Tag: news

Authored by Jeffrey Tucker via The Brownstone Institute,

The outrageous prices at the grocery store and gas stations – the highest ever recorded and increasing at rates too fast to calculate with precision – are yet more collateral damage from the initial lockdowns two years ago. The story unfolds over two years but the line of causality is direct. 

Apparently it’s going to get much worse. I wonder if at some point, no one will remember how this all began. Maybe everyone has already forgotten. 

I asked a friend: do you think people understand the relationship between the March 2020 lockdowns and the wild price increases two years later? The answer came: no way. 

That surprises me but I also understand. There has been so much flimflam coming from the media and government spokespeople for so long, so many many attempts to demonize and scapegoat. 

In addition, for many people, the past 24 months have seemed like one big blur when everything they thought about the world has been blasted to pieces. It’s extremely disorienting. After a while, one can get used to the chaos and just accept it without attempting to account for it. The lines of causality too become blurry. 

The latest mess – and this doesn’t even account for the shocking talk of nuclear war that is now in the air – profoundly affects all states in the US, not just the blue ones that stayed closed much longer than red ones. Red states have felt normal but now they too must deal with incredible price increases in everything plus strange and random goods shortages on the shelves. 

No one is spared when we all use the same currency and inhabit the same global economic environment. 

Cash and Mattresses

The cash you hold is losing value. Financial markets are volatile, but even when rising, portfolios can’t keep up. Even the best-managed funds are scrambling for returns. Savings seem ever less like savings. Even with cost-of-living increases in salaries and wages, the purchasing power is shrinking day-by-day. 

The promises of “transitory” inflation turned out to be as credible as the promises to control the virus. 

Persistently high inflation becomes a tragedy for the poor and working classes, who are daily astonished at the new terrain of high prices for everything that makes life good. But it is especially awful for the savers. They are all being punished for frugality and exercising good personal stewardship over their resources. 

It was not a surprise to any economist that personal savings soared during lockdowns. This is not only due to few opportunities to spend money. That was the least of it. When a crisis hits, risk aversion dominates confidence. The pace at which money changes hands collapses. The cash stays in the mattress. This is due to fear, and it is entirely reasonable. 

This boost in savings during a crisis normally prepares the way for recovery. Once it ends, deferred consumption in the form of savings becomes the basis of investment in capital that then becomes the basis of the rebuilding. It’s a natural economic phenomenon. You can call it the silver lining of any crisis. There is recovery and it is built on the real economic behaviors inspired by the crisis itself. 

You can see this happening in the data from 2020 in personal savings. It ballooned from 7% of income to 33% practically overnight. In fact, we’ve never seen anything like this before. It’s a measure of just how awful things became so quickly. 

Of course, it was brief but still valuable. Household savings soared 120%. Corporate and business savings also showed risk aversion, as they socked away a clean $600 billion in so many months. 

Counterfactual: let’s say that “two weeks to flatten the curve” had been real. All restrictions were removed in a fortnight. Everything opened. Congress had done nothing. Everyone wondered why we had behaved so egregiously and then we got to work dealing with the pandemic like intelligent adults. Might we have recovered quickly? Surely so, even if it would be the trauma of a generation. 

Instead, however, Congress went absolutely nuts with spending money that they did not have. I’ve previously explained the events: 

It was March 27, 2020, and there was a $2.2 trillion spending bill on the table. Congress was going to approve it without even showing up to the Capitol. It was an appalling sight. These lockdowns had already permissioned every privileged person who could work on a laptop to stay home while the working class had to keep up the old routine. Congress was going to throw trillions around the country now without even showing up to a vote. 

That’s when Congressman Thomas Massie, Republican from Kentucky, hatched a brilliant idea. He would insist that Congress obey its own quorum rules. He pressed the point and thereby required at least half of everyone to come back, traveling to Washington, D.C., precisely when they were most scared to leave their homes. It made sense. If you are going to shower the country with that much money, the least one could do is adhere to the rules of the house and show up for a vote! 

