The Trump Economy

[GG]

15 hours ago, TPS said:

Btw, S&P did downgrade the US in August of 2011, what did the 10-year yield do?

 

As I said, investors' actions didn't follow fundamentals.

 

 

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Ok, so you don't use the same language that most do when discussing the FED, QE and crisis.  If you want to call the actions the FED took immediately after Lehman announced its, bankruptcy "LoLR" and not QE1, then let's call it LoLR.  From Sept 15, 2009 to the time TARP was passed in early Oct, the FED's balance sheet (and bank reserves) increased by over $600 billion, and another $600 billion over the next month.  TARP invested about $300 billion after it was passed in early October, 25% of the FED's initial response (what most call QE1...).

 

Again, different things.  TARP was run through the Treasury which purchased the financials' preferred stock and debt.  When did the Fed do that as part of QE?

 

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As I stated, I fully understand the flexibility of the financial system, but in the end there is only one legal tender acceptable in the US for "all debts public and private," and the government will assert its legal authority whenever it wants.  The private sector can create all kinds of alternative methods, but when the crunch comes, they go into a mad scramble for the government's legal tender (for the financial sector, that's reserves and government securities). 

 

What are  you talking about?  "Someone has to repay those assets".....?  In QE2 and 3, the FED bought treasuries and MBS (BY CREDITING BANK RESERVES). No one has to "repay". The government is paying interest on the treasuries, and from 2010-2014, the FED bought new ones as the old matured. Since 2014, the FED has let some mature and not replaced, slowly winding down its BS.  Homeowners were still making payments on the mortgages that made up the MBS, and those wind down over time as mortgage payments are made. If the FED wants, it can sell off some of those assets, but they don't have to.  They can let their BS decline as the assets mature and are paid off.  

The reason for QE was to keep interest rates down on longer maturities (T-bonds and MBS) to entice borrowing by the private sector.  The reserves are a consequence of the actions to keep those yields low.  In the real world, reserves don't have much impact on lending--interest rates are more important to borrowers.

 

No.  When the FED intervenes in those markets, its buying raises demand for (and the prices of) those assets, which causes their yields to decline, not rise.  They took $2.7 trillion of assets OUT of the market and put them on the FED's BS.  And one more time, if they bought an asset from banks (the majority), then it's a swap in the composition of bank assets (reserves for securities); if they bought it from a Hedge Fund (for example), then it's a swap of that asset for an increase in the demand deposit (and bank reserves) of the HF. 

 

They ignored warnings because no one believes them anymore....Fitch threatened to lower the rating of the US, and no one cared....

And one last time, since the US government is the monopoly issuer of its currency, it can always pay its obligations--it will only default if the idiots in congress fail to raise the artificial debt ceiling--it's a political constraint, not economic.  Long term treasury yields are mainly influenced by inflation expectations, which is why the 10-year has come down almost 100 bp over the past year; short term T-bill yields are tied to the FED's target rate interest rate.  While it talks in terms of the Fed Funds Rate, the more important rates are interest on excess reserves (IOER) and the repo rate. 

 

 

You're all over the place.  Nobody is discussing Fed's role as the lender of last resort or the possibility of a US Government default.  You keep skirting around the fact that the Fed created nearly $3 trillion of assets out of thin air and used reserve accounting to float the additional cash into the system.  They used the cash to buy real assets, which will need to be repaid, retired or absorbed into the private sector over time.  That's why I keep harping that it's a race against time, because the Fed is unwinding QE at about $500 billion/year.   That amount is being absorbed by the private sector which effectively takes up the maturing obligations on Fed's balance sheet.

 

This is the part that's missing from your analysis.  QE unwinding only works when there's enough time for the private market to soak up the bloat of the central banks' balance sheets.  Even though Fed is reducing its assets and liabilities by not replacing the maturing obligations, those obligations are replaced by new MBS or Treasury issuances.  Somebody has to buy the new debt.  If there isn't enough private sector demand for the new debt, the Fed is stuck with those assets, because somebody has to buy the new debt.  Maybe this is where your discussion of Feb being the lender of last resort comes in !!

 

QE is nothing but a clever way to avoid Treasury issuing $2.7 trillion in new cash and throwing it into the private sector.    It's a good gambit, as long as the private sector is accomodating.  Yet I continue to be astounded by economists who think that the economy moves only at the direction of the central bank and that government policies can force companies to act outside their self-interest.   

 

It's as if the 6 Summers of Recovery ©️ ™️ never happened or there was a lesson to be learned from them.

[B-Man]

 

 

 

 

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[Buffalo_Gal]

This is "close" to an 18 year high.

 

Consumer Confidence rebounds in July to 135.7, the highest level since November
 

• American consumer confidence rebounded this month to the highest level since November after drooping in June.
• The Conference Board, a business research group, said Tuesday that its consumer confidence index rose to 135.7 in July from 124.3 in June.
• The bounce back from last month’s drop was much stronger than economists expected.
 

