The Trump Economy

[Tiberius]

34 minutes ago, Chef Jim said:

 

And this has to do what exactly with Trump??  

Can't you just figure it out, it's not that complicated and I have already explained it. 

[TPS]

2 hours ago, Tiberius said:

Oil prices spike 12% 

And the deficit topped $1 trillion, though it may drop slightly below for the fiscal year as September is a tax payment month.

[Chef Jim]

31 minutes ago, Tiberius said:

Can't you just figure it out, it's not that complicated and I have already explained it. 

 

I missed your explanation. Give to me again here. 

 

Actually your post would probably fit better under the Iran economy thread. If one such thread existed.

Edited September 16, 2019 by Chef Jim

[/dev/null]

1 hour ago, Chef Jim said:

 

And this has to do what exactly with Trump??  

Because #orangemanbad

[Buffalo_Gal]

I stole this from another site as it is very interesting:

real time global marine traffic  (tankers are in red)

 

[jrober38]

1 hour ago, TPS said:

And the deficit topped $1 trillion, though it may drop slightly below for the fiscal year as September is a tax payment month.

 

Remember when Trump said he'd eliminate the deficit?

[Tiberius]

2 minutes ago, jrober38 said:

 

Remember when Trump said he'd eliminate the deficit?

And all the factories would return....GM workers go on strike in part to protest closing of factories 

[Warren Zevon]

3 minutes ago, jrober38 said:

 

Remember when Trump said he'd eliminate the deficit?

 

Give the guy a break - he said he'd eliminate it within 8 years!

[jrober38]

2 minutes ago, Tiberius said:

And all the factories would return....GM workers go on strike in part to protest closing of factories 

 

Yeah. 50,000 people protesting plant closures and jobs moving to Mexico as GM looks to cut costs.

1 minute ago, Gary Busey said:

 

Give the guy a break - he said he'd eliminate it within 8 years!

 

True. 

 

Things should get under control when the economy goes into a recession, revenues fall and the deficit balloons to around $1.5 trillion a year. 

[TPS]

15 minutes ago, jrober38 said:

 

Remember when Trump said he'd eliminate the deficit?

I think the one truthful statement he made was, "I could stand in the middle of 5th Avenue and shoot someone, and I wouldn't lose any voters...."

[jrober38]

1 minute ago, TPS said:

I think the one truthful statement he made was, "I could stand in the middle of 5th Avenue and shoot someone, and I wouldn't lose any voters...."

 

He'd lose voters, but he wouldn't lose his base. They'd keep rocking their MAGA hats proudly. 

[B-Man]

 

 

 

 

 

 

 

 

 

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[B-Man]

TEXAS SAYS, YOU’RE WELCOME, AMERICA: 

 

Saudi oil attacks didn’t spark a U.S. fuel crisis. Thank Texas.

 

 

 

 

 

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[Buffalo_Gal]

Industrial Production Rebounds 0.6% in August, Easily Beating Forecasts

Manufacturing Production More Than Recovers Losses In July

The Federal Reserve reported industrial production rose 0.6% in August after declining 0.1% in July, easily beating the forecast range and consensus. Forecasts for the total index ranged from a low of -0.5% to a high of 0.6%.

The consensus forecast was just 0.2%.

</snip>

[TPS]

Should be an interesting couple days with the Fed meeting and announcement. A lot of turmoil in the money markets this week. While I expect them to cut its target rate by 25 basis points, I (as would Trump) would really like to see a more dramatic move of 50. It would provide a boost to the stock market, bring the $ down a bit (and help with trade issues), and Trump wouldn't grump so much at Powell.

 

This is a good piece on some of the issues. https://www.bloomberg.com/news/articles/2019-09-18/divided-fed-reluctant-to-forecast-more-cuts-decision-day-guide

 

the last paragraph explains what was behind my post from a couple months ago stating the Fed would/should cut by 50 BP.

 

Added: This guy agrees... https://www.bloomberg.com/opinion/articles/2019-09-18/the-fed-should-cut-interest-rates-more-than-expected?srnd=premium

 

Edited September 18, 2019 by TPS

[GG]

1 hour ago, TPS said:

Should be an interesting couple days with the Fed meeting and announcement. A lot of turmoil in the money markets this week. While I expect them to cut its target rate by 25 basis points, I (as would Trump) would really like to see a more dramatic move of 50. It would provide a boost to the stock market, bring the $ down a bit (and help with trade issues), and Trump wouldn't grump so much at Powell.

 

This is a good piece on some of the issues. https://www.bloomberg.com/news/articles/2019-09-18/divided-fed-reluctant-to-forecast-more-cuts-decision-day-guide

 

the last paragraph explains what was behind my post from a couple months ago stating the Fed would/should cut by 50 BP.

