The inflation/interest rate thread

[GreenvilleSucks]

Aldi, Walgreens, Walmart, Amazon and Target are lowering prices on thousands of items: https://www.themirror.com/news/us-news/walgreens-walmart-target-aldi-amazon-514838.amp

Home sales plummet in April to lowest level in four years: https://www.cnbc.com/amp/2024/05/30/april-pending-home-sales-fall.html

Oil prices continue to fall and now down for six straight days: https://www.cnbc.com/2024/06/05/oil-slips-for-sixth-consecutive-day-on-big-builds-in-us-oil-fuel-stocks.html

ISM data continues to show contraction while construction spending falls: https://www.reuters.com/markets/us/us-factory-activity-slips-second-month-may-ism-says-2024-06-03/

Job openings fall to three year low: https://amp.cnn.com/cnn/2024/06/04/economy/job-openings-quits-jolts-april

Fast food wars have started which is leading to value meals at lower prices: https://www.today.com/today/amp/rcna153703

 

 

Maybe we will see an interest rate cut in September after all but only if this trend continues until then. 

 

Edited June 5 by GreenvilleSucks

[GreenvilleSucks]

European Central Bank is slated to cut interest rates for the first time in years. This could cause the Federal Reserve to take action as they usually like to be in tandem due the value of the Euro and US Dollar in relation to each other: 

https://www.cnbc.com/amp/2024/06/05/european-central-bank-set-to-cut-rates-for-the-first-time-since-2019.html

Bank of Canada also lowered their interest rates on Wednesday.

Edited June 6 by GreenvilleSucks

[vicupstate]

On 6/6/2024 at 2:40 AM, GreenvilleSucks said:

European Central Bank is slated to cut interest rates for the first time in years. This could cause the Federal Reserve to take action as they usually like to be in tandem due the value of the Euro and US Dollar in relation to each other: 

https://www.cnbc.com/amp/2024/06/05/european-central-bank-set-to-cut-rates-for-the-first-time-since-2019.html

Bank of Canada also lowered their interest rates on Wednesday.

Wow. Three years went by fast. 

[GreenvilleSucks]

Welp…you can kiss any chance of the Fed cutting interest rates this year goodbye: 

https://www.nbcnews.com/business/economy/may-2024-jobs-report-how-many-new-jobs-added-economy-analysis-rcna155594

Maybe these proposed high rises will start construction in 2026…maybe not. 

[NewlyUpstate]

It's pretty wild how strong the economy is regardless of the high interest rates and inflationary environment we're exiting.

I know this is frustrating for development, but the high interest rate gives the country an incredible amount of room to spur growth if things slow. We are in much better shape than many other peer countries around the world.

Edited June 7 by NewlyUpstate

[gman]

4 hours ago, NewlyUpstate said:

It's pretty wild how strong the economy is regardless of the high interest rates and inflationary environment we're exiting.

I know this is frustrating for development, but the high interest rate gives the country an incredible amount of room to spur growth if things slow. We are in much better shape than many other peer countries around the world.

Yes we are in great shape. We have the best economy in the world, and no one knows about it. 

[apaladin]

Economy is great for those with money and those that don’t have to worry about feedng their families and keeping a roof over their head. Otherwise it sucks bigtime. 

[btoy]

I mean even if you have money it still sucks having to pay more for everything.

[NewlyUpstate]

1 hour ago, gman said:

Yes we are in great shape. We have the best economy in the world, and no one knows about 

I mean we do have the best economy in the world. That's not to say all US citizens have a good present financial state, but the nation's economy is very strong presently. Everyone else is cutting rates right now to spur growth while we are chugging right along with immense wage, job, and GDP growth.

I'd love to see a metric that disagrees with that.

Edited June 7 by NewlyUpstate

[apaladin]

7 hours ago, NewlyUpstate said:

I mean we do have the best economy in the world. That's not to say all US citizens have a good present financial state, but the nation's economy is very strong presently. Everyone else is cutting rates right now to spur growth while we are chugging right along with immense wage, job, and GDP growth.

I'd love to see a metric that disagrees with that.

