Month: September 2021

Watch: Women’s Protest In Kabul Dispersed By Taliban Automatic Gunfire

Watch: Women’s Protest In Kabul Dispersed By Taliban Automatic Gunfire

On Thursday AFP journalists witnessed and recorded a disturbing scene unfold during a women’s rights protest in eastern Kabul. A small group of women gathered outside a high school to demand they be allowed access to secondary education, after the Taliban issued a blanket decree banning any upper level education for women.

CBS News reported starting last week that “The Taliban’s effective ban on women working sank in on Monday, sparking rage over the dramatic loss of rights after millions of female teachers and girls were barred from secondary school education.” Thursday’s protest among a mere half-dozen women resulted in perhaps the harshest crackdown yet, involving live gunfire as a ‘warning’ – which sent the girls fleeing into the nearby school building.

Not all of the dramatic episode was captured on camera, as Taliban militants were seen attempting to block cameras and journalists from the scene.

The extremely small but hugely symbolic protest that featured a banner with the words “Don’t break our pens, don’t burn our books, don’t close our schools” resulted in a large Taliban police presence descending on the area and even blocking roadways. 

The militants confiscated the banners as the following scene ensued: 

They pushed back the women protesters as they tried to continue with the demonstration, while a foreign journalist was hit with a rifle and blocked from filming.

A Taliban fighter also released a brief burst of gunfire into the air with his automatic weapon, AFP journalists saw.

A Taliban spokesman attempted to chalk up the ordeal to the protest not being “authorized” with formal permission ahead of time, claiming that protests are allowed but only if police are aware ahead of time.

“They have the right to protest in our country like every other country. But they must inform the security institutes before,” the police guard was cited as saying.

Soon after the Taliban takeover of Kabul at the end of August, there were pronouncements by leaders and pundits in the West claiming the Taliban had greatly “moderated” when compared to the pre-2001 situation; however, increasingly this is proving not the case, also as the hardline Islamist group has reinstated strict Sharia-law corporal punishment, including chopping off hands for offenses, or public displays of the bodies of people that were executed. 

Tyler Durden
Thu, 09/30/2021 – 15:43

via ZeroHedge News https://ift.tt/3kTzr02 Tyler Durden

JPMorgan Spooks Market With $3 Billion Crash Hedge

JPMorgan Spooks Market With $3 Billion Crash Hedge

Anyone who has been following Nomura’s Charlie McElligott or the analysis from our friends over at SpotGamma, knows that as part of the quarter-end hedging fireworks, one of the most notable trades to keep an eye on is quarterly reset of the JPMorgan Collar Trade which the JPMorgan Hedge Equity Fund puts on every quarter to protect against a 5% up to 20% crash in stocks.

Just this morning we quoted Nomura’s McElligott who warned of “potential fireworks” in the Equities space will as a result of the “absolutely mongo-sized qtrly SPX Put Spread Collar that is being rolled, where paper needs to buy 44,600 SPX SepQ 4430 Call (on the cover) to buy the DecQ 3490 / 4140 Put Spread while selling the DecQ 4515 Call x 44,600.” As the Nomura quant calculates, the trade will lift the Street on ~$3.1B in Gamma and SELL 14.5mm in Vega.

The details of the trade were also discussed by SpotGamma which dedicated an entire discussion on the JPMorgan Collar Trade which conists of the following:

  • Sell 45,000 contracts of the Dec 31st 4505 calls at a delta of 34
  • Buy 45,000 of the Dec 31st 4135 puts at a delta of 30
  • Sell 45,000 of the Dec 31st 3480 puts at a delta of 7.

According to SpotGamma, the net of this trade is a negative delta of ~57 (34+30-7), and the impact of this trade is shown in the image below, where the top chart is the ES futures, and the bottom blue line is the rolling sum of deltas traded on the day. The sharp move in the deltas is when the trade is put on.

