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Tag Archives: FED

Did the Fed Experiment with a Mini-Taper and Fail?

The Fed balance sheet stands at $8.56T, up $108B from the prior month-end, but down in the past week by $8.7B. The chart below shows how the Fed Balance sheet has grown by instrument over the last 18 months.The Fed autopilot buying targets about $120B in monthly purchases split by $40B in MBS and $80B in US Treasuries. As the numbers show, this is not exact, but an approximation. The latest month added $33B in MBS and almost $82B in Treasuries, offset by “Other” dropping $7B.The Fed has...

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Money Supply Grows Almost 10% Annualized and Nears $21 Trillion

In the latest period, M2 increased by $163 billion and sits just shy of $21 trillion. This represents a 0.78% MoM increase which annualizes to 9.8%. This is below last month’s rise of $254B and last September’s rise of $223B.The table below shows the change in M2 over different period lengths. All numbers have been annualized for consistency. As can be seen, the growth in M2 is decelerating compared to the 6-month, 1-year, and 3-year average growth rates. The charts below put the growth...

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Fiscal Spending Up 18.7% MoM and 4.1% YoY

The federal budget deficit for September 2021 was $61.5 billion, down from the $171 billion in August. Even though the deficit fell 64% MoM, it was driven primarily by receipts. Spending was up 18.7% MoM but receipts were up 71.2% driven by a surge in corporate and individual taxes.September marks the end of fiscal year 2021 for the Government. The Fed ran the second-largest budget deficit in US history. Similar to the MoM picture, this was not due to a fall in spending. Spending...

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Price Analysis: Gold Diverges from Bonds as Critical Test Looms at $1800

The analysis last month showed that selling exhaustion may be near in the gold market. Since then, gold continues to be range-bound between $1750 and $1800 running up against both solid resistance and support. Meanwhile, silver has shown a mini-breakout.The $1800 level for gold is in play this week and could open the door for a big move if it gets through it soon.More importantly, gold and bonds have shown a strong divergence in October which is a very bullish sign.Finally, the gold...

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Is Powell Right About Inflation?

If we believe what its chairman is saying, the Fed does not seem to know what inflation is. The Wall Street Journal of Friday wrote (Nick Timiraos, “Powell Says Supply-Side Constraints Have Worsened, Creating More Inflation Risk,” October 22, 2021): “Supply-side constraints have gotten worse,” Mr. Powell said Friday at a virtual conference. “The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation.” The economic definition of...

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A More Accurate CPI: Up .97% MoM and 7.1% YoY

The CPI data for September came in hotter than expected at 0.4%. That pushed the yearly gain to 5.4%. But an honest CPI calculation would come in even hotter.I am doing something different this month. In past reviews of the CPI, I typically take the BLS data and recalculate the values to get a more detailed number that is rounded to two decimal points instead of one. This methodology also allows me to show the impact of each component on the top-line number.The Fallacy of Owners...

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Another Big Jobs Miss: All But Two Categories Are Below The 12-Month Trend

For the second month in a row, the jobs numbers in September came in well below expectations.The Labor Department reported an increase of only 194,000 jobs, well below the estimated 500,000. The big miss was similar to August’s report.Despite the unemployment rate ticking down to 4.8% from 5.2% and an upward August revision of 131,000 jobs, this is the weakest jobs report since January.This next chart compares the current month with the trailing 12-month average. A few key...

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Fed Absorbs $60B of 1-5 Year US Treasuries in September

The Fed balance sheet stands at $8.45T, up $115B from the prior month end, but down in the past week by $42B. The chart below shows how the Fed Balance sheet has grown by instrument over the last 18 months.The Fed autopilot buying targets about 120B in monthly purchases split by $40B in MBS and 80B in US Treasuries. As the numbers show, this is not exact, but an approximation. The latest month added $56B in MBS and almost $84B in Treasuries, offset by “Other” dropping $26BThe “Other”...

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Gold Under Fed’s New Monetary Regime

Did you believe that the monetary policy of Ben Bernanke in a response to the Great Recession was extraordinary? Nah, Bernanke was an amateur compared to Jerome Powell. The latter quickly reintroduced ZIRP, implemented unlimited quantitative easing, and provided bailouts to Wall Street – and now he risks higher inflation as a result. In August 2020, Federal Reserve Chair Jerome Powell delivered his Jackson Hole speech, unveiling a new monetary framework in the process. He announced a flexible...

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The headline should match the article

Headlines are typically not written by the same person that pens the article. Nonetheless, the headline should at least match the content of the article. Bloomberg failed with this headline: I was surprised by this headline, as the Fed obviously can drive inflation higher.  Perhaps they meant that Powell cannot convince the FOMC to drive inflation higher, but that would be an odd way of phrasing that claim. The article itself is excellent: The Treasury market has set...

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