Connect with us

Economics

Is Fed Chair Powell’s “Soft Landing” Even Possible?

Is Fed Chair Powell’s "Soft Landing" Even Possible?

Via SchiffGold.com,

After last week’s FOMC meeting, Federal Reserve Chairman Jerome…

Published

on

Is Fed Chair Powell's "Soft Landing" Even Possible?

Via SchiffGold.com,

After last week’s FOMC meeting, Federal Reserve Chairman Jerome Powell claimed that a “soft landing” was still possible. In other words, he thinks the central bank will be able to slay red-hot inflation without tipping the economy into a recession.

Is this feasible? Or is it a fairytale?

Economist Daniel Lacalle leans toward fairytale. The word he uses is “impossible.”

After more than a decade of chained stimulus packages and extremely low rates, with trillions of dollars of monetary stimulus fueling elevated asset valuations and incentivizing an enormous leveraged bet on risk, the idea of a controlled explosion or a ‘soft landing” is impossible.”

Why?

Lacalle goes on to explain.

The following was originally published by the Mises Wire. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

In an interview with Marketplace, the Federal Reserve chairman admitted that “a soft landing is really just getting back to 2 percent inflation while keeping the labor market strong. And it’s quite challenging to accomplish that right now.” He went on to say that “nonetheless, we think there are pathways … for us to get there.”

The first problem of a soft landing is the evidence of weak economic data. While the headline unemployment rate appears robust, both the labor participation and employment rate show a different picture, as they have been stagnant for almost a year. Both the labor force participation rate, at 62.2 percent, and the employment-population ratio, at 60.0 percent remain each 1.2 percentage points below their February 2020 values, as the April Jobs Report shows. Real wages are down, as inflation completely eats away the nominal wage increase. According to the Bureau of Labor Statistics, real average hourly earnings decreased 2.6 percent, seasonally adjusted, from April 2021 to April 2022. The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 3.4 percent decrease in real average weekly earnings over this period.

The University of Michigan consumer confidence in early May fell to an eleven-year low of 59.1, from 65.2, deep into recessionary territory. The current conditions index fell to 63.6, from 69.4, but the expectations index plummeted to 56.3, from 62.5.

The second problem of believing in a soft landing is underestimating the chain reaction impact of even allegedly small corrections in markets. With global debt at all-time highs and margin debt in the US alone at $773 billion, expectations of a controlled explosion where markets and the indebted sectors will absorb the rate hikes without significant damage to the economy are simply too optimistic. Margin debt remains more than $170 billion above the 2019 level, which was an all-time high at the time.

However, the biggest problem is that the Federal Reserve wants to curb inflation while at the same time the Federal government is unwilling to reduce spending. Ultimately, inflation is reduced by cutting the amount of broad money in the economy, and if government spending remains the same, the efforts to reduce inflation will only come from obliterating the private sector through higher cost of debt and a collapse in consumption. You know that the economy is in trouble when the fiscal deficit is only reduced to $360 billion in the first seven months of fiscal year 2022 despite record receipts and the tailwind of a strong recovery in GDP. Now, with GDP growth likely to be flat in the first six months but mandatory and discretionary spending still virtually intact, government consumption of monetary reserves is likely to keep core inflation elevated even if oil and gas prices moderate.

The Federal Reserve cannot expect a soft landing when the economy did not even take off, it was bloated with a chain of newly printed stimulus packages that have made the debt soar and created the perverse incentive to monetize all that the Federal government overspends.

The idea of a gradual cooling down of the economy is also negated by the reality of emerging markets and European banks. The relative strength of the US dollar is already creating enormous financial holes in the assets of a financial system that has built the largest carry trade against the dollar in decades. It is almost impossible to calculate the nominal and real losses in pension funds and the negative result of financial institutions in the most aggressively priced assets, from socially responsible investment and technology to infrastructure and private equity. We can see that markets have lost more than $7 trillion in capitalization in the year so far with a very modest move from the Federal Reserve. The impact of these losses is not evident yet in financial institutions, but the write-downs are likely to be significant into the second half of 2022, leading to a credit crunch exacerbated by rate hikes.