And while option traders are intimately familiar with the quarterly roll of the JPM Collar, it appears that Bloomberg is not, and in a bombastic sounding article, “Giant S&P 500 Options Trade Placed to Guard Against 20% Swoon” the media giant writes that “a trader just established a massive hedging position via options to protect a portfolio of stocks in the event that the S&P 500’s losses snowball toward 20% during the fourth quarter. The trader Thursday morning bought 45,300 put-spread collars — options cocktails that combine various strike prices in a single strategy — on the S&P 500 for $94 million. The order involved selling calls with a strike price at 4,505 while buying puts exercising at 4,135 and selling puts at 3,480.”

Of course, our readers know that JPM is behind this trade which incidentally hardly as exciting as Bloomberg would like to make it sound, even if it is a bit embbarassing for those Wall Street “experts” quoted by the Bloomberg writer, such as Alon Rosin, Oppenheimer’s head of institutional equity derivatives. who was quoted as saying “It’s a portfolio protection trade. It was a notably sized bearish trade.”

Well yes it is: although since the largest bank in the US is behind and regularly rolls it, one would think Oppenheimer would be on top of these things.

Susquehanna’s co-head of derivatives, Chris Murphy, was also quoted: “The top strike of this put spread kicks in if we do actually break the 200dma, and hedges a lot of room on downside if there is an air pocket below. Meanwhile, the upside call is well below the highs from earlier this month and appears to be closer to spot than usual, so this hedger may believe upside will remain muted into the end of the year.”

Actually no, Chris, this is just a quarterly rolled position that JPM puts on – every quarter – to hedge against a crash.

Bloomberg’s ominous conclusion is alarming…

Angst is growing in the market as the S&P 500 has fallen almost 4% in September for the worst month in a year. Stocks tumbled as surging bond yields transpired with the government debt ceiling and China’s real estate woes.

… even if completely misses the point, namely that with JPM now having a $3 billion hedge on, it is far less likely to sell into a crash thus assuring that angst is merely a buying opportunity.

So for all the quoted experts above and the Bloomberg article author, here again is a video from SpotGamma that explains what happened.

Tyler Durden
Thu, 09/30/2021 – 15:21

via ZeroHedge News https://ift.tt/3orWS2Z Tyler Durden

Biden’s Nominee For Top Bank Regulator Earned “Lenin” Award, Praised USSR’s “Equality”, And Wants To “End Banking As We Know It”

Biden’s Nominee For Top Bank Regulator Earned “Lenin” Award, Praised USSR’s “Equality”, And Wants To “End Banking As We Know It”

President Biden’s pick for Comptroller of the Currency is quite the anti-capitalist.

Cornell University law professor Saule Omarova, who proposed ‘ending banking as we know it,’ and that radical change to the system would make the institution ‘more inclusive, efficient and stable,’ has come under fire over her extreme views.

Saule Omarova in 201

“Until I came to the US, I couldn’t imagine that things like gender pay gap still existed in today’s world. Say what you will about old USSR, there was no gender pay gap there. Market doesn’t always ‘know best,’” Omarova tweeted in 1999, adding (after receiving harsh criticism) “I never claimed women and men were treated absolutely equally in every facet of Soviet life. But people’s salaries were set (by the state) in a gender-blind manner. And all women got very generous maternity benefits. Both things are still a pipe dream in our society!”

What’s more, Omarova supports several progressive proposals – including the Green New Deal, and the creation of a giant bureaucracy she dubbed the National Investment Authority, which would – among other things – coordinate the long term economic strategy for the United States with upcoming infrastructure developments, according to the Washington Free Beacon. It would also manage a “big and bold” climate agenda.

The authority would have a congressionally approved governing board and regional offices across the country. In addition to developing roads, bridges, and other traditional infrastructure projects, the authority would fund affordable housing, public transit, and clean energy projects, as well as “climate change mitigation solutions,” Omarova told Congress this year. -Free Beacon

As the Wall Street Journal editorial board notes, “Ms. Omarova thinks asset prices, pay scales, capital and credit should be dictated by the federal government. In two papers, she has advocated expanding the Federal Reserve’s mandate to include the price levels of “systemically important financial assets” as well as worker wages. As they like to say at the modern university, from each according to her ability to each according to her needs.”