Go to the grocery store or gas station. First hand knowledge.

[gman]

On 6/7/2024 at 11:48 PM, apaladin said:

Go to the grocery store or gas station. First hand knowledge.

Nevertheless, our economy is humming. Thus, higher inflation. If you want lower prices, you need a slow economy. Econ 101. 

[GreenvilleSucks]

I don’t get how this many jobs are still being created if nothing is getting built and prices are through the roof. Shouldn’t demand be dropping and supply be increasing which would lead to price drops and less inflation? This economy makes no sense.

Edited June 9 by GreenvilleSucks

[vicupstate]

1 hour ago, GreenvilleSucks said:

I don’t get how this many jobs are still being created if nothing is getting built and prices are through the roof. Shouldn’t demand be dropping and supply be increasing which would lead to price drops and less inflation? This economy makes no sense.

For one thing our economy is one of if not the strongest in the world, so that attracts foreign investment which creates jobs.  BTW, wages have been increasing faster than inflation. 

[GreenvilleSucks]

1 hour ago, vicupstate said:

For one thing our economy is one of if not the strongest in the world, so that attracts foreign investment which creates jobs.  BTW, wages have been increasing faster than inflation. 

Is that why this country is $32 trillion in debt and credit card debt is the highest in history? 

Edited June 10 by GreenvilleSucks

[gman]

8 hours ago, GreenvilleSucks said:

Is that why this country is $32 trillion in debt and credit card debt is the highest in history? 

Debt has nothing to do with the strength or weakness of the economy. Our country’s economy is tremendous. The problem is, people are spending more than they bring in, and that includes those that make big money. Ask mortgage brokers. They will tell you that a large percentage of mortgage loans are for those that are consolidating debt, includes big credit card balances and huge car payments. The point is, it is not just the lower income folks using credit cards. There are a lot of high income people out there getting into trouble trying to “keep us with the joneses.” As for the national debt, that is all on our sorry politicians (both sides). 

Edited June 10 by gman

[gman]

10 hours ago, GreenvilleSucks said:

I don’t get how this many jobs are still being created if nothing is getting built and prices are through the roof. Shouldn’t demand be dropping and supply be increasing which would lead to price drops and less inflation? This economy makes no sense.

When people are spending, supply is low and demand is high. But I think there is more to it. Check out the profit numbers of the large corporations, including grocery store companies. They are taking advantage of the American consumer. Thankfully, stores like Target are feeling the pressure and have lowered prices on many items. Bottom line, with the economy is strong, inflation is high. When the economy is weak, inflation is low. In other words, good news is bad and bad news is good when it comes to the economy. Getting to a happy medium is extremely difficult. 

[Exile]

3 hours ago, gman said:

...When the economy is weak, inflation is low...

That's not necessarily true. The stagflation of the 70's is an example of bad economy, high inflation. Some putative authorities think we may be heading into something like that again. I'm not endorsing that view, but it is a thing.

The real problem here, though, is the debt, which has become essentially unpayable absent inflation in that other, more critical meaning of the term: government money creation by fiat. They're doing that all the time, of course (e.g., the money supply doubled between 2000 and 2012; it increased 36% between 2007 and 2012, pretty much all "quantitativ easing"). Bad economic leadership.

Peter Boettke said it best: "Economics puts parameters on people's utopias." He was of course speaking of rational economics, something that nobody in power seems to give a flip about.

[NewlyUpstate]

Interesting discussion, but as far as I know, it's not known if our national debt is actually a problem or not, or at what level it becomes a problem.

For a long time, any national debt was considered a problem... then that never happened. Then having national debt higher than GDP was considered a problem... then that never happened.  

It's something talked about often but we haven't yet seen any major ramifications due to the almighty power of the US Dollar and the fact that we always pay our debts. We will see.. but let's not act like we know.

Too many Americans look at the national debt similar to having personal debt, which is not even remotely equivalent.

Edited June 10 by NewlyUpstate

[clemsonfan]

I'd like to point out that no, gman, interest rates are not neccessarily "to blame" for the "dearth of construction" you are complaining about. They are very low by historical standards, not enough to throttle construction overall (I can't speak to individual cases). First, you have to look at REAL interest rates, net of inflation. (Inflation matters because it will inflate away the value of the debt and interest payments over time). The difference between the 10-year yield and inflation is now 2 percentage points.

