Another “unexpected” bit of financial news
Funny how the experts keep getting the prognostications wrong. Such as:
Stocks fell sharply on Tuesday after a key August inflation report came in hotter than expected, hurting investor optimism for cooling prices and a less aggressive Federal Reserve.
The Dow Jones Industrial Average slid 1,276.37 points, or 3.94%, to close at 31,104.97. The S&P 500 dropped 4.32% to 3,932.69, and the Nasdaq Composite sank 5.16% to end the day at 11,633.57…
The August consumer price index report showed a higher-than-expected reading for inflation. Headline inflation rose 0.1% month over month, even with falling gas prices. Core inflation rose 0.6% month over month. On a year-over-year basis, inflation was 8.3%.
Economists surveyed by Dow Jones had been expecting a decline of 0.1% for overall inflation, with a rise of 0.3% for core inflation.
The report is one of the last the Fed will see ahead of their Sept. 20-21 meeting, where the central bank is expected to deliver its third consecutive 0.75 percentage point interest rate hike to tamp down inflation. The unexpectedly high August report could lead the Fed to continue its aggressive hikes longer than some investors anticipated.
The Biden administration’s job is to destroy this country.
Arthur Laffer, influential member of Pres. Reagan’s Economic Policy Advisory Board related on Larry Kudlow’s show that the Biden Administration has ‘persuaded’ the FED that inflation can only be achieved by “crushing demand” and by doubling the number of unemployed Americans. That it will also double the number of dependent Americans and further impoverish Americans is ignored.
Would “crushing demand” also include first time home buyers? It will certainly move the young closer to the day when they “will own nothing”…
At least we have The Notorious KJP (our very own “Baghdad Bob”) to assure us that things are fine and completely under control, with no possibility of any unfortunate consequences from the passing of massive and massively irresponsible spending bills (read by no-one voting on them), or from the endless printing of increasingly worthless dollars, or from the rising cost of energy (not just in Europe) just as (in the words of GoT) “winter is coming”.
The economic situation right now is extremely bizarre.
First, you got the inflation which is becoming increasingly entrenched which makes a recession more and more the only way to break it.
But, many other parts of the economy are going great guns. Last week the manufacturing report came out and it expanded even more than the economists were predicting and the jobs numbers are still hanging in there and there are currently something like 1 million job openings right now and that number has to go down before the job market will go negative like people continue to predict it will.
On an anecdotal level around here virtually every restaurant and fast food place is hiring and many have almost nobody applying for these jobs which means they are massively understaffed. This of course fuels item one because then they offer more pay which increases costs which means increases in prices which leads to food inflation like we saw today.
But that’s what you get when shut the economy down and at the same poor trillions of dollars into the same economy. So stupid, all of them left and right.
I’ve been expecting another leg down in the markets, though the impetus for it seems a little weak to me. The numbers were only a couple or few tenths of percent worse than expected. I suspect it is a killing of hope for those investors who were hoping for a short lived bout of inflation.
It occurs to me that the Fed’s rising interest rates wreaks damage to both supply and demand factors. I’m not knowledgeable enough to understand the balance between the two. Eventually the hit to demand will dominate and inflation will moderate; in theory anyway.
But since the supply side has been a key factor in launching this inflation, it would have been an ideal circumstance for the federal gov. to take some actions to help stimulate supply and the supply chain. Instead, we have Dems in control who have anti-capitalism and anti-corporate ideas embedded in their DNA.
________
Would “crushing demand” also include first time home buyers?
And n-th time home buyers. I expect home prices to come way down.
TommyJay,
I agree about today’s market move. It seemed a little excessive but there has been some ‘whistling past the graveyard’ thinking lately as other than gas prices there has been no sign of inflation easing.
Has there been anything on the fiscal side that could possibly help bring inflation down? Calling something the ‘Inflation Reduction Act’ doesn’t count.
They are basically ensuring that demand will have to be crushed even more instead of a meeting in the middle between supply and demand.
But we don’t seem to be anywhere close to that happening right now. The Fed is still forecasting rates at 4-4.5% by the end of the year which is beginning to look like not enough.
What a mess. All of them from Trump who got the spendapalooza going to the current group of ‘leaders’ that just feed the fire.
this truman show gets a little tiring, what were they expecting, are they all on drugs,
now the traders may have a surfeit of adderall, so they overcalculate their downside loss,
but manchin and sinema did deliver a blow to the sternum if not the solar plexus,
They “need” to get people out of cars and into public transit. Because global warming. Also out of single family homes and into “densified” housing (apartments).
The whole inflation story gives them a convenient excuse to impoverish people.
Soon the 8% year over year will be on higher inflation of a year ago. Compounding inflation.