</snip>

[TPS]

21 hours ago, GG said:

 

 

 You keep skirting around the fact that the Fed created nearly $3 trillion of assets out of thin air and used reserve accounting to float the additional cash into the system.  They used the cash to buy real assets, which will need to be repaid, retired or absorbed into the private sector over time.  That's why I keep harping that it's a race against time, because the Fed is unwinding QE at about $500 billion/year.   That amount is being absorbed by the private sector which effectively takes up the maturing obligations on Fed's balance sheet.

 

This is the part that's missing from your analysis.  QE unwinding only works when there's enough time for the private market to soak up the bloat of the central banks' balance sheets.  Even though Fed is reducing its assets and liabilities by not replacing the maturing obligations, those obligations are replaced by new MBS or Treasury issuances.  Somebody has to buy the new debt.  If there isn't enough private sector demand for the new debt, the Fed is stuck with those assets, because somebody has to buy the new debt.  Maybe this is where your discussion of Feb being the lender of last resort comes in !!

 

QE is nothing but a clever way to avoid Treasury issuing $2.7 trillion in new cash and throwing it into the private sector.    It's a good gambit, as long as the private sector is accomodating.  Yet I continue to be astounded by economists who think that the economy moves only at the direction of the central bank and that government policies can force companies to act outside their self-interest.   

You still don't get it. You harped on me about accounting, but you completely ignore it when it comes to the Fed and Treasury. When the Fed buys an asset from banks, it does so by crediting the reserve account of banks. With the exception of vault cash, reserves are an accounting number on the Fed's computer. There is no "new cash" in the system (your words), which is why there was no inflationary burst. What happens is There are more reserves on the Fed's computer (the Fed's liability) which show up on banks' BS as an asset--deposits held by "other banks" and they now earn interest on them (as of 2008).

 

"Somebody has to buy the new debt." How many times do I have to tell you the primary dealers are required to bid and fill Treasury auctions? This means the treasury will always be able to sell securities whether it's rolling over  maturing debt or issuing new.

 

Regarding MBS, I can't believe I have to tell you how markets work.   When demand for an asset (debt instrument here) is less than supply, its price falls and yield rises attracting more buyers. Kind of like how the stock market works.....

 

that said, the Fed does not have to unwind its BS, as I've also said many times, so There is no "race" to do so. The only reason it might do so is to drain the excess reserves from the banking system in order to make the Fed funds rate a relevant policy variable again. Otherwise, it will continue to use interest on excess reserves as the current effective policy variable.

[Deranged Rhino]

 

[plenzmd1]

1 hour ago, Deranged Rhino said:

 

and yet, revenues are down and spending keeps expanding at an historic pace..and the Fed is gunna more juice by lowering rates...rutrow

[Buffalo_Gal]

U.S. private sector adds 156,000 jobs in July: ADP
 

U.S. private employers added 156,000 jobs in July, above economists’ expectations and supporting the view of a firm domestic labor market, a report by a payrolls processor showed on Wednesday.
 

Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 150,000 jobs, with estimates ranging from 100,000 to 185,000.
 

Private payroll gains in the month earlier were revised up to 112,000 from an originally reported 102,000 increase.

</snip>
 

[Buffalo_Gal]

The shouty letters are not mine, they are CNBC's:

 

FED CUTS RATE BY A QUARTER POINT, CITES ‘GLOBAL DEVELOPMENTS,’ ‘MUTED INFLATION’
 

• The policymaking Federal Open Market Committee dropped the target range for its overnight lending rate to 2% to 2.25%, or 25 basis points from the previous level.
• The Fed cited “implications of global developments for the economic outlook as well as muted inflation pressures” in its first rate cut since December 2008.
• The Fed also left the door open to future cuts, saying it will “act as appropriate to sustain the expansion.”
• The central bank also ended its balance sheet reduction two months earlier than planned.

</snip>
 

[Koko78]

3 hours ago, plenzmd1 said:

and yet, revenues are down...

 

You have some proof to back that up?

 

Oh nevermind, I do have proof that your talking point is a load:

 

https://www.statista.com/statistics/200405/receipts-of-the-us-government-since-fiscal-year-2000/

https://www.investors.com/politics/editorials/trump-tax-cuts-federal-revenues-deficits/

https://www.cnsnews.com/news/article/terence-p-jeffrey/feds-collect-record-individual-income-taxes-fy-2018

 

Whoops. Someone got caught lying.

[plenzmd1]

11 minutes ago, Koko78 said:

 

You have some proof to back that up?

 

Oh nevermind, I do have proof that your talking point is a load:

 

https://www.statista.com/statistics/200405/receipts-of-the-us-government-since-fiscal-year-2000/

https://www.investors.com/politics/editorials/trump-tax-cuts-federal-revenues-deficits/

https://www.cnsnews.com/news/article/terence-p-jeffrey/feds-collect-record-individual-income-taxes-fy-2018

 

Whoops. Someone got caught lying.

whoops, guess someone cant read

 

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Despite the record amount collected in individual income taxes in fiscal 2018, overall real federal tax revenues in fiscal 2018 were lower than in any of the previous three years.

