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Nick Timiroas highlighted an exchange from Fed Governor Waller (link to speech/interview transcript) on Twitter. This article consists of two rants based on the transcript, plus a bonus rant in the appendix based on what somebody else said.Supply Shock…



Nick Timiroas highlighted an exchange from Fed Governor Waller (link to speech/interview transcript) on Twitter. This article consists of two rants based on the transcript, plus a bonus rant in the appendix based on what somebody else said.

Supply Shocks

David Wessel Hmm. Another question was what your view is about, what role did fiscal policy played in causing the inflation that you've been working so hard to restrain? How big an issue was fiscal policy and how big an issue is fiscal policy now, as you try and calibrate the right pace of monetary easing?

Christopher Waller Well, just from a, it's just a simple macroeconomics point of view. If you're going to increase the spending in the debt [sic?] by $6 trillion in a matter of two years, and then say that has no effect on demand, that seems just impossible to me. It isn't the only thing that contributed to the inflation, but it certainly has had to have had an impact. The reason I say that is, you know, people have been talking a lot about, oh, all the last six months shows this was all supply, all supply, all supply. Well, if these are temporary supply shocks, when they unwind, the price level should go back down to where it was. It's not.

Go to Fred. Pull up CPI. Take the log. Look at that thing. The level of inflation [sic?] is permanently higher. That doesn't happen with supply shocks. That comes from demand. And this was a permanent increase in demand and permanent increase in debt. So I think there clearly was in fact a fairly...

I am just going to go after the part of the text that I highlighted. Firstly, the “level of inflation being permanently higher” is either a mis-statement or not carefully thought through. So I will not sweat his exact wording and try to guess what he meant. (Why is his wording a problem? The inflation rate went up, and has since gone down. Although it might still be higher than previous averages, that would imply that one could claim that “inflation is permanently higher” every single time inflation rose in the 1950-2024 period. If he meant that “the price level is permanently higher,” well, that is how a 2% inflation target is actually supposed to work.)

My concern is the Economics 101ism of the analysis, which is all over the discussion of this topic. In the world of Economics 101, everything in the economy is the result of two lines intersecting. All discussions revolve around what happens when one — and only one — of those lines are allowed to move. (This can often devolve into a debate whether one of the lines is horizontal or vertical, which is Peak Economics 101.) In this case, there has to be either a supply shock, or a demand shock. It is forbidden that “demand” and “supply” change at the same time.

Although I am mere blogger with almost no academic training in economics even I was able to notice that the pandemic lockdown period saw the simultaneous impositions on the ability to produce goods (“supply shock”) as well as fiscal transfers designed to avoid Consumer Cash Flow Armageddon (“demand shock”). This was then followed the Russian invasion of Ukraine (supply shock), etc. Deaths, early retirements, and the shutdown of worker migration also created a supply shock in the labour market. Although I saw a lot of commentary putting weight on supply side factors for the inflation, I cannot recall any serious commentator saying that nothing happened on the demand side.

Meanwhile, the idea that the price level/inflation must go back to its previous level after the shock passes is remarkably static thinking. The supply shock also hit the labour market, and wages broadly rose. Empirically, higher nominal wage incomes implies higher nominal household expenditure — sustaining the higher price level. This is not like The Great Canadian Cauliflower Panic Of 2016 where there is a shock to a single commodity that has extremely limited effect on other prices; the whole structure saw price increases. The higher wages allows the economy to function with higher prices across the board, which is why we have aggregate wage and price levels in economic models in the first place.

Inflation is only supposed to head back down after the various markets sorted themselves out. Given the empirically demonstrated persistence of inflation, a model that predicts that inflation exhibits immediate steps up and down in response to “shocks” can easily be rejected.

Comments like this are why I think that the whole “supply versus demand” debate needs to be put out of its misery.

Side Rants

This episode also provides an interesting view into inflation psychology. The entire neoclassical enterprise is premised on everybody internalising the central bank target, and doing sophisticated calculations related to it. But back in the real world, I keep having conversations with/reading texts by people who are mad that prices are not going back to where they were in 2019. Given that Canadian inflation had been rising at an average close to the target 2% per year (and more if you believe the inflation truthers!) between 1990-2020, if people were really aware of what was happening to inflation, why would they ever expect prices to return to their previous level?