Trump, however, was a huge supporter of the bill and the lockdowns, and therefore furious at Massie. He tweeted that Rep. Massie – one of the more brilliant and humble members of Congress – was a “third-rate Grandstander.” “He just wants the publicity,” he said, and called for party leaders to “throw Massie out of [the] Republican Party!”

Of course the bill sailed through, with only Massie in opposition. That bill ended up being a disaster. It could arguably be blamed for why so many states kept their economies closed as long as they did. The money itself, rather than being used for compensation for lockdowns, became itself a moral hazard to continue the lockdowns for as long as possible. Indeed, the more money that Congress allocated to lockdown relief, the longer the lockdowns went on. 

Here is a look at what happened from the spending side, if only to see how unprecedented this is.

When Congress spends like this, it generates government-secured debt that seeks a market. Eventually that $2.2 trillion would become $6 trillion. The Federal Reserve was there to provide exactly what Congress needed, and hence its balance sheet – still in the process of normalizing from its previous bout of buying – shifted dramatically. The balance sheet at the Fed exploded in its debt holdings, all of which are purchased with metaphorically printed money. 

The Inevitable Inflation 

When governments and central banks behave in unbearably stupid ways, it is worth asking whether there might be a point to the madness. That’s how I feel when I look at M2 data from 2020-21. (M1 might be a better way to express this but the Fed changed the definition in May 2020, making the chart inconsistent.) 

This money printing peaked at a 26% rate of increase. Or look at the raw money data (again, we have to use M2. The Fed inspired the addition of some $6 trillion to the supply of money, nearly a dollar-for-dollar match of what the politicians were promising. All appearances of science aside, it was nothing but the crudest deployment of a classic tale of monetary devaluation: print instead of tax. 

In raw dollar terms, we’ve seen a 42% increase in the money supply in a mere 24 months. 

It’s possible that some people at the Fed figured that they would get away with this because they loosened dramatically in 2008, with no substantial effects on prices, despite all predictions. They became arrogant and too sure that the net effect of all quantitative easing is positive or at least neutral. 

With lockdowns, the Fed and Congress cooperated to paper over the economic devastation, so that it would show up less in the final numbers and also to keep the rabble calm during the storm. People at the time warned of the possibility of an inflationary mess but others said that such concerns should be dismissed completely on grounds that some people said that in 2008 too. 

Plus, the government started dropping checks in people’s bank accounts. Seemed like a gift. It was quickly taken away. It was not only the savings that were wiped out in the subsequent inflation but also the purchasing power of the stimulus checks themselves. These checks worked for a while, until their effective value was essentially stolen by stealth. 

Even now, Americans hold some $2.7 trillion in savings in excess of what they held pre-pandemic. The economic planners in DC have essentially put a target on that saved cash. Even if you believe the reported inflation numbers at the retail level, $1 saved last year is only worth $0.92 today and will be worth $0.84 by year’s end. And where did that purchasing power flow? To Washington, DC, which has ballooned in size and scope. 

The Hunt for Value 

The realization of inflationary pillaging tends to dawn slowly and then all at once. In the coming months and years, we are going to see a dramatic change in the psychology of saving. More people will see that it is not worth it. Better to consume now. Live in the moment. Don’t plan for the future. Get rid of the paper as fast as possible before it loses ever more value. 

That’s how inflationary expectations work: it adds fuel to the fire of devaluation. We aren’t yet seeing much evidence of this yet but it could emerge at any time. This has a cultural impact on whole societies, rewarding short-term consumption over long-term planning. It punishes saving and rewards profligacy.  

To be sure, not all the price increases are accounted for with monetary policy. There are supply-chain breakages, shipping snarls, and now cruel sanctions against Russia that we didn’t see even at the height of the Cold War. 