In a recent paper “The People’s Ledger,” she proposed that the Federal Reserve take over consumer bank deposits, “effectively ‘end banking,’ as we know it,” and become “the ultimate public platform for generating, modulating, and allocating financial resources in a modern economy.” She’d also like the U.S. to create a central bank digital currency—as Venezuela and China are doing—to “redesign our financial system & turn Fed’s balance sheet into a true ‘People’s Ledger,’” she tweeted this summer. What could possibly go wrong? -WSJ

Omarova also wants to create a “Public Interest Council” of “highly paid” academics who would wield subpoena power over regulatory agencies, including the Fed.

In her earlier days, Omarova worked in the Bush administration Treasury Department.

As The Washington Free Beacon notes, Omarova’s policies have won her accolades from prominent progressive lawmakers and special interest groups. Sen. Elizabeth Warren (D., Mass.) said Omarova’s nomination was “tremendous news.” The Sierra Club said Omarova would help the Office of the Comptroller of the Currency fight against “climate chaos” and set up “guardrails against Wall Street’s risky fossil fuel investments.”

Interestingly, The Wall Street Journal reports that Biden nominated Ms. Omarova over the objections of Treasury Secretary Janet Yellen, to whom the comptroller reports. One theory they suggest for this bizarre nomination is that Mr. Biden is trying to appease progressives because he plans to reappoint Jerome Powell as Fed chairman.

Tyler Durden
Thu, 09/30/2021 – 15:04

via ZeroHedge News https://ift.tt/3D66PXX Tyler Durden

If Democrats Truly Wanted To Level the Playing Field, They’d End Crony Corporate Handouts


thumb2

How to best ensure substantial long-run economic growth should be a question on everyone’s mind. Its benefits can’t be overstated, and it’s undeniable that the lack of growth is a root contributor to many seemingly disconnected economic and social problems. That’s the central theme of a recent podcast discussion between The New York Times’ Ezra Klein and George Mason University economist Tyler Cowen.

They both expressed support for reforms to make government less bureaucratic and more agile. For example, Cowen cited the Food and Drug Administration’s recent failure to approve COVID-19 treatments quickly enough, while also getting in the way of COVID-19 tests’ development and distribution. In an ideal world, Cowen’s sensible observation should lead to serious reform of the FDA along with other alphabet agencies that fail the American people through slow and counterproductive processes. During ordinary times these bureaucratic problems loom large enough; during a pandemic they’re devastating.

My issue, however, is with Klein’s suggestion that changing the status quo requires conservatives and libertarians to stop denouncing Uncle Sam for big fiascoes like Solyndra, the solar company that infamously went under shortly after receiving a $538 million loan guarantee from a green-energy program under the Obama administration. Denouncing such waste, Klein insists, only serves to embarrass the government for its failures, thus prompting it to be more cautious. As such, Klein would like “to somehow quiet these players looking to point out every failure.”

That’s wrong. Klein misunderstands why I and other free-market proponents fight against private companies receiving government-granted privileges—which is called “cronyism.” It’s not the wasteful spending that I mostly focus on; it’s the unfairness.

Before I explain, I want to state for the record that it’s not the role of government to prop up private companies, even green ones. Nor is it the case that the FDA screws up because conservatives and libertarians don’t miss a chance to criticize government failures. Bad government, political incentives, and repeated lack of accountability are all alone to blame for this mess. Besides, if pointing out that the government fails and wastes taxpayers’ money were such a powerful way to embarrass government into exercising undue caution, we wouldn’t continue to see this administration double down on interventions where others have failed before.

Now, consider the Department of Energy’s Section 1705 green energy loan program, which gave us failures like Solyndra, Abound Solar, and others. The program started under former President George W. Bush but hit its stride during Obama’s presidency. It was allegedly designed to incentivize banks to lend to riskier green companies that wouldn’t get access to capital otherwise, bolstering innovation in the process and boosting growth.

While it did lend to risky Solyndra, a vast majority of the loans primarily went to large, well-financed, and established companies that already produce green energy. Take NRG Energy Inc., for instance, one of the program’s biggest recipients. As its then-chief executive, David W. Crane, explained to the Times after securing $5.2 billion in federal loan guarantees, plus hundreds of millions in other subsidies for four large solar projects, “I have never seen anything that I have had to do in my 20 years in the power industry that involved less risk than these projects,” and “It is just filling the desert with panels.”