As a final aside, the somewhat garbled comment on debt could be turned into a little MMT rant. Deficits are outcomes of economic developments, and the exact monetary amounts are somewhat arbitrary in the sense that what constitutes a “stimulative” deficit depends on a lot of factors. (Some might object to the use of dollar amounts instead of a more sensible scaling versus GDP. I think the use of dollar amounts should be avoided in written communications about aggregate fiscal policy, but using them in verbal remarks is going to be more natural for someone who stares at economic data all day.)

Reserves Comments

Another comment by Waller caught my eye.

Christopher Waller Yeah. I mean, I made an argument for probably ten years. There's no economic theory that tells you how big a Central Bank's balance sheet should be. I know of no theory that tells you. You have Switzerland where, it's basically 100% of GDP or some number like that. So there's no real theory. And from a point of view of the reserves, I love a floor system because, as Milton Friedman once said, you want to put enough liquidity in the system that you satiate the system. So there's no scarcity or shortage.

I am in the process of going after another dubious theory of Milton Friedman (should be published next week), so I have no choice but to comment.

To the contrary of Waller’s assertion, there is an economic theory about the size of the central bank balance sheet, or at least part of it. The central bank’s balance sheet is equal to notes and coin holdings plus reserves held at the central bank. Notes and coins is literally a money demand function found in any mainstream monetary textbook (although one might debate how accurate the models are).

As for reserves, they are arbitrary. A banking system can function perfectly well with exactly zero reserves held overnight at the central bank. Reserve holdings are either a tax on banks (required reserves) or are pushed in by central bankers to replace short-dated Treasury securities (which they are economically equivalent to from the perspective of the private sector). (Admittedly, there are markets where banks hold reserves based on convention. Since conventions are arbitrary, the reserves required to meet them are arbitrary.)

If I have $100 in my bank account and my idiot bank insists that I hold that $100 “in reserve,” I cannot use that $100 to pay any incoming expenses. I have a stranded, illiquid asset that pays whatever interest rate my bank decides to offer on it. In the case of bank reserves, replace “idiot bank” with “idiot central bank” and you immediately see the issue with reserves that Economics 101 textbooks ignore.

If banks truly want to hold reserves at the central bank and not lend in wholesale money markets (including the interbank market), this is not a “money demand” issue. It is a signal that the central bank once again failed its core responsibility to properly regulate the banking system. Letting the banks bypass wholesale lending markets by using the central bank as an intermediary is just putting band-aid on a major wound. How many band-aids you apply is a secondary concern relative to dealing with the real problems.

Appendix: My Turn to Strawman!

Having just objected to a strawman argument about supply shocks, I will then turn around and hit my own strawman. To be clear, this is not based on the Waller interview. Rather than create a new article, I will just throw this little rant (based on some recent comments I saw elsewhere) into this appendix.

I have seen comments to the effect that the rise in nominal GDP tells us that we would have an inflation problem.

Any time someone uses nominal GDP in such a context, please return to the following (approximate) identity. (You could use logarithms to be exact.)

Nominal GDP growth rate = (deflator inflation rate) + (real GDP growth rate).

Look at that equation. Ask yourself this: under what circumstances will the deflator inflation rate go off in a completely direction than nominal GDP growth (ignoring very short period rates of change, where it does)? How often do we see this medium-term divergence in practice?

After that exercise, one can then question why someone would suggest using nominal GDP trajectory as a cause of inflation?

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(c) Brian Romanchuk 2024

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Home buyers must now navigate higher mortgage rates and prices

Rates under 4% came and went during the Covid pandemic, but home prices soared. Here’s what buyers and sellers face as the housing season ramps up.



Springtime is spreading across the country. You can see it as daffodil, camellia, tulip and other blossoms start to emerge. 

You can also see it in the increasing number of for sale signs popping up in front of homes, along with the painting, gardening and general sprucing up as buyers get ready to sell. 

Which leads to two questions: 

  • How is the real estate market this spring? 
  • Where are mortgage rates? 

What buyers and sellers face

The housing market is bedeviled with supply shortages, high prices and slow sales.

Mortgage rates are still high and may limit what a buyer can offer and a seller can expect.  

Related: Analyst warns that a TikTok ban could lead to major trouble for Apple, Big Tech

And there's a factor not expected that may affect the sales process. Fixed commission rates on home sales are going away in July.

Reports this week and in a week will make the situation clearer for buyers and sellers. 