Decoupling the causative elements here is an impossible task, and monetary theorists will argue for years about the Fed’s culpability. Theory is beautiful but fitting it to reality does not reveal certainty about what is causing what. But even if you think the Fed is not wholly to blame, and that breakages and market chaos generally account for the lion’s share, government policies still bear responsibility. 

It all traces to the fateful March 2020 decision to turn off economic activity as if this would be as easy as shutting off a light switch. Just turn it back on when the virus is gone! It turned out not to be so easy. 

Meanwhile, there seems to be no stopping this beast that is eating through savings and currencies, and also the reputation of central banks fecklessly pretending to stop it. The wild swings are being exacerbated by tremendous uncertainty in supply chains and oil resources in particular. The war response is causing absolute havoc not only in oil but all commodity markets. 

The pandemic response unleashed several seasons of policy recklessness, destruction, and nihilism, almost as if none of the lessons of the past applied, whether in public health or economics. If we ever emerge from this chaos, historians will surely look back in amazement that so many terrible decisions could have taken place in so many parts of the world and in such quick succession. 

Would that we could recapture the theories of French economist J.B. Say who wrote: “let no government imagine, that, to strip them of the power of defrauding their subjects, is to deprive them of a valuable privilege. A system of swindling can never be long lived, and must infallibly in the end produce much more loss than profit.”

That’s a good description of the forces that were unleashed in the name of public health. It generated enormous loss in every area of life. We are still paying the price and will be for years to come. Even in the fog of inflation and war, let us not forget the origin of it all. It is caused by catastrophic decision making at the top. 

Oil has spiked to session highs, slamming the Nasdaq down to session lows)…

… after breaking reports of a major fire burning uncontrollably at a Saudi Aramco facility in the port city of Jeddah. According to unconfirmed reports, a Houthi missile or possible drone strike hit the facility from Yemen. The Saudi Press Agency tweeted that a projectile fell on a power distribution station in Samtah, causing a fire; No casulties have been reported. Meanwhile, Al-Arabiya reported that a strike hit the tanks of the National Water Company in Dhahran Al-Janoub, adding that civilian vehicles and residential houses were also hit

Today’s alleged attack follows a series of recent attacks from Yemen on various Saudi sites, including a last Sunday drone and missile attack also on Jeddah. 

While social media videos appear to confirm the inferno, there has not yet been an official confirmation of the reported missile strike.

#BREAKING: Massive fire at Aramco Facility in Saudi Arabia’s Jeddah following reported missile strike pic.twitter.com/fvQs4ibnfc

— I.E.N. (@BreakingIEN) March 25, 2022

Another video shows huge plumes of smoke above Jeddah:

Additional footage has begun to circulate social media of smoke rising from the Aramco Site in Jeddah. pic.twitter.com/gww7khzatC

— Aurora Intel (@AuroraIntel) March 25, 2022

And more from the scene…

The oil tanks are still burning in Saudi Arabia, the city of Jeddah. pic.twitter.com/AoRdnGBHQ6

— maytham (Z_V) (@maytham956) March 25, 2022

Large fire at Aramco facility in Jeddah, Saudi Arabia after Houthi missile attack. It’s worth noting that the Formula 1 is in Jeddah this weekend. pic.twitter.com/Ozk35ekuu0

— Kyle Glen (@KyleJGlen) March 25, 2022

The blaze appears to be the result of possibly the biggest Houthi attack in months that the kingdom has witnessed, also at a moment the US has said it is transferring more Patriot missile systems to defend against the attacks out of Yemen.

Now that the US and EU have reached a deal to boost LNG exports to the bloc to start the long and laborious process of weaning Europe off its dependence on Russian oil (a lofty ambition that may as yet never be realized), it seems the EU’s ruling unelected bureaucrats are already drumming up fresh ideas to mitigate the impact of surging energy costs on regular people – in ways that don’t require billions of euros in gas stimmies.

In a series of tweets sent early Friday that focused on mitigating Europe’s surging electricity costs, European Commission President Ursula von der Leyen suggested a two part plan; first, the bloc must bargain with once voice to increase its leverage over prices for pipeline gas and LNG. And if that doesn’t work, von der Leyen suggested that price controls could be in the offing.

