We’re being robbed!
And most of us don’t even realize it.
When the stock market tanked late last year, the Federal Reserve came to the rescue. First, we had the “Powell Pause” and then we got two interest rate cuts. More recently, the Fed launched a new quantitative easing program – although the central bank isn’t calling it QE.
The US national debt increased by a staggaring $814 billion between Aug. 1 and Oct. 6, according to Treasury Department data.
That represents a 4% increase in the debt — in just a little over two months.
We have yet another reason to be concerned about the direction of the US economy.
Earlier this month, we reported that the ISM index of national factory activity for September came in under 50 for the second month in a row. This indicates that manufacturing is contracting. The September ISM nonmanufacturing index wasn’t a whole lot better. It charted at 52.6%, down from August’s reading of 56.4%. It was the lowest reading in three years. The mainstream pundits warned that the disappointing service sector data could boost recession fears as this is the largest component of the US economy.
Yesterday we got the retail numbers for September and they were equally bleak.
The national debt continues to spiral upward. It increased by another $1.2 trillion in fiscal year 2019. But Paul Krugman says it’s not that big of a deal. He downplayed the national debt in a tweet, claiming emphatically that “DEBT IS MONEY WE OWE TO OURSELVES.”
This encapsulates a common Keynesian argument. Debt can’t really burden future generations. In the aggregate, Americans won’t be any worse off. Paying the national debt merely shifts dollars from one American to another. While future taxpayers will be out some money, the American bondholders who receive the interest payments will end up with more money. When all is said and done, it’s a wash.
Consumers continued to pile on debt in August, according to the latest data released by the Federal Reserve. But credit card debt fell slightly, raising a troubling question: are consumers close to maxing out the plastic?
Total consumer credit grew by another $17.9 billion in August. That represents an annualized increase of 5.2% and pushes total consumer indebtedness to a new record of $4.14 trillion (seasonally adjusted).
Central banks globally added a net 57.3 tons of gold in August, continuing a gold-buying spree that’s been going on for months. Countries like Russia and China are seeking to minimize exposure to the US dollar and undermine the ability of the US to weaponize the greenback as a foreign policy tool. But there are even more fundamental reasons central banks hold gold, as outlined by De Nederlandsche Bank (DNB), the central bank of the Netherlands.
The Federal Reserve is set to begin what a MarketWatch article called a “massive” bond-buying program.
Jerome Powell announced the program last Tuesday and the central bank released more details about the plan on Friday. The Federal Reserve will buy $60 billion in short-term Treasury bills each month. According to a statement, the purchases will continue, “at least into the second quarter of next year.” That would amount to around $400 billion worth of Treasurys added to the Fed’s balance sheet.
The budget deficit for fiscal year 2019 came in just a hair under $1 trillion according to the Congressional Budget Office estimate.
Even if it does come in under the trillion-dollar mark, it would still rank as biggest deficit since 2012. The budget shortfall has only eclipsed $1 trillion four times, all during the aftermath of the 2008 financial crisis.
The central bank gold-buying spree shows no signs of letting up. In fact, it ramped up again in August after ebbing slightly in July, according to the latest data released by the World Gold Council.
After a relatively modest net increase of 13.9 tons in July, central banks globally took in a net 57.3 tons of gold in August.
The unicorns are dying.
Markets seemed to really wake up to the plight of the unicorn when WeWork aborted its much-anticipated IPO, but the air started coming out of the unicorn bubble long before WeWork’s IPO demise.
Unicorns are privately held companies valued over $1 billion. Companies like Lyft, Chewie, Uber and WeWork were the darlings of WallStreet. Their IPOs were much-anticipated by investors. They are also the poster children for easy-money induced market mania, and their IPOs were crucial for maintaining the bubble.