Posted:
#1
Since the last oh so great and promising post got boxed, lets continue the discussion about the markets here....
STOCK MARKET CRASHING UNDER DEMOCRATIC LEADERSHIP
My guess is the markets will stay in tact through the middle of November. Then all bets are off. Anybody with a 'normalcy bias' is in serious trouble!
Posted:
#8
One of the main drivers of the stock market is investor's sentiment, especially towards the future of enacted policy and the affects it will have. Investors are real keen on interest rates right now. The fear, of course, is that we can be stuck in a recession, or worse, because of this. Now that the FED is raising interest rates, in an effort to slow inflation, this has investors worried. This is not just a worry in the United States but other countries as well.
It is not like this was not predicted either. The inflation itself was predicted by many when the Biden administration and Democratic Congress decided to put the policies in place that flooded the economy with money. It was pretty much decided at the time that the risk of inflation was worth it to improve the economy and to get things going again. Whether this was needed or acceptable or not is another matter.
When the Democrats decided to shut down the entire United States they did not have the foresight to see what the affects on the economy would be. If they did and decided it was necessary, that is also another discussion.
However, what cannot be excused is not to take the blame for the rise in inflation now that it is here. They also should be taking the blame for the actions now to try to get the inflation under control.
The FED usually has tried to maintain inflation at around 2%. A little while back they decided it was transitory and were going to allow it to be higher than 2% for a while. So, after they realized this was not the case, they started reacting. Now the hope is that it is not too late and that they can get it under control quickly. Otherwise, they risk overreacting on the backend and causing further, unnecessary, damage to the economy.
A very clear example of avoiding taking the blame for this, or to do damage-control, happened yesterday. The White House Press Secretary, Jen Psaki, claimed "nobody" could have predicted current, record inflation.
She was asked about the warnings they had at the time and how she felt about that now.
This is what she had to say:
"I wouldn't say we agreed with them then, and we don't agree with them now. I would note that as it relates to actions like the American Rescue Plan, the alternative to not putting in place and advocating for the American Rescue Plan would have been the economy continuing to spiral. Right? We would -- we were providing assistance and relief in the form of checks to people who needed that assistance at the time," Psaki responded.
"If we look at the recent inflation data, a large, depending on which data you look at, two thirds to even 70 percent of inflation data is a result of energy prices," she continued, arguing Biden Administration policies and government policies aren't the driver behind inflation. "A large part of that is the result, Chairman Powell has spoken to this and Secretary, Secretary Yellen has also spoken to this, is a result of President Putin's invasion of Ukraine and the impact on the global energy markets. Those are all steps and impacts that I don't think anyone could have predicted a year ago."
Posted:
#9
So, all in a matter of a few sentences she has done at least three things wrong. 1) She has again tried to swerve the blame by bringing Putin into the equation, even though this started before the Putin invasion, 2) she has denied, yet again, that Biden's policies were the reason, 3) She has denied that this was predicted by anyone, even though they were warned of this by multiple experts.
She could have tamped this somewhat by saying that, yes, they were warned at the time and decided the circumstances at the time warranted their policies. She could have said that knowing later they might have inflation show up, that they had plans to deal with that and that those plans are in place and they fully expect them to work.
The next day damage-control had to be done and this is what happened: During an interview with CNN Tuesday morning, Biden's top economic advisor Cecilia Rouse made the argument that inflation is a result of Biden "effectively" managing the pandemic. This is disingenuous to try to put a good spin on it by appearing to claim the pandemic is over and that the shutdowns that led to the economic mess we are in were needed. While at the same time, not taking any blame for the bad economic affects of their policies.
Posted:
#10
This is one of the quotes the reporter was referring to:
But those steps were in fact predicted a year ago while Biden administration officials claimed inflation was "transitory."
In February 2021, Obama economic advisor Larry Summers warned about coming inflation as a result of President Biden's $1.9 trillion American Rescue Act. Biden officials argued the package, which no Republicans voted for, would stimulate the economy and that it was necessary to rescue those impacted negatively by government decisions during the pandemic.
"As a massive program moves toward enactment and implementation, policymakers need to ensure that they have plans in place to address two possible, and quite serious, problems," Summers wrote in The Washington Post. "While there are enormous uncertainties, there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability. This will be manageable if monetary and fiscal policy can be rapidly adjusted to address the problem. But given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply."
Posted:
#11
I feel this inflation is driven by consumer savings during covid. Alot more Americans have a substantial savings accounts.
Business began this with temporary shortages of consumer products dealing with supply chain issues this has not readjusted based on spending patterns .
The fed has met to raise interest for a decade and fail to raise the rate due to economic concerns of their monetary policy.
Drive the point is a perceived shortage in oil and the cost of gasoline at the pump.