Central banks always underestimate how quickly the core capital of a financial institution can dissolve into inexistence. Even the financial system itself is unable to really understand the complexity of the cross-asset impact of a widespread slump in extremely generous valuations throughout all kinds of assets. That is why stress tests always fail. And financial institutions all over the world have abandoned the healthy process of provisioning expecting a lengthy and solid recovery.

The Federal Reserve tries to convince the world that rates will remain negative in real terms for a long time, but borrowing costs globally are surging while the US dollar is strengthening, creating an enormous vacuum effect that can create significant negative effects on the real economy before the Federal Reserve even realizes that the market is weaker than they anticipated, and liquidity is significantly lower than they calculated.

There is no easy solution.

There is no possible painless normalization path. After a massive monetary binge there is no soft hangover. The only thing that the Federal Reserve should have learnt is that the enormous stimulus plans of 2020 created the worst outcome: stubbornly high core inflation with weakening economic growth.

There are only two possibilities:

  1. To truly tackle inflation and risk a financial crisis led by the US dollar vacuum effect or

  2. to forget about inflation, make citizens poorer and maintain the so-called bubble of everything.

None is good but they wanted a decisive and unprecedented response to the pandemic lockdowns and created a decisive and unprecedented global financial risk. They thought money creation was not an issue and now the accumulated risk is so high it is hard to see how to tackle it.

One day someone may finally understand that supply shocks are addressed with supply-side policies, not with demand ones. Now it is too late. Powell will have to choose between the risk of a global financial meltdown or prolonged inflation.

Tyler Durden Tue, 06/21/2022 - 13:45

Read More

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Economics

Global IT Consulting Sourcing and Procurement Report with Pandemic Impact Analysis, Supplier Evaluation and Price Trends | SpendEdge

Global IT Consulting Sourcing and Procurement Report with Pandemic Impact Analysis, Supplier Evaluation and Price Trends | SpendEdge
PR Newswire
NEW YORK, July 3, 2022

Over 200 Forbes 2000 companies rely on our actionable insightsMore than 100 CPOs…

Published

on

Global IT Consulting Sourcing and Procurement Report with Pandemic Impact Analysis, Supplier Evaluation and Price Trends | SpendEdge

PR Newswire

  • Over 200 Forbes 2000 companies rely on our actionable insights
  • More than 100 CPOs and 500 category managers use our insights daily
  • SpendEdge has the fastest growth rate in number of reports and client base

NEW YORK, July 3, 2022 /PRNewswire/ -- The IT Consulting market size is expected to grow by USD 131.35 Billion by 2025, at a Compound Annual Growth Rate (CAGR) of 9.19% during the forecast period. To know more about this market.

Request For a Free Sample Report

IT Consulting Market Analysis

Analysis of the cost and volume drivers and supply market forecasts in various regions are offered in this IT Consulting research report. This market intelligence report also analyzes the top supply markets, market opportunities, challenges and the critical cost drivers that can aid buyers and suppliers devise a cost-effective category management strategy.

The report provides insights on the following information:

  • Regional spend dynamism and factors impacting costs
  • The total cost of ownership and cost-saving opportunities
  • Supply chain margins and pricing models
  • Competitiveness index for suppliers
  • Market favorability index for suppliers
  • Supplier and buyer KPIs

Get detailed insights on the COVID-19 pandemic crisis and recovery analysis of IT Consulting Market

www.spendedge.com/report/it-consulting-services-market-procurement-research-report

Related Reports on Professional Services Market:

Detect blind spots in your revenue decisions by analyzing interconnected unknowns around the "IT Consulting Market."

Report Metrics

Details

Base year considered

2021

Forecast period

2021 - 2025

Forecast units

USD Billion

Geographies covered

North America, South America, Europe, Middle East and Africa, and APAC

Leading IT Consulting suppliers

Deloitte Touche Tohmatsu Ltd., PricewaterhouseCoopers International Ltd., and Ernst & Young Global Ltd.

