Central bankers around the world have been picking up the pace of rate increases. Now the big question looms: When will they slow down?
Federal Reserve officials are set to make a second abnormally large interest rate increase this week as they race to cool down an overheating economy. The question for many economists and investors is just how far the central bank will go in its quest to tame inflation.
Central banks around the world have spent recent weeks speeding up their interest rate increases, an approach they’ve referred to as “front-loading.” That group includes the Fed, which raised interest rates by a quarter-point in March, a half-point in May and three-quarters of a point in June, its biggest move since 1994. Policymakers have signaled that another three-quarter-point move is likely on Wednesday.
The quick moves are meant to show that officials are determined to wrestle inflation lower, hoping to convince businesses and families that today’s rapid inflation won’t last. And, by raising interest rates quickly, officials are aiming to swiftly return policy to a setting at which it is no longer adding to economic growth, because goosing the economy makes little sense at a moment when jobs are plentiful and prices are climbing quickly. …
The U.S. may register a second straight quarter of economic contraction, one benchmark of a recession. But that won’t be the last word.
The United States is not in a recession.
Probably.
Economic output, as measured by gross domestic product, fell in the first quarter of the year. Government data due this week may show that it fell in the second quarter as well. Such a two-quarter decline would meet a common, though unofficial, definition of a recession.
Most economists still don’t think the United States meets the formal definition, which is based on a broader set of indicators, including measures of income, spending and job growth. But they aren’t quite as sure as they were a few weeks ago. The housing market has slowed sharply, income and spending are struggling to keep pace with inflation, and a closely watched measure of layoffs has begun to creep up. …
In the meantime, economists agree that the risks of a recession are rising. The Federal Reserve is raising rates aggressively to try to tame inflation, which has already contributed to large declines in the stock market and a steep drop in home construction and sales. Higher borrowing costs are all but certain to lead to slower spending by consumers, reduced investment by businesses and, eventually, slower hiring and more layoffs — all hallmarks of an economic downturn.
But the U.S. economy still has important sources of strength. Unemployment is low, job growth is robust, and households, in the aggregate, have lots of money in savings and relatively little debt. …
Americans feel terrible about the economy right now — worse, at least by some measures, than at the peak of the pandemic-related layoffs in spring of 2020. It’s easy to understand why: The climbing cost of food, fuel and other essentials is eroding living standards. Hourly earnings, adjusted for inflation, are falling at their fastest pace in decades. …
(Coincidentally, it’s about 43 years to the day since Jimmy Carter’s infamous ‘malaise’ speech. On the 40th anniversary thereof, the op-ed below appeared in the Boston Globe. We can (hopefully) be certain that there will be no such speech from Joe Biden.)
In fact, Jimmy Carter’s “malaise’’ speech — delivered in a nationally televised address 40 years ago Monday — never did employ the word “malaise.’’ It spoke of a “crisis of confidence,’’ to be sure. It enlisted Americans to battle what the 39th president called “a fundamental threat to American democracy.’’ It urged the public to confront “the growing doubt about the meaning of our own lives.’’
But Carter never uttered the mordant two-syllable word that defined this speech and that came to define his presidency. Even so, the president spoke at length — too long for his own good, it turned out — about a national malaise and then, two days later, fired his Cabinet. America had never witnessed such a spectacle, and though Carter’s popularity grew briefly after his remarks, his poll numbers swiftly sank back to low levels that reflected the real malaise in his administration. …
Things I am thinking about today. There has been considerable discussion of whether the Fed has been behind the curve in recognizing the threat of inflation and every Republican and their sister blaming the Democrats bill injecting a trillion and a half in Covid relief in early 2021 as the cause of inflation while ignoring the prior guys’ injection of twice that amount, but has anybody looked at whether the 2018 GOP tax cuts for the well to do, corporations and pass through entities are playing a role? The student debt issue has many nuances as Run’s post suggests, but wouldn’t a policy of allowing discharge in bankruptcy 10 years after the last loan solve at least a part of the past problem? If you are a physician with large amounts still due 10 years later it is probably because you have been spending your income on accumulating things which you are not willing to part with in bankruptcy. If you are someone who has struggled to make ends meet for 10 years bankruptcy would give you a fresh start and you should not have the continued burden of student loans. Judging by the division over abortion which is now once again playing out at the state level, I am thinking there are probably more GOP politicians than Dem politicians who rue the Dobbs decision.
Ha,ha,ha on the Repubs chasing the abortion car. They got what they did not want, having it overturned. It is not a talking point anymore. It is reality. Up till that, it looked like Repubs had the election in the bag. And there are still more surprises coming out of SCOTUS that need to be announced now.