Here’s von der Leyen in her own words (source: @vonderleyen):

* * *

The transatlantic partnership stands stronger than ever.

In a world faced with disorder, our unity upholds fundamental values and rules that our citizens believe in.

And we are determined to stand up against Russia’s brutal war.

Our cooperation on the sanctions against Russia has been exceptional. It shows that when we act together, we are stronger and can make a difference.   We are now reinforcing our cooperation in:

• Humanitarian aid to  Ukraine
• Energy • Protecting our democracies

Pleased that we found an agreement in principle on a new framework for transatlantic data flows.

It will enable predictable and trustworthy US-EU data flows, balancing security, the right to privacy and data protection.

This is another step in strengthening our partnership.

But to drive prices down and enhance our energy security in the longer-term, we have to look at the root cause of the price spike.

Namely high and volatile gas prices and their impact on electricity prices.

With a true European approach to buying pipeline gas, we have important leverage.

So instead of outbidding each other and driving prices up, we should pull our common weight.

This is why we are proposing common gas procurement and stricter rules for storage.

We pool our demand and reach out to international partners to negotiate LNG and pipeline gas via a new EU Energy Platform.

In parallel we use storage facilities in some Member States to the benefit of all.

If needed, we can consider price caps.

We will move fast.

In May, we will present options to optimise the electricity market design, so it better supports the green transition.

And we will propose to phase out Russian fossil fuels from our energy mix by 2027.

* * *

The hint of price controls harkens back the 1970s, when President Nixon froze prices (and wages) by executive fiat to counter inflation. As the Europeans try to contain the cost of heating homes with an eye toward the 2022-2023 winter, there are other strategies that they could employ. The IEA recently unveiled a 10-point plan that recommended a handful of (similarly dystopian) measures to blunt the impact of higher energy prices, including urban driving bans and reducing speed limits on highways.

By Michael Every of Rabobank

The Wisdom of Solomon

The mainstream financial industry is finally grasping that the comfy tectonic plates they sit on are not just shifting but smashing into each other. Yesterday saw a Bloomberg op-ed titled ‘Putin and Xi Exposed the Great Illusion of Capitalism’, It read like a greatest hits of this Daily, referring to Norman Angell, imperialism, WW1, The Treaty of Versailles, imbalances and fascism, WW2, Bretton Woods 1, and communism and the Cold War. The conclusion: “Unless the US and its allies mobilize to save it, the second great age of globalization is coming to a catastrophic close…. Unless something is done quickly and decisively, the world will divide into hostile camps, regardless of what happens in Ukraine. And this divided world will not suit the West.” Likewise, Larry Fink of BlackRock states: “The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades.”

The Financial Times headline is NATO warning Russia not to use chemical, biological, or nuclear weapons – and Western preparations in case they do. The Russian case for potentially doing so to change the war’s momentum is laid out as The Institute for War notes: “The Ukrainian government and military directly stated for the first time on March 24 that the Kremlin believes its invasion of Ukraine has entered a second, “protracted” phase”. The assessment is that Russia no longer threatens Kyiv, needs far more troops, and is digging in. As @b_judah reports, while things can still shift on several fronts, “…the base case is this settling into a war of attrition. One view is the battle lines will like a sort of gigantic version of the Donbas frontlines post-2014.”

Short of no-longer-unthinkable WMD usage, it’s the market’s worst-case scenario. No quick end to the war. No quick political settlement. No quick back to normal. And the Balkans are smouldering; North Korea just test-fired an ICBM and stated it will prepare for long-term confrontation with the US; Armenia and Azerbaijan are close to conflict again; and Iran is primed for action in the Middle East, with Houthi proxies having targeted Red Sea oil tankers recently. At least a cease-fire has been agreed between Ethiopia and Tigray.

