Free Markets, Free People

Economy

“Unexpectedly” Bad Employment Statistics

The Employment Situation statistics are due out later this week.  They will be bad.  I know this, because Larry Summers is already spinning them.

White House economic adviser Larry Summers said on Monday winter blizzards were likely to distort U.S. February jobless figures, which are due to be released on Friday.

“The blizzards that affected much of the country during the last month are likely to distort the statistics. So it’s going to be very important … to look past whatever the next figures are to gauge the underlying trends,” Summers said in an interview with CNBC, according to a transcript.

So, please, when you see the numbers of Friday, be sure you don’t assume that they have any policy implications.  It’s all about the weather, you see.

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The Economy: Most likely lower GDP growth, higher unemployment, flat spending in 1st quarter

Take all of the forecasts with a grain of salt given the “unexpectedness” of most economic numbers, but this gives a hint as to what to expect and it also explains why the last quarter’s GDP numbers were an illusion of growth, not the beginning of a growth trend:

The US economy continues on a bumpy road to recovery. Weaker data this week on consumer confidence, jobless claims, housing, and durable goods orders have introduced downside risks to our near-term economic outlook. We have made some minor adjustments to our GDP forecast. Fourth quarter GDP was revised up to 5.9%, with the inventory swing now accounting for 3.9 pp of growth, up from 3.4 pp. We think this “steals” some growth from 1Q. In addition, core capital goods orders and shipments were weaker than expected in January, so we are lowering our forecast for 1Q GDP to 1.5% from 2.0% previously.

1.5% growth isn’t a particularly auspicious number for those claiming we’ve “turned the corner” and are out of the recession and on a positive growth trend. It should be remembered that the last positive growth quarter before December was driven mostly by “cash for clunkers” or government spending. The 4th quarter of last year was driven by restocking inventories. Without it, the GDP is at 2%.  Unless there are consumption increases which will work to decrease those inventories, the growth for that quarter is an anomoly much like the GDP increase driven by cash for clunkers.

With consumer confidence down, housing and durable goods orders down and jobless numbers up, it doesn’t speak for an auspicious start to the year.

This next week will see some other numbers come in. If the forecasters are right (big if), then its going to be more bad news on the employment front:

The consensus is for a net loss of 50 to 80 thousand payroll jobs, and the unemployment rate to increase slightly to 9.8% (from 9.7%).

Today’s Personal Income and Outlays report (PCE) is mixed:

Personal income rose $11.4 billion, or 0.1%, less than the 0.4% expected, while personal consumption expenditures rose 0.5%, ahead of the 0.4% increase expected: So income’s rising slowly, but Americans are still spending more than expected.

The PCE index for the month posted a 0.2% increase, most of that because of energy and food; absent those items, the PCE index rose less than 0.1%, the report showed.

So the PCE index saw a slight increase above expectation but that was driven by necessities (food, energy) not the consumption of goods.

The ISM Manufacturing index released today also disappoints:

Activity in the manufacturing sector expanded for the seventh consecutive month in February, according to a report released by the Institute for Supply Management on Monday, although the pace of growth slowed by more than economists had been anticipating.

The ISM said its index of activity in the manufacturing sector fell to 56.5 in February from 58.4 in January, with a reading above 50 still indicating growth in the sector. Economists had been expecting the index to show a more modest decrease to a reading of 58.0.
Activity in the manufacturing sector expanded for the seventh consecutive month in February, according to a report released by the Institute for Supply Management on Monday, although the pace of growth slowed by more than economists had been anticipating.

The ISM said its index of activity in the manufacturing sector fell to 56.5 in February from 58.4 in January, with a reading above 50 still indicating growth in the sector. Economists had been expecting the index to show a more modest decrease to a reading of 58.0.

While snow is being blamed for some of the decline, but only in its depth, not the fact that there was a decline.

And the final Monday report is the Construction Spending Report for January was released:

Spending on U.S. construction projects fell at a seasonally adjusted rate of 0.6% in January, the third consecutive month of declines, the Commerce Department estimated Monday.

The decline in January was wider than the 0.5% drop that economists surveyed by MarketWatch had been expecting. December’s outlays fell an unrevised 1.2%.

In January, private residential outlays rose 1.3%, while private nonresidential outlays fell 2.1%. Public outlays also fell, off 0.7%.

During the rest of the week, you’ll see the following:

On Tuesday, the various manufacturers will release light vehicle sales for February. The consensus is for a decline to about 10.4 million on a Seasonally Adjusted Annual Rate (SAAR) basis from 10.8 million in January. Sales for Toyota will be closely watched. Also on Tuesday, the Personal Bankruptcy Filings estimate for February will be released.