Student loans? We are not just talking about the original loans. We are talking about the penalties, forbearance interest to be paid before any principal is touched, interest on each and interest on the interest. Cut the $1.6 trillion in half if you want to know what the original loans are. That is the starting point or one year of the Defense budget which add little to productivity. Guns or butter? Imagine all of the people freed up to work and produce.
People are arguing the loans should be paid back. I never had a loan with the potential of doubling and I doubt you or others have either. Yep, there were late fees when I was out of work or just plain late usually because of the weather delaying the mail.
And the chief architect of all of this, Biden knows this.
perhaps you are having the same problem with student loans that i have with Social Security People do not understand the problem. I think you need to find a way to listen to the people who don’t agree with you and try to answer their doubts.
It occurred to me that one trouble I have with SS is that people no longer have even heard of “layaway”.. that is paying for something gradually before you take it home from the store. Nowadays everyone puts it on their credit card and “enjoys” the new possession while happily paying 20% interest,
Your essay today helped me understand the problem a little better, but i need something more detailed and systematic. most people, i think, will be easier to convince with “anecdotes” but they also need to be detailed to be convincing.
I happen to know a student debt skeptic: she has a vision of people borrowing more than they could reasonbably hope to ever pay off and then majoring in “underwater basket weaving.” I think there may be some truth in that, but i also think that this person did not have a debt problem because her father believed in paying debts the day they were incurred. or better, just not borrowing in the first place. I have dealt enough with banks to see what crimes they can get away with because they write the laws.
i don’t think most eighteen year olds or their parents are in any position to anticipate the games banks will play, or their realistic chances of college leading to “success.” the government should know that and should never have “privatized” the loans or loan collections.
you, or someone, needs tell the whole story, detailed and systematic.
oh, yes, and….the overselling of college is a huge part of the problem. if college is a necessary means to success in the modern economy or just necessary to the well being of the country as a whole, the country needs to pay for it (yes, out of the taxes collected from the successful), and oversee the process topreven abuse or just damage caused by ignorance.
sorry that the current Occupa=ent had a hand in this, because the other choices available will be worse. as i read today on another blog about another problem “never wish the current czar is dead, because the next one might be worse.”
A shame that people did not read what Jimmy Breslin had to say about Donald Trump 30 years ago.
” ” For example, in his Newsday column of June 7, 1990:
Suddenly, we have all these prudent, responsible bankers, loan papers crackling in their frightened hands, chasing madly after Donald Trump for money. It seems like great sport, but I must tell you that I believe this to be temporary and that Trump, no matter what kind of a crash he experiences now, will come back as sure as you are reading this. I now will tell you why.
Trump survives by Corum’s Law. This is a famous, well-tested theory and is named after Bill Corum, who once wrote sports for the Hearst papers when they were in New York. He had a great gravel voice and did radio and television announcing for the World Series and heavyweight championship fights.
Corum went on to run the Kentucky Derby on the invitation of local businessmen who were alarmed that the event had acquired a sleazy reputation. People who came to the race were routinely fleeced by hoteliers, touts and whores. Corum’s genius, according to Breslin, was that he understood that this was a feature, not a bug.
Corum glanced at the [newspaper] clips and threw them in the air. “This is great. There is nothing better for a championship event than a treacherous woman. If a guy from North Dakota goes home from here after the race and has to be met because he doesn’t even have cab fare left, that guy is going to say to himself, ‘Wow. I must have had a hell of a time. I can’t wait for next year.’ But if that same guy goes home and he still has half his money, he is going to say ‘I guess I didn’t have such a great time at the Kentucky Derby after all.’
“Because, gentlemen, this is the rule. A sucker has to get screwed.”
{ If you have trouble getting to sleep at night, then go to the web site at the link above and you may never want to sleep again. I think that Mary Shelley was on to something. }
Ron (RC) Weakley (A.K.A., Darryl For A While At EV) says:
That link sure posted differently than expected. It is for the homepage of Floodlist.com. The articles listed there are just one extreme horror story after another. That and of course the reassurance that we ain’t seen nothing yet. Climate chaos is just getting started on our virgin butts. We screwed the Earth and now it is the Earth’s turn.
The Senate on Wednesday passed an expansive $280 billion bill aimed at building up America’s manufacturing and technological edge to counter China, embracing in an overwhelming bipartisan vote the most significant government intervention in industrial policy in decades.
The legislation reflected a remarkable and rare consensus in an otherwise polarized Congress in favor of forging a long-term strategy to address the nation’s intensifying geopolitical rivalry with Beijing, centered around investing federal money into cutting-edge technologies and innovations to bolster the nation’s industrial, technological and military strength.