The G-7 is hence split over the issue of energy boycotts. That, as the US promises to send LNG to the EU –totaling 4% of its consumption(!)– and Russia leaves Europe unclear over when/if it will shift to rouble payments for gas, and is saying gold can be used instead, or perhaps Bitcoin. In which case, the latter two are arguably about to run up against Western sanctions.

As I dot-joined yesterday, eyes are now being turned to China. Former Trump National Security Advisor McMaster told the US press: “Of course they’re going to give arms to the Russians” – a claim with huge implications. But before that, yesterday saw news that ‘US sets red lines for China helping Russia dodge sanctions’, noting the White House has warned Beijing not to take advantage of business opportunities created by sanctions, help Moscow evade export controls, or process its banned financial transactions. There is now also a US red line over “systematic efforts, industrial-scale efforts to try to reorient the settlement of financial payments.” So, China tries to avoid the US dollar with Russia, and it faces US secondary sanctions.

Today, Politico notes ‘China’s Russia embrace triggers Congress blowback’ and: “The Biden administration’s efforts to enlist Chinese government support to isolate and punish Russia for its Ukraine invasion have hit a brick wall. China is maintaining its diplomatic, economic and rhetorical alignment with Russia and is disavowing any meaningful role in leveraging its influence with Russian President Putin to end hostilities that both the EU and the US State Department say have included war crimes against Ukrainian civilians. That positioning has provoked public dismay that is boosting the rollout of congressional initiatives to deter China from economic or material support for Russia’s war machine and to impose stiff penalties if Beijing provides such assistance.” Indeed:

• Republican senators are proposing a Crippling Unhinged Russian Belligerence and Chinese Involvement in Putin’s Schemes (CURB CIPS) Act to block China from providing Russia financial system access to evade sanctions. This would target China’s Cross-Border Interbank Payment System (CIPS), China’s version of SWIFT as well as Russia’s System for Transfer of Financial Messages (STFS). Specifically, the proposed legislation would freeze or terminate any US-based accounts connected to Chinese financial institutions, or block their US-based property, that engage in transactions with a Russian financial institution using either CIPS or SPFS.
• There is a renewed push for House Foreign Affairs Committee support for the Protecting Americans from Corporate Human Rights Abusers Act, which will curtail Chinese state firms’ access to US capital markets.
• A member of the House Committee on Financial Services is also pushing a Special Drawing Rights Oversight Act to prevent Russia from accessing CNY.
• House representatives have further introduced legislation to revoke China’s Permanent Normal Trade Relations status to punish it “for its heinous human rights atrocities — especially and including the regime’s ongoing genocide and forced labour of Uyghurs and other Central Asian minorities.”

And this is the current Congress: the incoming one is likely to be even more hostile. Let’s not forget even the White House wants to kick Russia out of the G-20, while China wants it to stay in: what happened to the G-8, one might ask? Even Stephen Orlins, president of the New York-based National Committee on U.S.-China Relations, as pro US-China relations as one can get, says: “We are at a potential inflection point. If China uses its unique relationship with Russia to mediate an end to this Russian invasion, sentiment on Capitol Hill toward China could improve. At the other extreme, if China should supply Russia with military equipment, U.S.-China relations will drop to levels not seen since the establishment of diplomatic relations.” Against that backdrop, what is the smartest Chinese geopolitical move?

Arguably not ‘China Confirms ‘Policing’ Deal with Solomons’. In short, the Solomon Islands may allow Chinese police, and military, to be stationed there, giving China its second foreign military base after Djibouti, and its first in the Pacific. Australia and New Zealand are shocked, as are the US and ASEAN. Indeed, it’s hard to see any wisdom of Solomon in that decision unless Beijing has already decided that the warnings of Bloomberg and Fink are coming to pass. Notably, China has seen large capital outflows since Russia invaded Ukraine, unlike other EM: it is being treated differently. The headline above, combined with the mood in the White House and Congress, suggests there could be a lot more ahead. China may or may not be trying to build something with Russia, and the Solomons, but its economy is still dollar-based at heart: it may have to find that out the *very* hard way.