Top Pricing Models

Flat-fee model, hourly rate model, and cost-plus model

This procurement report answers help buyers identify and shortlist the most suitable suppliers for their IT Consulting Market requirements following questions:

  • Am I engaging with the right suppliers?
  • Which KPIs should I use to evaluate my incumbent suppliers?
  • Which supplier selection criteria are relevant for?
  • What are the workplace computing devices category essentials in terms of SLAs and RFx?

Table of Content

  • Executive Summary
  • Market Insights
  • Category Pricing Insights
  • Cost-saving Opportunities
  • Best Practices
  • Category Ecosystem
  • Category Management Strategy
  • Category Management Enablers
  • Suppliers Selection
  • Suppliers under Coverage
  • US Market Insights
  • Category scope

Appendix

About SpendEdge:

SpendEdge shares your passion for driving sourcing and procurement excellence. We are the preferred procurement market intelligence partner for 120+ Fortune 500 firms and other leading companies across numerous industries. Our strength lies in delivering robust, real-time procurement market intelligence reports and solutions.

Contact
SpendEdge
Anirban Choudhury
Marketing Manager
Ph No: +1 (872) 206-9340 
https://www.spendedge.com/contact-us

View original content to download multimedia:https://www.prnewswire.com/news-releases/global-it-consulting-sourcing-and-procurement-report-with-pandemic-impact-analysis-supplier-evaluation-and-price-trends--spendedge-301579152.html

SOURCE SpendEdge

Read More

Continue Reading

Spread & Containment

Visualizing A Decade Of Population Growth And Decline In US Counties

Visualizing A Decade Of Population Growth And Decline In US Counties

There are a number of factors that determine how much a region’s population…

Published

on

Visualizing A Decade Of Population Growth And Decline In US Counties

There are a number of factors that determine how much a region’s population changes.

If an area sees a high number of migrants, along with a strong birth rate and low death rate, then its population is bound to increase over time. On the flip side, as Visual Capitalists Nick Routley details below, if more people are leaving the area than coming in, and the region’s birth rate is low, then its population will likely decline.

Which areas in the United States are seeing the most growth, and which places are seeing their populations dwindle?

This map, using data from the U.S. Census Bureau, shows a decade of population movement across U.S. counties, painting a detailed picture of U.S. population growth between 2010 and 2020.

Counties With The Biggest Population Growth from 2010-2020

To calculate population estimates for each county, the U.S. Census Bureau does the following calculations:

      A county’s base population → plus births → minus deaths → plus migration = new population estimate

From 2010 to 2020, Maricopa County in Arizona saw the highest increase in its population estimate. Over a decade, the county gained 753,898 residents. Below are the counties that saw the biggest increases in population:

Phoenix and surrounding areas grew faster than any other major city in the country. The region’s sunny climate and amenities are popular with retirees, but another draw is housing affordability. Families from more expensive markets—California in particular—are moving to the city in droves. This is a trend that spilled over into the pandemic era as more people moved into remote and hybrid work situations.

Texas counties saw a lot of growth as well, with five of the top 10 gainers located in the state of Texas. A big draw for Texas is its relatively affordable housing market. In 2021, average home prices in the state stood at $172,500$53,310 below the national average.

Counties With The Biggest Population Drops from 2010-2020

On the opposite end of the spectrum, here’s a look at the top 10 counties that saw the biggest declines in their populations over the decade:

The largest drops happened in counties along the Great Lakes, including Cook County (which includes the city of Chicago) and Wayne County (which includes the city of Detroit).

For many of these counties, particularly those in America’s “Rust Belt”, population drops over this period were a continuation of decades-long trends. Wayne County is an extreme example of this trend. From 1970 to 2020, the area lost one-third of its population.

U.S. Population Growth in Percentage Terms (2010-2020)

While the map above is great at showing where the greatest number of Americans migrated, it downplays big changes in counties with smaller populations.

For example, McKenzie County in North Dakota, with a 2020 population of just 15,242, was the fastest-growing U.S. county over the past decade. The county’s 138% increase was driven primarily by the Bakken oil boom in the area. High-growth counties in Texas also grew as new sources of energy were extracted in rural areas.