It passed on a lopsided bipartisan vote of 64 to 33, with 17 Republicans voting in support. The margin illustrated how commercial and military competition with Beijing — as well as the promise of thousands of new American jobs — has dramatically shifted longstanding party orthodoxies, generating agreement among Republicans who once had eschewed government intervention in the markets and Democrats who had resisted showering big companies with federal largess. …
… The legislation will next be considered by the House, where it is expected to pass with some Republican support. President Biden, who has backed the package for more than a year, could sign it into law as early as this week.
The bill, a convergence of economic and national security policy, would provide $52 billion in subsidies and additional tax credits to companies that manufacture chips in the United States. It also would add $200 billion in scientific research, especially into artificial intelligence, robotics, quantum computing and a range of other technologies. …
Many senators, including Republicans, saw the legislation as a critical step to strengthen America’s semiconductor manufacturing abilities at a time when the nation has become perilously reliant on foreign countries — especially an increasingly vulnerable Taiwan — for advanced chips. …
(AP) — In an unexpected turnabout, Sen. Joe Manchin announced Wednesday that he had reached an expansive agreement with Senate Majority Leader Chuck Schumer which had eluded them for months on health care costs, energy and climate issues, taxing higher earners and large corporations and reducing federal debt.
Manchin, D-W.Va., whose resistance had long derailed sweeping legislation on those issues, abruptly revealed the agreement in a press release. It provided virtually no details on the accord.
Manchin, one of the most conservative Democrats in Congress, just last week said he would only agree this month to far more limited legislation curbing prescription drug costs and extending federal subsidies for health care costs. …
Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., have released preliminary details of a bill to address climate change, taxes, health care and inflation.
The agreement is a major reversal for Democrats, who had narrowed their ambitions for the package to address looming lapses in the Affordable Care Act and changes to prescription drug prices after Manchin raised concerns over approving more spending during record inflation.
“After many months of negotiations, we have finalized legislative text that will invest approximately $300 billion in Deficit Reduction and $369.75 billion in Energy Security and Climate Change programs over the next 10 years,” the senators said in a joint statement. “The investments will be fully paid for by closing tax loopholes on wealthy individuals and corporations.”
The legislation — called the Inflation Reduction Act of 2022 — would also continue expansions to the Affordable Care Act that passed during the pandemic though 2025 and allow Medicare to pursue lower drug costs by negotiating directly with drug companies. Democrats say the plan avoids any new taxes on families making $400,000 or less and does not include any new taxes on small businesses.
The new agreement aims to “reduce carbon emissions by roughly 40 percent by 2030” and address inflation while also reducing the deficit, according to documents released by Schumer and Manchin. Full text of the bill is not yet available. Schumer plans to submit the bill to the Senate parliamentarian for review on Wednesday night in order to start votes on the bill next week. Democrats plan to pass the bill using the budget process known as reconciliation to avoid a Republican filibuster, provided the legislation has unanimous support among Senate Democrats. …
Manchin and Schumer say they have also reached an agreement with House Speaker Nancy Pelosi, D-Calif., and President Biden to pass a permitting reform bill by the end of the year, with the goal of easing permits for domestic energy production and transmission. …
The agreement is a significant expansion of the very narrow bill Democrats had hoped pass through reconciliation before the midterm elections, though it still falls far short of the broader Build Back Better plan they began negotiating last year. That proposal initially included massive domestic spending to address climate, taxes, health care and social programs.
The agreement comes hours after the Senate passed a major bipartisan bill to expand domestic production of critical semiconductor chips that have been in short supply, leading to delays in the delivery of new cars and supply chain issues for smartphones, computers and medical equipment. Senate Minority Leader Mitch McConnell, R-Ky., had threatened to block the semiconductor bill, known as CHIPS, if Democrats continued to pursue climate and tax legislation.
Finalizing the CHIPS bill paved the way for Democrats to reach a deal without the threat of losing support for the semiconductor bill they viewed as a critical economic and political achievement.
The next step will be for the Senate Parliamentarian to assess whether the proposals meet strict Senate budget rules that govern the reconciliation process. Once that is done, it will go through a vote-a-rama, a process that would serve to circumvent the 60-vote threshold that bills normally must cross in order to be passed. The House must then pass a similar bill before President Biden signs it into law.
In a statement after the deal was announced, Biden praised it as “the action the American people have been waiting for.”
“This addresses the problems of today — high health care costs and overall inflation — as well as investments in our energy security for the future,” he said.
The announcement Wednesday of an agreement in the Senate almost instantly reset the role of the United States in the global effort to fight climate change.