Here in CO I just heard that our Dem Leftist Gov has a new Board that will control wages for Fast Food Workers. That will be a new disaster. More companies will go to automation.
nothing is only 8% higher now,
Last week my wife and I had lunch at a McDonalds. We had our usual fare. Small chicken nuggets for her, a McChicken for me. Plus, two small soft drinks. Two years ago, we could buy that for $4 or so. The bill was $6.28 last week. That’s a pretty big jump. Our weekly grocery bill had been about $85 until inflation began. Now it’s crept up to $105/week. For those of us on fixed incomes, it “ain’t funny Mcgee.”
The only bright spot is that we are now getting some return on our savings account. Though nowhere near enough to keep our dollars from falling in value. Prices are rising, the markets are tanking, savings aren’t keeping up with inflation, and even gold and silver have not been much of a refuge. We’re all getting poorer. The Democrats have no clue. They just want to spend more money and raise taxes. Biden celebrates the passage of his Inflation Reduction Act, which spends more money and raises taxes. 🙁
Regarding the Fed…there’s an interesting book, ‘Fed Up’, by a woman who was with the Fed for nine years. She says she was never discriminated against because of being a woman…but she WAS discriminated against because her background involved practical experience in the markets, rather than being an academic.
This is the soft underbelly of this White House, the Democrats, the Left, the WEF, and the whole “Great Reset” crew. They are shot threw with incompetence, ignorance, stupidity, and delusion. They think they can destroy consumerism but continue the prosperity of a consumer economy. They’ve been raised to the top of the heap and now think they can remove the heap but maintain their current altitude. And the rage they’re summoning up is going to explode into an America where THEY have been systematically undermining every thing that binds and bonds us together.
I’ve said it before, I’m not worried about communists taking over America. We simply don’t have the tradition and culture to support that. I am worried that the disaster these people are manufacturing is going to result in someone who will make Donald Trump look like a member of the League of Women Voters.
Mike
JJ,
“Prices are rising, the markets are tanking, savings aren’t keeping up with inflation, and even gold and silver have not been much of a refuge. We’re all getting poorer. The Democrats have no clue.”
They’re not stupid or unaware, they know exactly what they’re doing.
MBunge,
The White House, the Democrats, the Left, the WEF, and the whole “Great Reset” crew are all on the same page.
“They think they can destroy consumerism but continue the prosperity of a consumer economy. They’ve been raised to the top of the heap and now think they can remove the heap but maintain their current altitude.”
They’ve got theirs and know they have the resources to acquire whatever they wish even in a devastated consumer economy. As they have ‘connections’. They not only intend to remove the ‘heap’ but replace it with a combination of compliant workers and AI operated robotics. No $22.00 per hour fast food workers needed.
Yuval Noah Harari, the left’s new prophet:
“What shall we do with all of these useless people?
“History began when humans invented god, and it will end when humans become gods.”
“If we succeed, and there’s a very good chance we will, then very soon, we will be beyond the God of the Bible.” [my emphasis]
Could a more extreme example of hubris be found today?
“They’ve got theirs and know they have the resources to acquire whatever they wish even in a devastated consumer economy.”
That might work in Europe. In America, with our decentralized government authority and 400+ million privately owned firearms? Not so much.
Mike
I sold what remained of an S&P index last week, my last foothold in stocks. Yay, me. Another glass of this fine red box wine.
According to Peter Zeihan 2019 was the last good year — as good as it gets until the current chaos sorts itself out as a result of the end of Pax Americana, crashing demographics and our fragile globally interconnected economic web.
The Fed is painted as the culprits responible for causing recession even though so far the baby steps they have taken are too little and too late. Until the excess liquidity is drained from the system quickly the inflation spiral will continue. Quantitative Tighening and increasing interest rates are necessary to crush demand or economic price discovery will remain distorted. More displacement pain should be expected.
The financial markets remain over inflated. A reversion to mean values in the equity markets is inevitable because there is no such thing as a predominantly “consumer economy” that is perpetually borrowing that remains stable.
Production must balance or exceed consumption for building wealth and increasing standards of living to flourish. The domestic private sector has shrunk in relation to the public sector. The rebalancing gets harder as that trend continues.
Governments have borrowed from the future and we are now going to pay the price.
Lightening up on stocks and long-term bonds is the only defense as it was in the lost decade in the 1970s and ’80s.
“Unexpected news” should have been expected. Only the timing was in question.
I think people who think the problems with the economy are due to incompetence are woefully naive.
It’s quite intentional. As others have noted, they hope to initiate the “Great Reset” with them permanently at the top.
Attempting this while failing to gain control of the guns in this country is doomed to failure. The ones who think that the army — even, or especially, their army gutted of patriots and filled with sycophantic LGBQTXYZM fans — is going to be able to succeed against an armed people are abject fools. Even more so an armed people spearheaded by men and women who have served in Iraq and Afghanistan and been tossed from the service.