The nation’s counties are evenly divided between population increase and decline, and clear patterns emerge.

Pandemic Population Changes

More recent population changes reflect longer-term trends. During the COVID-19 pandemic, many of the counties that saw the strongest population increases were located in high-growth states like Florida and Texas.

Below are the 20 counties that grew the most from 2020 to 2021.

Many of these counties are located next to large cities, reflecting a shift to the suburbs and larger living spaces. However, as COVID-19 restrictions ease, and the pandemic housing boom tapers off due to rising interest rates, it remains to be seen whether the suburban shift will continue, or if people begin to migrate back to city centers.

Tyler Durden Sat, 07/02/2022 - 21:00

Read More

Continue Reading

Economics

The Best Cities to Buy a Starter Home

Competition for starter homes is intense. What’s a buyer to do? Look to these cities to break into the real estate market.

Published

on

Competition for starter homes is intense. What's a buyer to do? Look to these cities to break into the real estate market.

Who wants to buy a home? A lot more people than there are homes to buy, and the outlook for first-time buyers is particularly grim.

About 26 million Americans plan to buy a home in the next 12 months, but just 5-6 million homes were sold in each of the past five years, according to a NerdWallet survey conducted in December 2021.

Millennials, aged about 26-41 years, are the largest group trying to buy homes, about 37%, according to the National Association of Realtors, and first-time buyers made up 31% of all home buyers. The supply of starter homes decreased by more than half from 2017-2021, according to an analysis by Realtor.com, which defined starters as single-family homes, condos, and townhomes under 1,850 square feet.

While median monthly asking rent in the U.S. surpassed $2,000 in May, the national median sale price topped $431,000, according to Redfin data.

And it’s not just low inventory and high prices, the competition is fierce for first-time homebuyers. Urban renters headed for the suburbs during the pandemic to compete for those entry-level homes, baby boomers looking to downsize also go after smaller properties, and to make matters worse, first-time home buyers must compete with investors who pay cash to fix and flip homes. These cash-rich flippers now make up about 10% of homebuyers

Lastly, builders have largely been unable to offset the decline in starter homes.

For the house hunter who still has the moxie to try, turn to this list of cheapest cities to buy a home. To find the cheapest places for homebuyers and the best places for starter homes, StorageCafe, an online platform that provides storage unit listings across the nation, looked at data from 108 U.S. cities with populations ranging from 90,000 to 8 million. The metrics include property values, number of sales between 2015 and 2021, housing affordability, cost of living, unemployment rate, homebuyers’ ages, the ratio of renters to owners, income levels, FHA lending limits and average mortgage rates. They scored each city on these metrics then ranked them based on their potential with regard to starter homes.

Here are the best cities for first-time homebuyers:

1. Fort Wayne, Ind.

  • Median property value: $113,144
  • Cost of living index: 87
  • Homebuyers' age: 35
  • 2021 average mortgage rate: 3.14%

The analysis used average mortgage rates from 2021, and rates have since gone up, hovering near 6% in June, but last year's rates might still give you a sense of where rates tend to be lower.

2. Columbia Md.

  • Median property value: $264,055
  • Cost of living index:106
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.00%

3. Pittsburgh

  • Median property value: $170,042
  • Cost of living index:104
  • Homebuyers' age: 38
  • 2021 average mortgage rate: 3.03%

Shutterstock

4. Fishers, Ind.

  • Median property value: $258,679
  • Cost of living index: 92
  • Homebuyers' age: 38
  • 2021 average mortgage rate: 3.14%

5. Columbus, Ohio

  • Median property value: $164,229
  • Cost of living index: 92
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.16%

aceshot1 / Shutterstock

6. Carmel, Ind.

  • Median property value: $244,670
  • Cost of living index: 104
  • Homebuyers' age: 40
  • 2021 average mortgage rate: 3.01%

