation poll published in 2022 found that more than 20% of adults described their mental health as “fair” or “poor,” and about one-third of adult respondents said they feel anxious much of the time.

  • A 2021 study by the Survey on American Life found that 49% of Americans said they had fewer than three close friends – in 1990 the figure was 27%. That same year 33% of respondents said they had 10 or more close friends; in 2021 that number fell to 13%. The birth rate and rates of marriage – which, when done in tandem, producer happier and more stable parents and children – have long been in decline.

  • Unable to meet its recruitment goals, the Pentagon has repeatedly lowered its standards for physical fitness, mental health, and academic achievement to meet its numbers. “America’s youth are less qualified for service than ever before,” Army Brig. Gen. Patrick Michaelis, commander at Fort Jackson, S.C., was quoted as saying in a Stars and Stripes article published last year. Added Gen. James McConville, the Army’s chief of staff, “We have a lot of young men and women who want to serve – and they can’t pass the academic requirements or they can’t pass the physical requirements.”

  • The New York Sun reports that many citizens are no longer part of the workforce. “Jobs held by native-born Americans decreased by nearly half a million between January and February of this year, while jobs held by foreign-bornAmericans (both legal and illegal immigrants) spiked to 1.16 million. Looking further back, since January 2020 — just before the pandemic — there has been no growth in native-held jobs, while jobs for foreign-born employees have skyrocketed by more than 3.9 million. … The native-born workforce participation rate of 6 percent is also less than the foreign-born participation rate of 66.6 percent.”

  • The liberal Vera Institute has reported that “the number of women incarcerated in the United States has skyrocketed in the last four decades, increasing 475 percent in 40 years. In 2019, there were more than 231,000 women and girls held in prisons and jails across the country. … 50 years ago, almost 75 percent of counties held not a single woman in jail.” In a similar vein, news reports now routinely carry articles about female teachers accused of molesting students.

These are just some of the canaries in the American coal mine. Together they suggest how – despite the many strengths our nation still possesses – we are unraveling. The government cannot fix most of these problems, which may be why politicians largely ignore them. Such issues must be addressed at that most local of levels – the individual and the family.

It may feel good to complain about the other guy for the next eight months – and heaven knows we have plenty of reason to. But after the November election, all of our problems will remain. It’s long past time we recognized that much of the fault for our deep-rooted challenges lies not in our political stars but in ourselves.

Tyler Durden Tue, 03/26/2024 - 15:25

Read More

Continue Reading


Lockdown’s Fourth Birthday

Lockdown’s Fourth Birthday

Authored by Kit Knightly via,

Last weekend marked four years to the day since the UK went into…



Lockdown's Fourth Birthday

Authored by Kit Knightly via,

Last weekend marked four years to the day since the UK went into “lockdown” for the first time.

What an exciting time that was, right? With the pan-banging and the curve-flattening and the Spirit of the Blitz living on. Good times.

UK Prime Minister Rishi Sunak’s team decided to honour the occasion by slapping themselves on the back:

Needless to say, this is revisionism of the highest order. To quote my favourite reply, it’s the “gaslightiest gaslight I’ve ever been gaslit by”.

The furlough system did not “save the economy”. The economy was not saved. Rather, it was laid out on a stone table and slowly flayed with a sharpened flint.

We are all still living with the consequences of lockdown, not just in the UK but globally. The world over, hundreds of millions of people have been plunged into extreme poverty by so-called “anti-Covid measures”.

Billions more are worse off, paying more for almost every product and service, and struggling in general.

It’s important to remember this was the point.

As we wrote in our piece addressing Covid revisionism last year:

The poverty, the depression, despair. The shuttered stores and closed hospitals and bankrupt businesses. They were all predictable, and all deliberate. They knew that’s what would happen…that’s what it was for. That’s why “Covid” was invented. Lockdown was not a policy mistake, it was a policy success.

Lockdowns killed more people than they saved. Lockdowns doubled global child poverty.

Lockdown doesn’t work, it never worked and it wasn’t supposed to work.

And the only thing more nauseating than the anti-human trolls pushing it at the time, are the same anti-human trolls re-writing history since, claiming lockdowns were a mistake or a panic reaction, or that no one could have known how much damage they would do.

As we wrote in our piece marking Lockdown’s first birthday:

Too often soft language in the media talks about “misjudgments” or “mistakes” or “incompetence”. Supposed critics claim the government “panicked” or “over-reacted”. That is nonsense. The easiest, cheesiest excuse that has ever existed.

“Whoops”, they say, with an emphatic shrug and shit-eating grin “I guess we done messed up!”. Unflattering, but better than the truth.

Because the truth is that the government isn’t mistaken or scared or stupid…they are malign. And dishonest. And cruel.

All the suffering of lockdown was entirely predictable and deliberately imposed. For reasons that have nothing to do with helping people and everything to do with controlling them.

It’s been more than apparent for most of the last fifty-two weeks that the agenda of lockdown was not public health, but laying the groundwork for the “new normal” and “the great reset”.

A series of programmes designed to completely undercut civil liberties all across the world, reversing decades (if not centuries) of social progress. A re-feudalisation of society, with the 99% cheerfully taking up their peasant smocks “to protect the vulnerable”, whilst the elite proselytise about the worth of rules they happily admit do not apply to them.

Lockdown was not a policy mistake it was murder.

This revisionism isn’t just about protecting reputations or saving face, of course, but about establishing a couple of important new “truths”:

  1. Lockdowns are responsible for post-Covid excess deaths, NOT the experimental “vaccines”.

  2. Lockdowns were so bad that we need to do anything we can to avoid using them for the next pandemic, including vaccine mandates and quarantine camps.

In the future we may see another lockdown – for terrorism or climate or “disease X” – but we might not. It might be we never see another lockdown again.

Either way, it’s a policy which realised its goal.

Massive unemployment. Massive misery. Massive state-overreach. Normalizing Orwellian police raids for private actions on private property, increasing snitch culture, and promoting fear and resentment of your neighbours.

Drugs, depression, suicide up. Prosperity happiness and freedom down.

And most importantly, they now know they can get away with it. They wanted to see what we would do, and for the most part the answer was “nothing”.

It was a test, and most people failed.

As I wrote two days before lockdown was announced in 2020:

“Special powers” don’t go away. They are not temporary, they won’t be surrendered. Everything we give the government our permission to do, they will do. For the foreseeable.

And now CBDCs and edible insects and 15 minute cities are on the way. They will continue to do what they want, because they think we’ll continue to let them.

Hopefully, next time, we’ll prove them wrong.

Tyler Durden Tue, 03/26/2024 - 05:00

Read More

Continue Reading