That story repeats itself throughout the program. Contrary to the program’s goal, the 1705 loans didn’t incentivize new market entrants. They instead subsidized big and powerful market incumbents. Under these conditions, it’s not surprising that on paper and to untrained eyes the overall program seemed to be fairly low-risk, even successful, and led observers like Klein to dismiss Solyndra’s failure as a cost worth paying for an otherwise good program.

That’s the wrong conclusion, of course, if one understands how incredibly unfair such handouts are. They give an artificial competitive edge to big companies that have no problems accessing capital, and this comes at the expense of smaller and truly innovative competitors, of consumers and ultimately of the integrity of our markets and political system. Adding insult to injury, the companies’ executives are often well-connected with politicians or with White House officials—as were Solyndra executives. This recipe is hardly one that produces innovation and growth.

The incentives within government decision making processes are such that this same pattern exists in most programs where government extends handouts to private businesses, which explains why I oppose all subsidies and loan guarantee programs. It’s a barrier to the growth that Cowen and Klein want to boost, and it’s profoundly unfair.

COPYRIGHT 2021 CREATORS.COM

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If Democrats Truly Wanted To Level the Playing Field, They’d End Crony Corporate Handouts


thumb2

How to best ensure substantial long-run economic growth should be a question on everyone’s mind. Its benefits can’t be overstated, and it’s undeniable that the lack of growth is a root contributor to many seemingly disconnected economic and social problems. That’s the central theme of a recent podcast discussion between The New York Times’ Ezra Klein and George Mason University economist Tyler Cowen.

They both expressed support for reforms to make government less bureaucratic and more agile. For example, Cowen cited the Food and Drug Administration’s recent failure to approve COVID-19 treatments quickly enough, while also getting in the way of COVID-19 tests’ development and distribution. In an ideal world, Cowen’s sensible observation should lead to serious reform of the FDA along with other alphabet agencies that fail the American people through slow and counterproductive processes. During ordinary times these bureaucratic problems loom large enough; during a pandemic they’re devastating.

My issue, however, is with Klein’s suggestion that changing the status quo requires conservatives and libertarians to stop denouncing Uncle Sam for big fiascoes like Solyndra, the solar company that infamously went under shortly after receiving a $538 million loan guarantee from a green-energy program under the Obama administration. Denouncing such waste, Klein insists, only serves to embarrass the government for its failures, thus prompting it to be more cautious. As such, Klein would like “to somehow quiet these players looking to point out every failure.”

That’s wrong. Klein misunderstands why I and other free-market proponents fight against private companies receiving government-granted privileges—which is called “cronyism.” It’s not the wasteful spending that I mostly focus on; it’s the unfairness.

Before I explain, I want to state for the record that it’s not the role of government to prop up private companies, even green ones. Nor is it the case that the FDA screws up because conservatives and libertarians don’t miss a chance to criticize government failures. Bad government, political incentives, and repeated lack of accountability are all alone to blame for this mess. Besides, if pointing out that the government fails and wastes taxpayers’ money were such a powerful way to embarrass government into exercising undue caution, we wouldn’t continue to see this administration double down on interventions where others have failed before.

Now, consider the Department of Energy’s Section 1705 green energy loan program, which gave us failures like Solyndra, Abound Solar, and others. The program started under former President George W. Bush but hit its stride during Obama’s presidency. It was allegedly designed to incentivize banks to lend to riskier green companies that wouldn’t get access to capital otherwise, bolstering innovation in the process and boosting growth.

While it did lend to risky Solyndra, a vast majority of the loans primarily went to large, well-financed, and established companies that already produce green energy. Take NRG Energy Inc., for instance, one of the program’s biggest recipients. As its then-chief executive, David W. Crane, explained to the Times after securing $5.2 billion in federal loan guarantees, plus hundreds of millions in other subsidies for four large solar projects, “I have never seen anything that I have had to do in my 20 years in the power industry that involved less risk than these projects,” and “It is just filling the desert with panels.”

That story repeats itself throughout the program. Contrary to the program’s goal, the 1705 loans didn’t incentivize new market entrants. They instead subsidized big and powerful market incumbents. Under these conditions, it’s not surprising that on paper and to untrained eyes the overall program seemed to be fairly low-risk, even successful, and led observers like Klein to dismiss Solyndra’s failure as a cost worth paying for an otherwise good program.