7. St. Paul, Minn.

  • Median property value: $286,151
  • Cost of living index: 92
  • Homebuyers' age: 38
  • 2021 average mortgage rate: 3.14%

8. Cary, N.C.

  • Median property value: $308,611
  • Cost of living index: 94
  • Homebuyers' age: 43
  • 2021 average mortgage rate: 3.02%

9. Manchester, N.H.

  • Median property value: $276,257
  • Cost of living index: 111
  • Homebuyers' age: 40
  • 2021 average mortgage rate: 3.03%

10. Minneapolis

  • Median property value: $288,926
  • Cost of living index: 105
  • Homebuyers' age: 40
  • 2021 average mortgage rate: 3.01%

11. Nashville, Tenn.

  • Median property value: $318,046
  • Cost of living index: 93
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.02%

f11photo / Shutterstock

12. Bakersfield, Calif.

  • Median property value: $216,063
  • Cost of living index: 102
  • Homebuyers' age: 40
  • 2021 average mortgage rate: 3.04%

13. Arvada, Colo.

  • Median property value: $476,672
  • Cost of living index: 114
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.00%

14. Alexandria, Va.

  • Median property value: $432,703
  • Cost of living index: 137
  • Homebuyers' age: 40
  • 2021 average mortgage rate: 2.99%

Shutterstock

15. Centennial, Colo.

  • Median property value: $444,747
  • Cost of living index: 114
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.00%

16. Denver

  • Median property value: $505,777
  • Cost of living index: 113
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.00%

17. Raleigh, N.C.

  • Median property value: $279,304
  • Cost of living index: 94
  • Homebuyers' age: 43
  • 2021 average mortgage rate: 3.02%

18. Germantown, Md.

  • Median property value: $261,511
  • Cost of living index: 157
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.00%

19. St. Petersburg, Fla.

  • Median property value: $283,684
  • Cost of living index: 96
  • Homebuyers' age: 53
  • 2021 average mortgage rate: 3.11%

20. Lakewood, Colo.

  • Median property value: $380,165
  • Cost of living index: 114
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.00%

21. Aurora, Colo.

  • Median property value: $360,542
  • Cost of living index: 114
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.00%

22. Boca Raton, Fla.

  • Median property value: $280,104
  • Cost of living index: 116
  • Homebuyers' age: 51
  • 2021 average mortgage rate: 3.11%

23. Modesto, Calif.

  • Median property value: $319,328
  • Cost of living index: 119
  • Homebuyers' age: 39
  • 2021 average mortgage rate: 3.04%

Shutterstock

24. Chandler, Ariz.

  • Median property value: $388,450
  • Cost of living index: 103
  • Homebuyers' age: 51
  • 2021 average mortgage rate: 3.12%

Shutterstock

25. Las Vegas

  • Median property value: $265,170
  • Cost of living index: 107
  • Homebuyers' age: 50
  • 2021 average mortgage rate: 3.11%

26. Washington, D.C.

  • Median property value: $623,135
  • Cost of living index: 157
  • Homebuyers' age: 40
  • 2021 average mortgage rate: 4.90%

27. Scottsdale, Ariz.

  • Median property value: $478,609
  • Cost of living index: 103
  • Homebuyers' age: 51
  • 2021 average mortgage rate: 3.12%

28. Spokane, Wash.

  • Median property value: $300,881
  • Cost of living index: 107
  • Homebuyers' age: 44
  • 2021 average mortgage rate: 3.06%

29. Peoria, Ariz.

  • Median property value: $373,588
  • Cost of living index: 103
  • Homebuyers' age: 51
  • 2021 average mortgage rate: 3.12%

30. Gilbert, Ariz.

  • Median property value: $409,324
  • Cost of living index: 103
  • Homebuyers' age: 51
  • 2021 average mortgage rate: 3.12%

31. Portland, Ore.

  • Median property value: $484,475
  • Cost of living index: 132
  • Homebuyers' age: 44
  • 2021 average mortgage rate: 3.08%

Check out how all 108 cities ranked and see the methodology for this study at StorageCafe.com

Read More

Continue Reading

Trending