Credit Writedowns

With the Fed already on notice about inflation because of “low, low unemployment”, massive amounts of new deficit spending will only move up their timetable. And bond rates will rise as a result.

A big upward revision in the data would be what the President would call an unwelcome ‘good news’ surprise.

The short vol trade may now be over. Bond yields will again reach levels that causes angst for equity markets. And equities will tumble. Rinse and repeat.

Yesterday’s market meltdown - and today's reaction - reduces the risk that the Fed will over-tighten, taking froth out of an over-extended market.

Hallmarks of recession are all around about the time they happen if one looks close enough — certainly in 2008. I don’t think we are in a recession by any stretch, right now — not even close.

The short-term solution reached last month to extend the US federal government's funding expires on Thursday.

Reuters has done a state-by-state analysis of wage data in the US, showing average pay rising over 3% in more than half of US states. This puts more pressure on the Federal Reserve to raise interest rates.

Powell mentioned financial stability as a concern as he was sworn in today. With markets taking a dive, it’s not clear what that will mean in terms of policy.

When defaults begin to rise and the economy begins to slow, we will find out whether deficits really drive rates higher or cause inflation to rise and remain high.

We’re looking at about 1% in real terms. In the 2000s, we saw real earnings growth rise to 2% and in the late 1990s, it was even 3%.