Meanwhile, other big policy shifts loom. The West is trying to show it can fight Putin and emerging-market hunger, as ‘G-7 leaders pledge action to address food shortages caused by war’. They state: “We will make coherent use of all instruments and funding mechanisms to address food security and build resilience in the agriculture sector in line with climate and environment goals.” Yet there are enormous implications: let’s see the details of how one boosts agri planting within four weeks, as fertiliser costs soar, and deals with food-as-fuel biodiesel. Likewise, White House advisor, and environmentalist, Deese is now saying there should be greater oil production in the US – presumably as opposed to in Venezuela or Iran. But what policies will shift to see it happen, and when?

Against this, US durable goods orders dropped more than expected yesterday (-2.2%), suggesting that even though the Fed keeps talking about 50bp moves, and bond yields are surging (albeit US 2s and 10s slightly lower at 2.14% and 2.36%, respectively, at time of writing), the actual economy is already slowing. And that’s before we get $150 oil and food-flation.

The Fed may be about to make a terrible policy error, but if this current phase of globalization is ending, it won’t be the only one to have done so. So will everyone who didn’t see the ‘Great Illusion of Capitalism’ ending.

There will be real consequences for the way the Fed works –and the way we all do– if either of those come to pass, and far more so if they both do at once. Perhaps indicatively, over the border in Mexico, yesterday saw the President announce the central bank rate decision to hike 50bp well in advance of the actual news(!) Less central bank independence? Impossible!

Unless we are in a war economy in a collapsing global system in which supply chains are the front line, barter and counter-trade return, industrial policy is needed, so is MMT, where possible, and even rationing, price controls, and perhaps capital controls are required in places. So, yes, that means real consequences for all of us in business and markets. You can take traditional market rules of thumb and try to use them as fuel or food, and instead embrace older wisdom, such as that wars are highly inflationary before they are then deflationary.

None of this is new –or unexpected– if one wanted to look for it.  I turn to the Wisdom of Solomon to make that key point:

“What has been will be again, what has been done will be done again; there is nothing new under the sun. Is there anything of which one can say, “Look! This is something new”? It was here already, long ago; it was here before our time. No one remembers the former generations, and even those yet to come will not be remembered by those who follow them.

Happy Friday.

Democrats hoping to snag at least one Republican Senator to support Supreme Court Nominee Ketanji Brown Jackson may need to dig deep to secure all 50 members of their party – as GOP support for the controversial judge has all but evaporated following a week of contentious confirmation hearings.

A simple majority of all 50 Democrats can confirm Jackson without GOP support, with Vice President Kamala Harris breaking any tie – and with Friday’s announcement from Sen. Joe Manchin (D-WV) that he’ll support Jackson, it only leaves Sen. Kyrsten Sinema as the other potential roadblock on the radar.

“I think the read out from the members who have been in the hearing room for those of us who haven’t been in the hearing room is that she’s not changing minds,” said Sen. John Thune (R-SD), the #2 GOP Senator, according to The Hill. “They were thinking that she might win people over. I think if anything a closer examination of her record … has probably moved some of our members in the opposite direction.“

Another GOP Senator told The Hill “I didn’t think the hearings went as well for her as I thought they would,” referring to unsatisfactory answers Jackson gave over light sentences she handed down to pedophiles.

“I don’t believe she has sympathy for child pornographers. I don’t believe … any rational person does. I do believe her sentencing practices undercut deterrence,” said Sen. Lindsey Graham (R-SC), who told reporters he has ‘concerns’ about Jackson.

On Thursday, Senate GOP Leader Mitch McConnell (KY) formally announced his opposition to Brown’s nomination, saying in a statement: “After studying the nominee’s record and watching her performance this week, I cannot and will not support Judge Jackson for a lifetime appointment to the Supreme Court.”