That’s the wrong conclusion, of course, if one understands how incredibly unfair such handouts are. They give an artificial competitive edge to big companies that have no problems accessing capital, and this comes at the expense of smaller and truly innovative competitors, of consumers and ultimately of the integrity of our markets and political system. Adding insult to injury, the companies’ executives are often well-connected with politicians or with White House officials—as were Solyndra executives. This recipe is hardly one that produces innovation and growth.

The incentives within government decision making processes are such that this same pattern exists in most programs where government extends handouts to private businesses, which explains why I oppose all subsidies and loan guarantee programs. It’s a barrier to the growth that Cowen and Klein want to boost, and it’s profoundly unfair.

COPYRIGHT 2021 CREATORS.COM

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YouTube Completely Removes The Ron Paul Institute’s Channel Without Warning

YouTube Completely Removes The Ron Paul Institute’s Channel Without Warning

On Thursday afternoon former Republican Congressman Ron Paul announced that YouTube inexplicably and without warning deleted his Ron Paul Institute Channel, citing “no warning, no strikes, no evidence.”

The popular Libertarian thinker and long-term Republican rep whose daily commentary is featured in the Ron Paul Liberty Report said he was “very shocked” especially given the channel has lately been “rarely used”. The popular Liberty Report is hosted on a different channel altogether and appears to still be active, however.

After appealing the move, YouTube sent Paul a message saying the request for review and appeal has been denied.

“We have decided to keep your account suspended based on our Community Guidelines and Terms of Service,” YouTube said in a statement screenshoted and posted to Twitter by the former Congressman. 

It’s unclear precisely what was behind YouTube’s rationale for the suspension, but the dominant video upload platform owned by Google just this week announced what’s essentially a ‘zero tolerance’ approach to channels flagged for Covid ‘misinformation.’

As TechCrunch detailed Wednesday, “The Google-owned video platform had previously banned over 1 million videos spreading dangerous COVID-19 misinformation.”

The report continues, “Now, YouTube says it will also remove content that spreads misinformation about vaccine safety, the efficacy of vaccines and ingredients in vaccines.”

Getty Images

The Ron Paul Institute via its main webpage regularly features analysis questioning the flurry of contradictory dictates coming out of federal and state health authorities concerning Covid-19, vaccines, social distancing practices and enforcement. 

However, it remains unclear if this was the reason for the ban on its YouTube channel. Regardless it’s possible that the more popular Liberty Report, which has over 289,000 subscribers and frequently produces viral videos, could be targeted next. 

Tyler Durden
Thu, 09/30/2021 – 14:41

via ZeroHedge News https://ift.tt/3zXmLtl Tyler Durden

Joe Manchin Is Forcing Congress To Think About the Deficit. Good.


dpaphotosfive351491

Sen. Joe Manchin (D–W.Va.) didn’t play in Wednesday’s annual congressional baseball game, but he managed to throw the best curveball of the evening anyway.

In a lengthy statement, Manchin spelled out the reasons he is unwilling to support the $3.5 trillion reconciliation package his fellow Democrats are hoping to push through Congress within the next few days or weeks. “Spending trillions more on new and expanded government programs,” he said, “when we can’t even pay for the essential social programs, like Social Security and Medicare, is the definition of fiscal insanity.” Manchin went on to say that he worries about how more government spending might drive inflation even higher, how higher taxes necessary to pay for that spending will make it harder for small businesses to compete with big retailers like Amazon, and how an expanded welfare state might slow the ongoing economic recovery.

Manchin’s opinion about these things carries a lot of weight right now. Democrats have the slimmest possible majority in the U.S. Senate, and need all 50 of their members (plus Vice President Kamala Harris) to vote in support of the reconciliation bill or it will not pass. The senator from West Virginia has all the leverage, and he’s using it to force the rest of Congress to take a good, hard look the fiscal mess its made over the past few years (and, more specifically, since the COVID-19 pandemic began.