The reports are:

  • Housing starts from the U.S. Commerce Department due Tuesday. The consensus estimate is for a seasonally adjusted rate of about 1.4 million homes. These would include apartments, both rentals and condominiums. 
  • Existing home sales, due Thursday from the National Association of Realtors. The consensus estimate is for a seasonally adjusted sales rate of about 4 million homes. In 2023, some 4.1 million homes were sold, the worst sales rate since 1995. 
  • New-home sales and prices, due Monday from the Commerce Department. Analysts are expecting a sales rate of 661,000 homes (including condos), up 1.5% from a year ago.

Here is what buyers and sellers need to know about the situation. 

Mortgage rates will stay above 5% 

That's what most analysts believe. Right now, the rate on a 30-year mortgage is between 6.7% and 7%. 

Rates peaked at 8% in October after the Federal Reserve signaled it was done raising interest rates.

The Freddie Mac Primary Mortgage Market Survey of March 14 was at 6.74%. 

Freddie Mac buys mortgages from lenders and sells securities to investors. The effect is to replenish lenders' cash levels to make more loans. 

A hotter-than-expected Producer Price Index released that day has pushed quotes to 7% or higher, according to data from Mortgage News Daily, which tracks mortgage markets.

Home buyers must navigate higher mortgage rates and prices this spring.


On a median-priced home (price: $380,000) and a 20% down payment, that means a principal and interest rate payment of $2,022. The payment  does not include taxes and insurance.

Last fall when the 30-year rate hit 8%, the payment would have been $2,230. 

In 2021, the average rate was 2.96%, which translated into a payment of $1,275. 

Short of a depression, that's a rate that won't happen in most of our lifetimes. 

Most economists believe current rates will fall to around 6.3% by the end of the year, maybe lower, depending on how many times the Federal Reserve cuts rates this year. 

If 6%, the payment on our median-priced home is $1,823.

But under 5%, absent a nasty recession, fuhgettaboutit.

Supply will be tight, keeping prices up

Two factors are affecting the supply of homes for sale in just about every market.

First: Homeowners who had been able to land a mortgage at 2.96% are very reluctant to sell because they would then have to find a home they could afford with, probably, a higher-cost mortgage.

More economic news:

Second, the combination of high prices and high mortgage rates are freezing out thousands of potential buyers, especially those looking for homes in lower price ranges.

Indeed, The Wall Street Journal noted that online brokerage Redfin said only about 20% of homes for sale in February were affordable for the typical household.

And here mortgage rates can play one last nasty trick. If rates fall, that means a buyer can afford to pay more. Sellers and their real-estate agents know this too, and may ask for a higher price. 

Covid's last laugh: An inflation surge

Mortgage rates jumped to 8% or higher because since 2022 the Federal Reserve has been fighting to knock inflation down to 2% a year. Raising interest rates was the ammunition to battle rising prices.

In June 2022, the consumer price index was 9.1% higher than a year earlier. 

The causes of the worst inflation since the 1970s were: 

  • Covid-19 pandemic, which caused the global economy to shut down in 2020. When Covid ebbed and people got back to living their lives, getting global supply chains back to normal operation proved difficult. 
  • Oil prices jumped to record levels because of the recovery from the pandemic recovery and Russia's invasion of Ukraine.

What the changes in commissions means

The long-standing practice of paying real-estate agents will be retired this summer, after the National Association of Realtors settled a long and bitter legal fight.

No longer will the seller necessarily pay 6% of the sale price to split between buyer and seller agents.

Both sellers and buyers will have to negotiate separately the services agents have charged for 100 years or more. These include pre-screening properties, writing sales contracts, and the like. The change will continue a trend of adding costs and complications to the process of buying or selling a home.

Already, interest rates are a complication. In addition, homeowners insurance has become very pricey, especially in communities vulnerable to hurricanes, tornadoes, and forest fires. Florida homeowners have seen premiums jump more than 102% in the last three years. A policy now costs three times more than the national average.

Related: Veteran fund manager picks favorite stocks for 2024


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Mistakes Were Made

Mistakes Were Made

Authored by C.J.Hopkins via The Consent Factory,

Make fun of the Germans all you want, and I’ve certainly done that…



Mistakes Were Made

Authored by C.J.Hopkins via The Consent Factory,

Make fun of the Germans all you want, and I’ve certainly done that a bit during these past few years, but, if there’s one thing they’re exceptionally good at, it’s taking responsibility for their mistakes. Seriously, when it comes to acknowledging one’s mistakes, and not rationalizing, or minimizing, or attempting to deny them, and any discomfort they may have allegedly caused, no one does it quite like the Germans.