One Democrat ‘has a feeling’ however…

“We’re going to get some GOP support. …I feel like we’re going to get some folks,” said Sen. Doug Jones (D-AL), who has been helping advance Jackson’s nomination through the Senate.

Sen. Dick Durban thinks there’s a chance, telling The Hill “I still think there’s a chance. …I’ve talked to a few of them,” while declining to “name names.”

If no Republicans vote for Jackson, she’ll be the second justice in US history to be confirmed entirely by one party – the first being Justice Amy Coney Barrett in 2020, who GOP Sen. Susan Collins (ME) crossed the aisle to vote against.

While Republicans oppose Jackson, they’ve said they won’t actually boycott her vote in the Judiciary Committee – which has been used in other hearings to try and ‘bottle up’ other Biden nominees, such as Sarah Bloom Raskin’s nomination to the Federal Reserve – which was withdrawn over controversial statements on climate change and other matters.

Jackson appears increasingly likely to face a tie vote in the Judiciary Committee, which is evenly split 11-11.  

GOP Sens. Lindsey Graham (R-S.C.) and John Cornyn (R-Texas) both voted to advance Jackson’s appeals court nomination in committee last year, letting her avoid a tie. Cornyn ultimately voted against her nomination before the full Senate and told The Hill that he wouldn’t split his vote in a similar way for her Supreme Court nomination.  

GOP Sen. Thom Tillis (N.C.), who voted against Jackson’s appeals court nomination, has emerged as a potential sleeper “yes” vote to watch because of his more favorable interaction with Jackson during the high-profile committee hearings. -The Hill

If Jackson receives a tie vote, Democrats will be required to discharge her nomination from the committee to the full Senate – and would mark the first time a Supreme Court nominee has been forcibly discharged from the Judiciary Committee since 1853.

The Committee will vote on Jackson’s nomination on April 4.

The final data for March’s University of Michigan sentiment survey was expected to confirm the preliminary data’s collapse to 11-year lows, but in fact it worsened intra-month from 59.7 to 59.4 for the headline index. Both current conditions and expectations also fell modestly intramonth to multi-year lows…

Source: Bloomberg

Politically, sentiment is down across the board, but Democrats and Independents are suffering the most…

Source: Bloomberg

From a political perspective, Republicans report a much higher awareness of inflation. When asked how their finances have recently changed, half of Republicans mention inflation compared to 19% of Democrats.

And perhaps most importantly for now, inflation expectations remain at 41 year highs

Source: Bloomberg

It seems all that Fed jawboning about how they will control inflation is not working.

About a third of consumers expect their overall financial position to worsen in the year ahead, the highest recorded level since the survey began in the mid 1940s, the report said. Furthermore, more consumers mentioned reduced living standards due to rising inflation than any other time except during the recessions seen in the late 1970s and 2008.

After unexpectedly plunging in January, pending home sales were expected rebound very modestly in February (despite both new- and existing-home-sales tumbling as mortgage rates soar). The analysts were very wrong as pending home sales puked 4.1% MoM (after a downwardly revised drop of 5.8% MoM in January). That is the fourth straight monthly drop…

Source: Bloomberg

Pending home sales are down 5.45% YoY and the pending home sales index is at its lowest since May 2020…

Source: Bloomberg

A recent report showed a measure of homebuilders’ sales expectations for the next six months slumped in March to the lowest since June 2020 amid growing concerns over the combination of rising construction costs and higher interest rates.

And we suspect this is far from over as mortgage applications in the last week tumbled once again, now at its lowest since pre-COVID seasonal lows…

Source: Bloomberg

All of which has occurred before The Fed actually hiked rates even once and as housing affordability is about to crash by the most on record…

The costs and financial hurdles to buying a home are not the only thing that have been on a tear recently. Rents have been on fire over the past year, with the Zillow Observed Rent index soaring 14.9% yoy to $1,904 in January.

Will the Biden admin blame Putin for US housing un-affordability too?