“I can’t support $3.5 trillion more in spending when we have already spent $5.4 trillion since last March,” Manchin said. “I cannot—and will not—support trillions in spending or an all or nothing approach that ignores the brutal fiscal reality our nation faces.”

While he did not specifically invoke the $28 trillion national debt or the federal government’s current budget deficit, Manchin obviously wants to draw Congress’ attention to the massive disconnect between how much the government spends and how much it collects in taxes. According to the Congressional Budget Office (CBO), the national debt will exceed the size of the U.S. economy by the end of this year and will continue growing as annual budget deficits pile up over the next few decades. “A growing debt burden could increase the risk of a fiscal crisis and higher inflation as well as undermine confidence in the U.S. dollar, making it more costly to finance public and private activity in international markets,” the CBO has warned.

Higher levels of debt mean higher interest costs and larger sums of money that must be dedicated to debt service. Every dollar spent paying for the cost of carrying so much debt is a dollar that can’t be used on something else. If interest rates rise even just a few percentage points, the cost of servicing $28 trillion (and counting) of debt will skyrocket.

As Manchin also pointed out, the government is already going to need a lot of dollars to fix the trajectories of the major entitlement programs—Social Security will be insolvent in the early 2030s and part of Medicare will be unable to fully pay benefits in just five years.

But while the senator at the center of the reconciliation bill drama has made clear he won’t support $3.5 trillion in new spending, he’s been more than a bit vague about what sort of package would earn his vote. There are a few nuggets to be mined from Manchin’s statement on that front: He signals support for undoing some of the Trump tax cuts and for means-testing expanded social programs to ensure they are aimed at the truly needy. Those seem like places where Democrats might find a compromise that satisfies both Manchin and the party’s progressive wing.

Relatedly, Politico reported Thursday that Manchin offered in July to support a $1.5 trillion reconciliation bill. That plan would reportedly raise corporate income taxes, personal income taxes on high earners, and the capital gains tax. Excess revenue beyond the $1.5 trillion necessary to pay for the bill would reportedly be directed to deficit reduction.

Manchin is hardly the only person worried about these things, though you wouldn’t know it by paying attention to Congress or the national media. An April poll conducted by the Pew Research Center found that 72 percent of Americans rated the federal budget deficit as a “very big” or “moderately big” problem for the country. It ranked ahead of violent crime, racism, the pandemic, illegal immigration, and lots of other issues that get far more attention.

Manchin’s Wednesday statement drew condemnation from some public figures on the political left who have decided that there’s nothing wrong with massive deficits and nothing to fear in piling up more debt.

In truth, no one is sure how much money the federal government will be able to borrow before a crisis hits—piling up debt is like walking down an infinite hallway with an invisible pit, as Noah Smith has described it. But higher levels of debt are associated with lower economic growth even in places that haven’t suffered major meltdowns. The surely catastrophic consequences of America going through a major debt crisis demands that even a small risk of one must be taken seriously. And there is no arguing with the fact that we are now in uncharted territory.

“America is a great nation but great nations throughout history have been weakened by careless spending and bad policies,” Manchin said Wednesday. “Now, more than ever, we must work together to avoid these fatal mistakes.”

Republicans and Democrats have mostly abandoned any interest in fiscal responsibility. But Manchin has decided, for whatever reason, that deficits actually do matter. And, right now, he’s got the power to make the rest of Congress listen.

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Stagflation Risk: Stephen Roach Latest Economist To Sound Alarm On ’70s-Style Inflation

Stagflation Risk: Stephen Roach Latest Economist To Sound Alarm On ’70s-Style Inflation

Authored by Tom Ozimek via The Epoch Times,

Stephen Roach is the latest high-profile economist to sound the alarm on the risk of a 1970s-style stagflation—where economic growth falls but inflation stays stubbornly high.

The former Morgan Stanley Asia chairman told CNBC in a Sept. 29 interview that the energy price spike is inflicting major damage to struggling supply chains and that he believes the United States is “one supply chain glitch” away from a 70s-era bout of stagflation.

His remarks came as gasoline stations were running dry in Britain, power costs were surging in the European Union ahead of winter, and amid rising prices for oil, natural gas, and coal.