Take this Covid mess, for example. Just last week, the German authorities confessed that they made a few minor mistakes during their management of the “Covid pandemic.” According to Karl Lauterbach, the Minister of Health, “we were sometimes too strict with the children and probably started easing the restrictions a little too late.” Horst Seehofer, the former Interior Minister, admitted that he would no longer agree to some of the Covid restrictions today, for example, nationwide nighttime curfews. “One must be very careful with calls for compulsory vaccination,” he added. Helge Braun, Head of the Chancellery and Minister for Special Affairs under Merkel, agreed that there had been “misjudgments,” for example, “overestimating the effectiveness of the vaccines.”

This display of the German authorities’ unwavering commitment to transparency and honesty, and the principle of personal honor that guides the German authorities in all their affairs, and that is deeply ingrained in the German character, was published in a piece called “The Divisive Virus” in Der Spiegel, and immediately widely disseminated by the rest of the German state and corporate media in a totally organic manner which did not in any way resemble one enormous Goebbelsian keyboard instrument pumping out official propaganda in perfect synchronization, or anything creepy and fascistic like that.

Germany, after all, is “an extremely democratic state,” with freedom of speech and the press and all that, not some kind of totalitarian country where the masses are inundated with official propaganda and critics of the government are dragged into criminal court and prosecuted on trumped-up “hate crime” charges.

OK, sure, in a non-democratic totalitarian system, such public “admissions of mistakes” — and the synchronized dissemination thereof by the media — would just be a part of the process of whitewashing the authorities’ fascistic behavior during some particularly totalitarian phase of transforming society into whatever totalitarian dystopia they were trying to transform it into (for example, a three-year-long “state of emergency,” which they declared to keep the masses terrorized and cooperative while they stripped them of their democratic rights, i.e., the ones they hadn’t already stripped them of, and conditioned them to mindlessly follow orders, and robotically repeat nonsensical official slogans, and vent their impotent hatred and fear at the new “Untermenschen” or “counter-revolutionaries”), but that is obviously not the case here.

No, this is definitely not the German authorities staging a public “accountability” spectacle in order to memory-hole what happened during 2020-2023 and enshrine the official narrative in history. There’s going to be a formal “Inquiry Commission” — conducted by the same German authorities that managed the “crisis” — which will get to the bottom of all the regrettable but completely understandable “mistakes” that were made in the heat of the heroic battle against The Divisive Virus!

OK, calm down, all you “conspiracy theorists,” “Covid deniers,” and “anti-vaxxers.” This isn’t going to be like the Nuremberg Trials. No one is going to get taken out and hanged. It’s about identifying and acknowledging mistakes, and learning from them, so that the authorities can manage everything better during the next “pandemic,” or “climate emergency,” or “terrorist attack,” or “insurrection,” or whatever.

For example, the Inquiry Commission will want to look into how the government accidentally declared a Nationwide State of Pandemic Emergency and revised the Infection Protection Act, suspending the German constitution and granting the government the power to rule by decree, on account of a respiratory virus that clearly posed no threat to society at large, and then unleashed police goon squads on the thousands of people who gathered outside the Reichstag to protest the revocation of their constitutional rights.

Once they do, I’m sure they’ll find that that “mistake” bears absolutely no resemblance to the Enabling Act of 1933, which suspended the German constitution and granted the government the power to rule by decree, after the Nazis declared a nationwide “state of emergency.”

Another thing the Commission will probably want to look into is how the German authorities accidentally banned any further demonstrations against their arbitrary decrees, and ordered the police to brutalize anyone participating in such “illegal demonstrations.”

And, while the Commission is inquiring into the possibly slightly inappropriate behavior of their law enforcement officials, they might want to also take a look at the behavior of their unofficial goon squads, like Antifa, which they accidentally encouraged to attack the “anti-vaxxers,” the “Covid deniers,” and anyone brandishing a copy of the German constitution.

Come to think of it, the Inquiry Commission might also want to look into how the German authorities, and the overwhelming majority of the state and corporate media, accidentally systematically fomented mass hatred of anyone who dared to question the government’s arbitrary and nonsensical decrees or who refused to submit to “vaccination,” and publicly demonized us as “Corona deniers,” “conspiracy theorists,” “anti-vaxxers,” “far-right anti-Semites,” etc., to the point where mainstream German celebrities like Sarah Bosetti were literally describing us as the inessential “appendix” in the body of the nation, quoting an infamous Nazi almost verbatim.