See this graph for the historical record.

https://fred.stlouisfed.org/series/REAINTRATREARAT10Y

Current rates only seem high when compared with the abnormally low (irresponsibly low, IMO) levels from the financial crisis on. Compared with the period before that, they are still dramatically low.  In the mid-1980s the rate peaked at 7.5 percent (as early as this data set goes back, it was even higher before this). It did come down some after then, but in the late 1980s it was 4-5 percent and up to the year 2000 was generally around 3 percent. And outside of the early 1990s recession, the period between 1984 and the dotcom bust around 2000 was a boom time for the economy. So IMO don't blame interest rates, they are still very low by historical standards.

How about another explanation for your complaints: it is not realistic for Greenville to have 15 cranes going at once. We are growing but still there's a limit. Right now we are having a massive project at County Square that will add a ton of new residential, retail, and office space, really a game changer for the city.  This isn't enough breakneck growth for you? Ask other cities whether they wish their downtowns were having such a huge expansion and redevelopment. Other stuff will come in time as developers believe our market will support it. Find something else to complain about.

Edited June 10 by clemsonfan

[GreenvilleSucks]

The Fed’s favorite and most important tool (CPI) came in fairly low this morning for May: 

https://www.cnbc.com/2024/06/12/cpi-report-june-inflation.html

Stock market is jumping on the news. 

Edited June 12 by GreenvilleSucks

[GreenvilleSucks]

Welp…what the Federal Reserve tried to prevent is now happening. Oh boy. Look at the stock market go. And Japan’s Nikkei…YIKES.

[GreenvilleSucks]

 It’s happening. Dow futures down 800 points. VIX surges above 40. Oil is even collapsing. 2008 is back: 

https://www.cnn.com/business/live-news/global-stock-markets-plunge/index.html

“Japanese stocks suffered their biggest daily loss Monday as fears about a US economic slowdown sent shock waves through global markets.

The Nikkei 225 index of leading stocks in Tokyo lost a staggering 4,451 points, its biggest drop in history.”

Edited August 5 by GreenvilleSucks

[NewlyUpstate]

4 hours ago, GreenvilleSucks said:

 It’s happening. Dow futures down 800 points. VIX surges above 40. Oil is even collapsing. 2008 is back: 

https://www.cnn.com/business/live-news/global-stock-markets-plunge/index.html

“Japanese stocks suffered their biggest daily loss Monday as fears about a US economic slowdown sent shock waves through global markets.

The Nikkei 225 index of leading stocks in Tokyo lost a staggering 4,451 points, its biggest drop in history.”

Total Market is only down like 2% today. Still up 9% on the year, with up 14% on a rolling 12.  Drop is due to the obvious AI bubble with Nvidia and Intel not performing as spectacularly as expected.

This doom and gloom perspective from certain people is certainly interesting based on where we are in the calendar with current events.

Edited August 5 by NewlyUpstate

[GreenvilleSucks]

1 hour ago, NewlyUpstate said:

Total Market is only down like 2% today. Still up 9% on the year, with up 14% on a rolling 12.  Drop is due to the obvious AI bubble with Nvidia and Intel not performing as spectacularly as expected.

This doom and gloom perspective from certain people is certainly interesting based on where we are in the calendar with current events.

The ISM data that came out this morning did show an expansion reading above 50. Definitely must be an election year. 

[gman]

19 hours ago, NewlyUpstate said:

Total Market is only down like 2% today. Still up 9% on the year, with up 14% on a rolling 12.  Drop is due to the obvious AI bubble with Nvidia and Intel not performing as spectacularly as expected.

This doom and gloom perspective from certain people is certainly interesting based on where we are in the calendar with current events.

I met with my financial advisor last week. We discussed the fact that a correction was coming and that it was needed. The sky is not falling. Our economic fundamentals have not changed.  Corrections in the market are healthy. Buy the dip. 

Edited August 6 by gman