In the interview, Roach spoke of supply chain bottlenecks shifting from one part of the supply chain to another rather than easing, a situation he called “strikingly reminiscent of what we saw in the early 1970s” and one that “suggests that inflation will stay at these elevated levels for longer than we thought.”

“We were sort of one supply chain glitch away from stagflation,” Roach said, adding, “That seems to be playing out, unfortunately.”

Roach took aim at the Fed’s easy money policies, arguing they were excessive, particularly in the face of persistent inflationary pressures.

While Fed officials have maintained that the current bout of inflation is temporary and will abate once supply chain dislocations abate, they have increasingly started to acknowledge that inflation has been stickier than previously thought.

“This is not the situation that we have faced for a very long time and it is one in which there is a tension between our two objectives. … Inflation is high and well above target and yet there appears to be slack in the labor market,” Federal Reserve Chair Jerome Powell said at a European Central Bank forum, with his remarks appearing to point to a stagflationary dynamic.

Surging prices have been a headline theme amid the economic recovery, rising faster than wages and eroding the purchasing power of Americans.

Core personal consumption expenditures (PCE) inflation, which excludes the volatile categories of food and fuel and is the Fed’s preferred gauge for price growth, has risen sharply in recent months, well above the central bank’s 2 percent target.

In April of this year, core PCE was 3.1 percent, rising to 3.5 percent by May and 3.6 percent in June and July, the latest months of available data from the Commerce Department.

While Fed officials have expressed concern about price pressures, they predict that the high rate of inflation is a transitory phenomenon. Still, they acknowledge there’s a risk that price pressures will be stickier than previously anticipated.

New York Federal Reserve Bank President John Williams said Monday that consumer expectations for what the rate of inflation will be several years down the road remain “well-anchored” around the Fed’s 2 percent objective, though he said there are upside risks and a “great deal of uncertainty” around the inflationary outlook.

Economist Nouriel Roubini, known for his gloomy-yet-accurate forecast of the 2008 financial crash—a prediction he made at a time of peak market exuberance—warned in a recent op-ed that the global supply chain crisis combined with high debt ratios and ultra-loose monetary and fiscal policies threaten to turn the “mild stagflation” of recent months into a full-blown stagflationary crisis.

Tyler Durden
Thu, 09/30/2021 – 14:00

via ZeroHedge News https://ift.tt/3ut8OCl Tyler Durden

Joe Manchin Is Forcing Congress To Think About the Deficit. Good.


dpaphotosfive351491

Sen. Joe Manchin (D–W.Va.) didn’t play in Wednesday’s annual congressional baseball game, but he managed to throw the best curveball of the evening anyway.

In a lengthy statement, Manchin spelled out the reasons he is unwilling to support the $3.5 trillion reconciliation package his fellow Democrats are hoping to push through Congress within the next few days or weeks. “Spending trillions more on new and expanded government programs,” he said, “when we can’t even pay for the essential social programs, like Social Security and Medicare, is the definition of fiscal insanity.” Manchin went on to say that he worries about how more government spending might drive inflation even higher, how higher taxes necessary to pay for that spending will make it harder for small businesses to compete with big retailers like Amazon, and how an expanded welfare state might slow the ongoing economic recovery.

Manchin’s opinion about these things carries a lot of weight right now. Democrats have the slimmest possible majority in the U.S. Senate, and need all 50 of their members (plus Vice President Kamala Harris) to vote in support of the reconciliation bill or it will not pass. The senator from West Virginia has all the leverage, and he’s using it to force the rest of Congress to take a good, hard look the fiscal mess its made over the past few years (and, more specifically, since the COVID-19 pandemic began.

“I can’t support $3.5 trillion more in spending when we have already spent $5.4 trillion since last March,” Manchin said. “I cannot—and will not—support trillions in spending or an all or nothing approach that ignores the brutal fiscal reality our nation faces.”

While he did not specifically invoke the $28 trillion national debt or the federal government’s current budget deficit, Manchin obviously wants to draw Congress’ attention to the massive disconnect between how much the government spends and how much it collects in taxes. According to the Congressional Budget Office (CBO), the national debt will exceed the size of the U.S. economy by the end of this year and will continue growing as annual budget deficits pile up over the next few decades. “A growing debt burden could increase the risk of a fiscal crisis and higher inflation as well as undermine confidence in the U.S. dollar, making it more costly to finance public and private activity in international markets,” the CBO has warned.