The $369 billion climate and tax package forged in a surprise deal by Senate Democrats on Wednesday would be the most ambitious action ever taken by the United States to try to stop the planet from catastrophically overheating.
The agreement, which Senate Democrats hope to pass as early as next week, shocked even some who had been involved in the sputtering negotiations over climate legislation during the past year. The announcement of a deal, after many activists had given up hope, almost instantly reset the role of the United States in the global effort to fight climate change.
And it was delivered by Senator Joe Manchin III of West Virginia, the holdout Democrat who had been reviled by environmentalists and some of his own colleagues after he said this month that he could not support a climate bill because of inflation concerns. …
RIGA, Latvia – Russia met a proposal to free jailed U.S. nationals WNBA star Brittney Griner and security consultant Paul Whelan with cool silence on Thursday.
Russian front pages and state media did not carry the news that Washington made a “substantial proposal” to Russia to secure the release of Phoenix Mercury star Griner, on trial in Moscow for drug charges, and U.S. Marine Paul Whelan, who was convicted by Russian authorities in 2020 of espionage and sentenced to 16 years of hard labor.
There was little public reaction from officials as Moscow keeps its cards close to its chest. Kremlin spokesman Dmitry Peskov told state-owned media late Wednesday that he had no comment.
Secretary of State Antony Blinken said Wednesday that the possible deal was offered “weeks ago,” but did not specify its terms or if there had been any concrete response. …
Is Recession Staring Us Down? Already Upon Us? Here’s Why It’s Hard to Say.
NY Times – July 26
(Coincidentally, it’s about 43 years to the day since Jimmy Carter’s infamous ‘malaise’ speech. On the 40th anniversary thereof, the op-ed below appeared in the Boston Globe. We can (hopefully) be certain that there will be no such speech from Joe Biden.)
The meaning of Jimmy Carter’s ‘malaise’ speech
Boston Globe – July 15, 2019
Things I am thinking about today. There has been considerable discussion of whether the Fed has been behind the curve in recognizing the threat of inflation and every Republican and their sister blaming the Democrats bill injecting a trillion and a half in Covid relief in early 2021 as the cause of inflation while ignoring the prior guys’ injection of twice that amount, but has anybody looked at whether the 2018 GOP tax cuts for the well to do, corporations and pass through entities are playing a role? The student debt issue has many nuances as Run’s post suggests, but wouldn’t a policy of allowing discharge in bankruptcy 10 years after the last loan solve at least a part of the past problem? If you are a physician with large amounts still due 10 years later it is probably because you have been spending your income on accumulating things which you are not willing to part with in bankruptcy. If you are someone who has struggled to make ends meet for 10 years bankruptcy would give you a fresh start and you should not have the continued burden of student loans. Judging by the division over abortion which is now once again playing out at the state level, I am thinking there are probably more GOP politicians than Dem politicians who rue the Dobbs decision.
Ha,ha,ha on the Repubs chasing the abortion car. They got what they did not want, having it overturned. It is not a talking point anymore. It is reality. Up till that, it looked like Repubs had the election in the bag. And there are still more surprises coming out of SCOTUS that need to be announced now.
Student loans? We are not just talking about the original loans. We are talking about the penalties, forbearance interest to be paid before any principal is touched, interest on each and interest on the interest. Cut the $1.6 trillion in half if you want to know what the original loans are. That is the starting point or one year of the Defense budget which add little to productivity. Guns or butter? Imagine all of the people freed up to work and produce.
People are arguing the loans should be paid back. I never had a loan with the potential of doubling and I doubt you or others have either. Yep, there were late fees when I was out of work or just plain late usually because of the weather delaying the mail.
And the chief architect of all of this, Biden knows this.
Run
perhaps you are having the same problem with student loans that i have with Social Security People do not understand the problem. I think you need to find a way to listen to the people who don’t agree with you and try to answer their doubts.
It occurred to me that one trouble I have with SS is that people no longer have even heard of “layaway”.. that is paying for something gradually before you take it home from the store. Nowadays everyone puts it on their credit card and “enjoys” the new possession while happily paying 20% interest,
Your essay today helped me understand the problem a little better, but i need something more detailed and systematic. most people, i think, will be easier to convince with “anecdotes” but they also need to be detailed to be convincing.