Yall love to pick your stats!..and that quote directly from one of the articles you cite...

Edited July 31, 2019 by plenzmd1

[Koko78]

5 minutes ago, plenzmd1 said:

Yall love to pick your stats!

 

Tell me about it:
 

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That was less than the $3,446,613,230,000 (in constant September 2018 dollars) that the Treasury collected in fiscal 2015; less than the $3,415,674,450,000 (in constant September 2018 dollars) collected in fiscal 2016; and less than the $3,390,373,210,000 (in constant September 2018 dollars) collected in fiscal 2017.

 

 

When your argument is based on "adjusting" the numbers, you ain't got schiff.

[ALF]

3 hours ago, Buffalo_Gal said:

U.S. private sector adds 156,000 jobs in July: ADP
 

U.S. private employers added 156,000 jobs in July, above economists’ expectations and supporting the view of a firm domestic labor market, a report by a payrolls processor showed on Wednesday.
 

Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 150,000 jobs, with estimates ranging from 100,000 to 185,000.
 

Private payroll gains in the month earlier were revised up to 112,000 from an originally reported 102,000 increase.

</snip>
 

 

How many baby boomers retired in July ?

[Buffalo_Gal]

Just now, ALF said:

 

How many baby boomers retired in July ?

I don't know, how many baby boomers retired in July? 

[ALF]

26 minutes ago, Buffalo_Gal said:

I don't know, how many baby boomers retired in July? 

 

Jun 21, 2018, 05:27pm

 

About 10,000 Baby Boomers turn 65 each day.

 

https://www.forbes.com/sites/greatspeculations/2018/06/21/social-security-feels-pinch-as-baby-boomers-clock-out-for-good/#763679ea4995

 

DC Tom would have a better answer to your ?

Edited July 31, 2019 by ALF

[Buffalo_Gal]

28 minutes ago, ALF said:

 

Jun 21, 2018, 05:27pm

 

About 10,000 Baby Boomers turn 65 each day.

 

https://www.forbes.com/sites/greatspeculations/2018/06/21/social-security-feels-pinch-as-baby-boomers-clock-out-for-good/#763679ea4995

 

DC Tom would have a better answer to your ?

Turning 65 does no equal retiring that day. Some of those people have previously retired, many will continue to work full-time, many will work part-time. Simply because someone turns 65 it does not equal a job opening left behind by that person. 
 

[ALF]

1 minute ago, Buffalo_Gal said:

Turning 65 does no equal retiring that day. Some of those people have previously retired, many will continue to work full-time, many will work part-time. Simply because someone turns 65 it does not equal a job opening left behind by that person. 
 

 

The increase in the number of Baby Boomers retiring each day is expected to have a direct impact on the number of available workers in the U.S. workforce as the Social Security program is primarily funded by payroll taxes assessed on wages in the United States. 

 

The increasing number of Baby Boomers leaving the workplace along with historically low U.S. birth rates could very well impact the future of the Social Security program.

[3rdnlng]

Cherry picking season is over, guys.

[Buffalo_Gal]

1 minute ago, ALF said:

 

The increase in the number of Baby Boomers retiring each day is expected to have a direct impact on the number of available workers in the U.S. workforce as the Social Security program is primarily funded by payroll taxes assessed on wages in the United States. 

 

The increasing number of Baby Boomers leaving the workplace along with historically low U.S. birth rates could very well impact the future of the Social Security program.

And, so? 

Baby boomers have been turning 65 for eight years now.  If you are going strictly by the people turning 65 numbers as leaving the work force, and those people being replaced, then shouldn't the "experts" be spot on with their monthly layoff, hiring, jobs, and people in the work force predictions?  I think things are more nuanced than most can predict.  

[ALF]

26 minutes ago, Buffalo_Gal said:

And, so? 

Baby boomers have been turning 65 for eight years now.  If you are going strictly by the people turning 65 numbers as leaving the work force, and those people being replaced, then shouldn't the "experts" be spot on with their monthly layoff, hiring, jobs, and people in the work force predictions?  I think things are more nuanced than most can predict.  

 

So there are job openings due to retirement ?  The economy has been adding jobs for the last 8 years , no ?

Edited July 31, 2019 by ALF

[OldTimeAFLGuy]

3 hours ago, Buffalo_Gal said:

The shouty letters are not mine, they are CNBC's:

 

FED CUTS RATE BY A QUARTER POINT, CITES ‘GLOBAL DEVELOPMENTS,’ ‘MUTED INFLATION’
 

• The policymaking Federal Open Market Committee dropped the target range for its overnight lending rate to 2% to 2.25%, or 25 basis points from the previous level.
• The Fed cited “implications of global developments for the economic outlook as well as muted inflation pressures” in its first rate cut since December 2008.
• The Fed also left the door open to future cuts, saying it will “act as appropriate to sustain the expansion.”
• The central bank also ended its balance sheet reduction two months earlier than planned.

</snip>
 

 

...so is your husband on the window ledge??.........