And then there’s the whole “vaccination” business. The Commission will certainly want to inquire into that. They will probably want to start their inquiry with Karl Lauterbach, and determine exactly how he accidentally lied to the public, over and over, and over again …

And whipped people up into a mass hysteria over “KILLER VARIANTS” …



And so on. I could go on with this all day, but it will be much easier to just refer you, and the Commission, to this documentary film by Aya Velázquez. Non-German readers may want to skip to the second half, unless they’re interested in the German “Corona Expert Council” …

Look, the point is, everybody makes “mistakes,” especially during a “state of emergency,” or a war, or some other type of global “crisis.” At least we can always count on the Germans to step up and take responsibility for theirs, and not claim that they didn’t know what was happening, or that they were “just following orders,” or that “the science changed.”

Plus, all this Covid stuff is ancient history, and, as Olaf, an editor at Der Spiegel, reminds us, it’s time to put the “The Divisive Pandemic” behind us …

… and click heels, and heil the New Normal Democracy!

Tyler Durden Sat, 03/16/2024 - 23:20

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“Extreme Events”: US Cancer Deaths Spiked In 2021 And 2022 In “Large Excess Over Trend”

"Extreme Events": US Cancer Deaths Spiked In 2021 And 2022 In "Large Excess Over Trend"

Cancer deaths in the United States spiked in 2021…



"Extreme Events": US Cancer Deaths Spiked In 2021 And 2022 In "Large Excess Over Trend"

Cancer deaths in the United States spiked in 2021 and 2022 among 15-44 year-olds "in large excess over trend," marking jumps of 5.6% and 7.9% respectively vs. a rise of 1.7% in 2020, according to a new preprint study from deep-dive research firm, Phinance Technologies.

Algeria, Carlos et. al "US -Death Trends for Neoplasms ICD codes: C00-D48, Ages 15-44", ResearchGate, March. 2024 P. 7

Extreme Events

The report, which relies on data from the CDC, paints a troubling picture.

"We show a rise in excess mortality from neoplasms reported as underlying cause of death, which started in 2020 (1.7%) and accelerated substantially in 2021 (5.6%) and 2022 (7.9%). The increase in excess mortality in both 2021 (Z-score of 11.8) and 2022 (Z-score of 16.5) are highly statistically significant (extreme events)," according to the authors.

That said, co-author, David Wiseman, PhD (who has 86 publications to his name), leaves the cause an open question - suggesting it could either be a "novel phenomenon," Covid-19, or the Covid-19 vaccine.

"The results indicate that from 2021 a novel phenomenon leading to increased neoplasm deaths appears to be present in individuals aged 15 to 44 in the US," reads the report.

The authors suggest that the cause may be the result of "an unexpected rise in the incidence of rapidly growing fatal cancers," and/or "a reduction in survival in existing cancer cases."

They also address the possibility that "access to utilization of cancer screening and treatment" may be a factor - the notion that pandemic-era lockdowns resulted in fewer visits to the doctor. Also noted is that "Cancers tend to be slowly-developing diseases with remarkably stable death rates and only small variations over time," which makes "any temporal association between a possible explanatory factor (such as COVID-19, the novel COVID-19 vaccines, or other factor(s)) difficult to establish."

That said, a ZeroHedge review of the CDC data reveals that it does not provide information on duration of illness prior to death - so while it's not mentioned in the preprint, it can't rule out so-called 'turbo cancers' - reportedly rapidly developing cancers, the existence of which has been largely anecdotal (and widely refuted by the usual suspects).

While the Phinance report is extremely careful not to draw conclusions, researcher "Ethical Skeptic" kicked the barn door open in a Thursday post on X - showing a strong correlation between "cancer incidence & mortality" coinciding with the rollout of the Covid mRNA vaccine.

Phinance principal Ed Dowd commented on the post, noting that "Cancer is suddenly an accelerating growth industry!"


Bottom line - hard data is showing alarming trends, which the CDC and other agencies have a requirement to explore and answer truthfully - and people are asking #WhereIsTheCDC.

We aren't holding our breath.

Wiseman, meanwhile, points out that Pfizer and several other companies are making "significant investments in cancer drugs, post COVID."


We've featured several of Phinance's self-funded deep dives into pandemic data that nobody else is doing. If you'd like to support them, click here.


Tyler Durden Sat, 03/16/2024 - 16:55

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