Posted:
#13
Quote Originally Posted by nature1970:
I feel this inflation is driven by consumer savings during covid. Alot more Americans have a substantial savings accounts. Business began this with temporary shortages of consumer products dealing with supply chain issues this has not readjusted based on spending patterns . The fed has met to raise interest for a decade and fail to raise the rate due to economic concerns of their monetary policy. Drive the point is a perceived shortage in oil and the cost of gasoline at the pump.
I feel this inflation is driven by consumer savings during covid. Alot more Americans have a substantial savings accounts. Business began this with temporary shortages of consumer products dealing with supply chain issues this has not readjusted based on spending patterns . The fed has met to raise interest for a decade and fail to raise the rate due to economic concerns of their monetary policy. Drive the point is a perceived shortage in oil and the cost of gasoline at the pump.
Yessir. Part of it is that. I addressed that the other day. Folks were paying off debt and were saving, as they should. Businesses were doing some of the same. Now you have a surge in money entering the market -- it was going to do that at some point.
Posted:
#17
Quote Originally Posted by nature1970:
I feel this inflation is driven by consumer savings during covid. Alot more Americans have a substantial savings accounts. Business began this with temporary shortages of consumer products dealing with supply chain issues this has not readjusted based on spending patterns . The fed has met to raise interest for a decade and fail to raise the rate due to economic concerns of their monetary policy. Drive the point is a perceived shortage in oil and the cost of gasoline at the pump.
I feel this inflation is driven by consumer savings during covid. Alot more Americans have a substantial savings accounts. Business began this with temporary shortages of consumer products dealing with supply chain issues this has not readjusted based on spending patterns . The fed has met to raise interest for a decade and fail to raise the rate due to economic concerns of their monetary policy. Drive the point is a perceived shortage in oil and the cost of gasoline at the pump.
Where did you get your stats that say Americans have more savings? Is that because they are taking on more debts? Consumer debts have risen in ALL states each of the last few years. Only 57 year olds and up showed a decrease in personal debts. 18-24 years olds saw the most significant debt increase from 2020-2021 at over 29% while the 25-40 age group saw an increase of over 15% debt increase. Are they saving the money instead of paying off debts? Must not be good to hold debts while interest rates rise. Gee, wonder what will happen when rates continue to go up and people hold even more debts?!
Delinquency rates from borrowers behind 30-60 days late from 2020-2021 increased over 6%
Auto loan debts has increased drastically. Guess who needs that debt on the books?
Guess who needs student loan debts on the books? What do you think will happen to banks/public/ markets if we keep "erasing" debts?
Nearly ALL personal debts have been increasing. MOSTLY because of INFLATION and very likely from the democratic govt shut downs in 2020! Workers wages are NOT keeping pace with inflation. Stagflation might be on the horizon if it's not already here.
Posted:
#18
@BigGame90
He is correct about that part. During the pandemic the ‘personal saving rate’ of the average person in the US did go up. People did pay down on debt. Some of course, were on the opposite side. But the personal saving rate went up for a good stretch. Usually it will be around 10%. But it went to well above 20% for a bit and was around 12-15% for a good while. I do not have the exact numbers but they are fairly easy to look up.
The issue is now people have that money to spend along with the money the government threw at them.
Certainly, it was not all folks. But on average.
But this was expected to happen with the way the government handled this.
Posted:
#19
During the pandemic, Americans' savings soared above normal levels according to data from Moody's Analytics, a phenomenon economists call excess savings. Specifically, Federal Reserve Economic Data (FRED) reveals that in April 2020, the personal savings rate increased 25.5% from just two months prior.Mar 2, 2022
Pick Washington post, market watch, slate magazine, time magazine......
Posted:
#22
@nature1970
The savings part applied to a lot of folks and now they are able to go and spend and do things.
But he is right as well that it affected a lot of folks badly and there is a lot of debt built up as well.
The student debt part has been on hold. Some places have had rent on hold, etc.
It for sure is not a one-size-fits all deal. The worry has been all along that the folks that could not go and do during lockdowns and were saving money — would then go out and start to overspend. The folks that were on the other end of things would slide further into debt, etc.
The issue is both are happening. The savers are now spending and the ones with debt that didn’t pay debt with stimulus money — also spent that, etc., etc.
Posted:
#24
In addition, there were some folks that were managing to save for awhile and accrue debt at the same time — and now are spending the money. For example, you could get a lot of Covid-related stays on bills — that debt can be a type that is piling up AND you are not paying on it AND you are saving the money you have because you are scared AND saving the ‘free’ money also. NOW you have some of all the groups that are out and about spending money, etc.
I know that sounds convoluted — but it is convoluted. There is a lot to be sorted out. Bottom line is still that there was a huge amount of money coming into the system. This was the main driver of the inflation.
Whether each person, individually, should be out spending is another issue altogether. People should still be paying debt down and saving.
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