Higher levels of debt mean higher interest costs and larger sums of money that must be dedicated to debt service. Every dollar spent paying for the cost of carrying so much debt is a dollar that can’t be used on something else. If interest rates rise even just a few percentage points, the cost of servicing $28 trillion (and counting) of debt will skyrocket.

As Manchin also pointed out, the government is already going to need a lot of dollars to fix the trajectories of the major entitlement programs—Social Security will be insolvent in the early 2030s and part of Medicare will be unable to fully pay benefits in just five years.

But while the senator at the center of the reconciliation bill drama has made clear he won’t support $3.5 trillion in new spending, he’s been more than a bit vague about what sort of package would earn his vote. There are a few nuggets to be mined from Manchin’s statement on that front: He signals support for undoing some of the Trump tax cuts and for means-testing expanded social programs to ensure they are aimed at the truly needy. Those seem like places where Democrats might find a compromise that satisfies both Manchin and the party’s progressive wing.

Relatedly, Politico reported Thursday that Manchin offered in July to support a $1.5 trillion reconciliation bill. That plan would reportedly raise corporate income taxes, personal income taxes on high earners, and the capital gains tax. Excess revenue beyond the $1.5 trillion necessary to pay for the bill would reportedly be directed to deficit reduction.

Manchin is hardly the only person worried about these things, though you wouldn’t know it by paying attention to Congress or the national media. An April poll conducted by the Pew Research Center found that 72 percent of Americans rated the federal budget deficit as a “very big” or “moderately big” problem for the country. It ranked ahead of violent crime, racism, the pandemic, illegal immigration, and lots of other issues that get far more attention.

Manchin’s Wednesday statement drew condemnation from some public figures on the political left who have decided that there’s nothing wrong with massive deficits and nothing to fear in piling up more debt.

In truth, no one is sure how much money the federal government will be able to borrow before a crisis hits—piling up debt is like walking down an infinite hallway with an invisible pit, as Noah Smith has described it. But higher levels of debt are associated with lower economic growth even in places that haven’t suffered major meltdowns. The surely catastrophic consequences of America going through a major debt crisis demands that even a small risk of one must be taken seriously. And there is no arguing with the fact that we are now in uncharted territory.

“America is a great nation but great nations throughout history have been weakened by careless spending and bad policies,” Manchin said Wednesday. “Now, more than ever, we must work together to avoid these fatal mistakes.”

Republicans and Democrats have mostly abandoned any interest in fiscal responsibility. But Manchin has decided, for whatever reason, that deficits actually do matter. And, right now, he’s got the power to make the rest of Congress listen.

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Quarter-End Pushes Fed’s Reverse Repo To Record $1.6 Trillion

Quarter-End Pushes Fed’s Reverse Repo To Record $1.6 Trillion

Back in July, when we forecast that the Fed’s reverse repo would hit $2.5 trillion by year end, we thought that this projection was too aggressive even for a Fed as clueless as this one. Maybe not.

Moments ago, the NY Fed reported that today’s overnight repo saw a record $1.604 trillion in usage, the highest number on record  distributed among 92 counterparties, also the most on record.

Putting this explosion in context:

To be sure, a substantial portion of today’s surge was due to month and quarter-end window dressing, and we expect about $200 billion in the total to drop tomorrow once we enter October, however even at $1.4 trillion to say that liquidity conditions are anywhere close to normal would be a joke.

That said, one reason we don’t anticipate a continued surge in the rev repo facility is because one of the biggest sources of funding, the Treasury’s cash balance, has been almost drained and at $173 billion was the lowest since August 2020. This number will likely drop to just shy of zero by Oct 18 when the debt ceiling D-date hits and the Treasury runs out of cash.

Meanwhile, in other broken market observations, today was the 2nd consecutive Bill auction which saw rate on the 4 Week come higher than that on the 8 Week, typically an unprecedented inversion yet one made possible because the bond market is clearly concerned that the debt ceiling drama will not be resolved on time, or worse.

Tyler Durden
Thu, 09/30/2021 – 13:48

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