 

Interesting is the operative word for an outfit that isn't reliant on the market to set interest rates or that QE unwinding will be painless because it's just an accounting entry on the banks' balance sheets  (according to some)

 

 

Quote

 

For the first time in more than a decade, the Federal Reserve injected cash into money markets Tuesday to pull down interest rates and said it would do so again Wednesday after technical factors led to a sudden shortfall of cash.

The pressures relate to shortages of funds banks face resulting from an increase in federal borrowing and the central bank’s decision to shrink the size of its securities holdings in recent years. It reduced these holdings by not buying new ones when they matured, effectively taking money out of the financial system.

….

Fed policy makers set their target range to influence a suite of short-term rates at which banks lend to each other in overnight markets—but those rates are ultimately determined by the markets. If various operations in the markets fail, the fed-funds rate can deviate significantly from the target.

In the short run this likely affects only market participants who borrow in the overnight markets, but if the strains last long enough it can affect the rates other businesses and consumers pay.

Such deviations also undercut the Fed’s ability to keep the economic expansion on track through monetary policy, such as by lowering rates to provide a boost and raising them to prevent the economy from overheating.

...

 

 

[TPS]

35 minutes ago, GG said:

 

Interesting is the operative word for an outfit that isn't reliant on the market to set interest rates or that QE unwinding will be painless because it's just an accounting entry on the banks' balance sheets  (according to some)

 

 

 

I thought this would tempt you...

the Fed's target rate is the Fed Funds Rate which is set in a band that's 25 BP wide, and (of course) during the day there are temporary liquidity squeezes that force it to intervene as necessary So that it stays within target at the end of each day--that's the Fed's primary role day-to-day, ensuring the liquidity of the payments system.

 

Given the legacy of reserves from QEs, the Fed had to start paying interest on those bank reserves (ioer) as a way to manage supply in the FFR market. The impact of those reserves on the FFR market also mean the repo market has become as much if not more important than the FFR market--the repo market is now where most of the demand for day-to-day liquidity is met.  While the Fed is much more active in the repo market, it has not (as yet) implemented a formal policy there. Under normal conditions the two are tied by arbitrage. Given this temporary cash squeeze in the repo market, the Fed is acting--$50 bil yesterday, and committing $75 bill today. Until (if?) we get back to a world of minimal excess reserves, I guarantee the Fed will provide the liquidity in the repo market to keep its rate tied to the FFR. And, It may become a formal part of its policy set (which includes ioer) to manage short rates. 

 

Regarding QE winding down, as I've always stated, there is no economic reason (it's more philosophical) for the FEd to shrink its balance sheet. In fact, what this shows is that by doing so they've come into conflict with their day-to-day role. It's a temporary blip and a simple solution: 1) slow or stop the wind down; 2) provide all the temporary liquidity the system needs day-to-day in order to meet your short term rate target. 

 

while the goals of reducing its BS and maintaining short rates can conflict at times, the latter will always take precedent because that's its most important role--ensuring the liquidity of the payments system.  If they really believe they need to reduce their BS, they could still do it gradually over time via mbs payoffs. 

 

 

[ALF]

The rate on overnight repurchase agreements hit 5% on Monday, according to Refinitiv data. That's up from 2.29% late last week and well above the target range set in July by the Federal Reserve, which is 2% to 2.25%. The surge continued Tuesday, with the overnight rate hitting a high of 10% before the NY Fed stepped in.

 

The spike in overnight borrowing rates forced the New York Federal Reserve to come to the rescue with a special operation aimed at easing stress in financial markets.

The funding markets are clearly stressed."

It was the NY Fed's first such rescue operation in a decade, the last occurring in late 2008.

 

https://www.cnn.com/2019/09/17/business/overnight-lending-rate-spike-ny-fed/index.html

[TPS]

50 minutes ago, ALF said:

The rate on overnight repurchase agreements hit 5% on Monday, according to Refinitiv data. That's up from 2.29% late last week and well above the target range set in July by the Federal Reserve, which is 2% to 2.25%. The surge continued Tuesday, with the overnight rate hitting a high of 10% before the NY Fed stepped in.

 

The spike in overnight borrowing rates forced the New York Federal Reserve to come to the rescue with a special operation aimed at easing stress in financial markets.

The funding markets are clearly stressed."

It was the NY Fed's first such rescue operation in a decade, the last occurring in late 2008.

 

https://www.cnn.com/2019/09/17/business/overnight-lending-rate-spike-ny-fed/index.html

The target rate is in the Fed Funds market, which is not the same as the Repo market.  There were spikes during the day in the FFR market, but the FED always intervenes in the market where it sets the target.  The Fed is now intervening in the Repo market to relieve the temporary liquidity issues.

[GG]

15 minutes ago, TPS said:

The target rate is in the Fed Funds market, which is not the same as the Repo market.  There were spikes during the day in the FFR market, but the FED always intervenes in the market where it sets the target.  The Fed is now intervening in the Repo market to relieve the temporary liquidity issues.

 

If always means once a decade, then I agree with you