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Markets tumble following Governor Powell’s “We must keep at it” speech

With every financial ear listening in, and millions of pairs of eyes glued to their screens, market watchers from around the globe tuned in, as Governor…

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With every financial ear listening in, and millions of pairs of eyes glued to their screens, market watchers from around the globe tuned in, as Governor Powell spoke at the first session of the Jackson Hole Economic Policy Symposium.

Naturally, high inflation has got everyone’s attention. Equally, the Fed’s accelerated front-loading of hikes has been a bit of a surprise to markets, with rates surging 225 bps in a matter of 4 meetings.

The Governor’s speech summed up in one sentence, you ask? “We must keep at it.”

That’s right. Chair Powell has firmly reiterated the Federal Reserve’s resolve to prioritize price stability and bring inflation closer to its 2% target.

This was despite plenty of mixed economic data. For instance, GDP contracted for the second quarter in a row and PMI crashed earlier in the week. However, unemployment stayed low, business sentiment improved and 1-year ahead inflation expectations were meaningfully lower.

Given the moderation in CPI and stable consumption data, some market watchers believed that Powell and Co. may choose to slow the pace of rate hikes, having already equalled the peak of the 2019 cycle.

However, it was clear that the Governor wanted to decisively quash any speculation around a “quick pivot to rate cuts.”

Labour market considerations

A crucial driver for Powell’s hawkishness was the jobs situation. Unemployment currently stands at a half-century low of 3.5%. Interest rate sensitive sectors such as housing and technology have faced the brunt of losses, while other areas have been relatively immune.

However, policymakers fear that without a return to price stability, labour market conditions are destined to deteriorate.

Powell added that the 2% target would require “sustained below trend growth” and “very likely be some softening of labour market conditions.”

If the Fed fails to act decisively, higher inflation expectations could get cemented, making the task of monetary authorities even more challenging.

Despite the hardship this would cause, “a failure to restore price stability would mean far greater pain.”

Powell conceded that in the past, “a lengthy period of very restrictive monetary policy was ultimately needed to stem high inflation,” but insisted “our aim is to avoid that outcome by acting with resolve now.”

Central bank speak

Central bank communication remains a mystery wrapped in a riddle. Gauging the pulse of the crowd, balancing this with what should be done with an allowance for what may come is a delicate balancing act. As an immensely subtle art far from being mastered, monetary authorities have accumulated battle scars far more routinely than resounding successes delivered with pinpoint precision.

The world’s foremost central bank has been struggling to maintain its sway over the markets too.

Today, was an opportunity for Powell to exorcise many of its demons including the 2019 reversal, insistence on ‘transitory’, the ill-timed Average Inflation Targeting policy and near limitless stimulus amid the pandemic.

He chose to talk tough on inflation with a view to restoring the Fed’s credibility, a central piece in conducting effective monetary policy and managing public expectations.

Despite being largely in line with expectations in spirit, the market appears to have focused on the expected hardship for homeowners and small businesses over the coming year, and Powell’s comments on imminent slowing growth. Following this, the Dow plunged more than 1000 points. Other major stock indexes also fell between 3% and 4% today

But the Fed is credible

Optimistically, one could argue that the Fed’s restrictive policy has already begun to bear fruit, with July inflation dipping to the mid-8s.

However, one better month does not a successful policy make, and the FOMC would need to see much more evidence of a continued decline in prices before even considering any easing. In addition, it usually takes at least a few quarters for monetary policy to be transmitted throughout the economy.

Citi economist Andrew Hollenhorst noted that the softer reading may merely be a reaction to cuts in the Medicare program or falling equity prices, which may prove temporary at best.

Although the Governor spoke a tough game, this narrative was largely anticipated. It is yet to be seen if the FOMC can follow through once a deeper slowdown takes hold.

According to the CME FedWatch Tool, the latest data shows that after Jay Powell’s remarks there was a 58.5% probability of a third 75-bps hike, while a 41.5% chance of a 50-bps increase.

Interestingly, CME data also shows that there is a 100% chance of rate hikes continuing without pause until the July meeting in 2023, with a staggering 95.6% probability that the FOMC will hike to the 400 – 425 bps range between December 2023 and July 2023.  

In this regard, it would appear that the Fed’s messaging has been largely successful in restoring the Fed’s credibility by convincing the market of its steadfast intentions.

Source: CME

However, not everyone seems to be a believer in the robust portrayal of the Fed, with well-known commentators such as Peter Schiff anticipating a reversal at some point within the next few months.

Personal consumption expenditures

In its latest round of PCE data released by the Bureau of Economic Analysis earlier today, consumer spending edged 0.1% higher, although June data was revised slightly downwards.

The marginal improvement in spending was driven by external factors, specifically the end of the summer vacation driving season which likely freed up household budgets in response to easing gasoline prices.

Annual PCE rose to 6.3%, while the annual core PCE (minus food and energy), the Fed’s favoured inflation gauge, rose 4.6% YoY, easing slightly from the 4.8% recorded in June.

Monthly core PCE dropped sharply from 0.6% in June to 0.1% in the latest release.

Source: Investing.com

Despite the moderation in consumption, which makes up 70% of US economic activity, Q2 GDP stayed negative. It contracted 0.6% but improved substantially over the decline of 1.6% in Q1.

Although two consecutive quarters of economic contraction is a terrible sign, it must be noted that much of the fall in output was driven by supply-side shocks that saw inventories balloon. The higher stocks compressed intermediate goods production, subtracting an estimated 1.3% from overall GDP. (Intermediate goods are not counted as a part of GDP.)

Arguably, once supply chain disruptions are resolved, inventory flow should improve considerably. However, given the persistence of bottlenecks thus far, it is to be seen how quickly these can be untangled.

Consumer sentiment

The University of Michigan’s sentiment index for August was recorded at 58.2, above both preliminary estimates of 55.1 and considerably better than July data of 51.5.

Public estimates of 1-year ahead inflation were recorded at 4.8% versus 5.2% during the previous month, a welcome sign for the Fed.

Despite the improvement in outlook, Powell made it abundantly clear that this is not the time to pause rate hikes while invoking former Chairman Volcker, that the central bank must “break the grip of inflationary expectations.”

Supply-side

It is also worth noting that the Governor himself admitted that central bank policy is demand focused. With much of today’s inflation stemming from pandemic-era bottlenecks, and broken international supply chains, the Fed would likely need to hike rates substantially higher to bring down inflation meaningfully, with investors like Schiff feeling that the current efforts have been “wholly insufficient.” 

A recent study by the Federal Reserve Bank of New York estimated that 40% of prevailing inflation was supply-led.

Yet, contrary to suggestions of Stiglitz and Baker, the overarching emphasis appears to remain on the demand side interventions and perhaps not enough on easing supply side blockages.

The post Markets tumble following Governor Powell’s “We must keep at it” speech appeared first on Invezz.

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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…

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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

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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…

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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

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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…

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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

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