I happen to know a student debt skeptic: she has a vision of people borrowing more than they could reasonbably hope to ever pay off and then majoring in “underwater basket weaving.” I think there may be some truth in that, but i also think that this person did not have a debt problem because her father believed in paying debts the day they were incurred. or better, just not borrowing in the first place. I have dealt enough with banks to see what crimes they can get away with because they write the laws.
i don’t think most eighteen year olds or their parents are in any position to anticipate the games banks will play, or their realistic chances of college leading to “success.” the government should know that and should never have “privatized” the loans or loan collections.
you, or someone, needs tell the whole story, detailed and systematic.
oh, yes, and….the overselling of college is a huge part of the problem. if college is a necessary means to success in the modern economy or just necessary to the well being of the country as a whole, the country needs to pay for it (yes, out of the taxes collected from the successful), and oversee the process topreven abuse or just damage caused by ignorance.
sorry that the current Occupa=ent had a hand in this, because the other choices available will be worse. as i read today on another blog about another problem “never wish the current czar is dead, because the next one might be worse.”
A shame that people did not read what Jimmy Breslin had to say about Donald Trump 30 years ago.
” ” For example, in his Newsday column of June 7, 1990:
Suddenly, we have all these prudent, responsible bankers, loan papers crackling in their frightened hands, chasing madly after Donald Trump for money. It seems like great sport, but I must tell you that I believe this to be temporary and that Trump, no matter what kind of a crash he experiences now, will come back as sure as you are reading this. I now will tell you why.
Trump survives by Corum’s Law. This is a famous, well-tested theory and is named after Bill Corum, who once wrote sports for the Hearst papers when they were in New York. He had a great gravel voice and did radio and television announcing for the World Series and heavyweight championship fights.
Corum went on to run the Kentucky Derby on the invitation of local businessmen who were alarmed that the event had acquired a sleazy reputation. People who came to the race were routinely fleeced by hoteliers, touts and whores. Corum’s genius, according to Breslin, was that he understood that this was a feature, not a bug.
Corum glanced at the [newspaper] clips and threw them in the air. “This is great. There is nothing better for a championship event than a treacherous woman. If a guy from North Dakota goes home from here after the race and has to be met because he doesn’t even have cab fare left, that guy is going to say to himself, ‘Wow. I must have had a hell of a time. I can’t wait for next year.’ But if that same guy goes home and he still has half his money, he is going to say ‘I guess I didn’t have such a great time at the Kentucky Derby after all.’
“Because, gentlemen, this is the rule. A sucker has to get screwed.”
https://memex.naughtons.org…
You will be up tomorrow
{ If you have trouble getting to sleep at night, then go to the web site at the link above and you may never want to sleep again. I think that Mary Shelley was on to something. }
That link sure posted differently than expected. It is for the homepage of Floodlist.com. The articles listed there are just one extreme horror story after another. That and of course the reassurance that we ain’t seen nothing yet. Climate chaos is just getting started on our virgin butts. We screwed the Earth and now it is the Earth’s turn.
Senate Passes $280 Billion Industrial Policy Bill to Counter China
NY Times – July 27
or so they said.
No fear Mate. The word is fire ‘stead of flood next time. They are just emptying out the fire extinguisher before striking the match.
“an increasingly vulnerable Taiwan.”
unh oh. Taiwan take warning.
Is this anything?
Manchin says he has health, energy, tax deal with Schumer
NY Times – July 27
After spiking earlier talks, Manchin agrees to a new deal on climate and taxes
NPR – July 27
Surprise Climate Deal Would Be Most Ambitious of Its Kind Undertaken by US
Surprise Deal Would Be Most Ambitious Climate Action Undertaken by US
NY Times – July 28
The announcement Wednesday of an agreement in the Senate almost instantly reset the role of the United States in the global effort to fight climate change.
The $369 billion climate and tax package forged in a surprise deal by Senate Democrats on Wednesday would be the most ambitious action ever taken by the United States to try to stop the planet from catastrophically overheating.
The agreement, which Senate Democrats hope to pass as early as next week, shocked even some who had been involved in the sputtering negotiations over climate legislation during the past year. The announcement of a deal, after many activists had given up hope, almost instantly reset the role of the United States in the global effort to fight climate change.
And it was delivered by Senator Joe Manchin III of West Virginia, the holdout Democrat who had been reviled by environmentalists and some of his own colleagues after he said this month that he could not support a climate bill because of inflation concerns. …
Hmmm. Maybe Russia would be willing to swap Ms Griner & Mr Whelan for Ukraine?
Russia silent on US proposal to release Brittney Griner, Paul Whelan
Washington Post – July 28
Just a note about stock indexes.
Particularly my own, which is not unlike the others.
They all have seen a terrible year, but things went better in July.
The Dobbs Index is down about 16% since last year’s high (October 2021), but it had been down 25% until last week.
It is now down slightly less than it was in at the end of May. June was a terrible month.
Otherwise, it is about where it was in October 2020.
However, buying opportunities abound.