On Wednesday, the ADP Employment report and ISM Non-Manufacturing index (consensus is for a slight increase to 51% from 50.5%), and the Fed’s beige book will all be released.

On Thursday, the closely watched initial weekly unemployment claims, productivity report, factory orders, and pending home sales will all be released.

And on Friday, the BLS employment report, Consumer Credit (more contraction), and another round of bank failures (I’m thinking Puerto Rico will make an appearance).

The good news, if there is any, is that inflation expectations haven’t really reared their ugly head to this point, meaning right now inflation is under a modicum of control and not rising appreciably. Of course that could literally change in a heartbeat, so other than to note it and be glad for the fact, I have no idea how long those expectations will remain dormant.

Bottom line – we’re bumping along the bottom and hopefully we’ll see a meaningful turnaround sometime this fall. But right now, anyone saying things are going well and we’re fully into recovery doesn’t realize how fragile the economy is right now and certainly doesn’t know what they’re talking about.

~McQ

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At what point does the media drop “unexpectedly” from its unemployment stories?

I mean, for heaven sake, it seems that weekly the “experts” are surprised by an “unexpected rise” in unemployment statistics.  This week was no different than the “unexpected rise” last week:

Unemployment claims filed last week rose unexpectedly, coming in at 496,000, up 22,000 from the previous week.

Taken with other discouraging news released this week — record-low January new home sales and a slide in consumer confidence — the new jobless claims number describes a slow and uncertain recovery.

Forecasters had expected 460,000 new jobless claims to be filed last week

The four-week moving average of new jobless claims — which smooths out volatility in the week-to-week numbers — rose 6,000 to 473,750.

Key phrase – “slow and uncertain recovery”. So a continued “rise” in unemployment, even to this weeks actual numbers, shouldn’t be “unexpected” in such a recovery. Why it is so important to predict what the next week’s unemployment stats will be anyway? As often as they’ve been wrong and seen “unexpected” numbers you have to wonder why they even bother. More significantly, given the track record, you have to wonder why the media even bothers with their numbers. The numbers are what they are. From those numbers we should be able to understand the condition of the economy. But I’m tired of seeing “unexpected” numbers every week treated as some sort of surprise by a group whose credibility was shot a long time ago.

~McQ

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It’s Bush’s Fault. And Paulson’s. And Bernanke’s. And ….

John McCain, under attack for his part in approving TARP, is now claiming he was “misled”:

In response to criticism from opponents seeking to defeat him in the Aug. 24 Republican primary, the four-term senator says he was misled by then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. McCain said the pair assured him that the $700 billion Troubled Asset Relief Program would focus on what was seen as the cause of the financial crisis
, the housing meltdown.

“Obviously, that didn’t happen,” McCain said in a meeting Thursday with The Republic’s Editorial Board, recounting his decision-making during the critical initial days of the fiscal crisis. “They decided to stabilize the Wall Street institutions, bail out (insurance giant) AIG, bail out Chrysler, bail out General Motors. . . . What they figured was that if they stabilized Wall Street – I guess it was trickle-down economics – that therefore Main Street would be fine.

Well one reason it wasn’t used only for the “housing meltdown” is because the law apparently didn’t specify it must be. Consequently one has to conclude it was McCain and those who wrote the law and voted for it who are responsible for what happened.  They a wrote bad law.  They fell for the drama.  They threw almost a trillion dollars out there and are now complaining that it wasn’t used as they “thought” it would be used.  Really?

If they were going to pass this travesty anyway, why wasn’t it limited to what the people who brought the problem to them (Paulson and Bernanke) said constituted the problem?  How did it end up bailing out auto companies and AIG?

Bad law.  And the ones responsible for writing th law include this guy trying to pass of the blame to others.

Secondly, there’s this:

McCain said Bush called him in off the campaign trail, saying a worldwide economic catastrophe was imminent and that he needed his help. “I don’t know of any American, when the president of the United States calls you and tells you something like that, who wouldn’t respond,” McCain said. “And I came back and tried to sit down and work with Republicans and say, ‘What can we do?’

Responding is one thing. But when your constituents are dead set against it, to whom should he really be responding? Well, who does he supposedly represent?  What McCain is really saying is “when the president tells you he wants you to pass a bad law, you salute and do what he says”.  Really?  “Response” apparently means saying ok to unconstitutional spending.  Not that Mr. McCain/Feingold has much use for the Constitution.

So, bad law, ignoring his constituents and now blaming others.

Sounds like a pretty typical politician who has spent way too much time inside the beltway to me – a politician well past his “incumbent expiration” date.

~McQ

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Greece? Just Like The US

You have to wonder how far we’ve slipped when the financial wreck that is Greece is assured that its situation isn’t so unique – look at the US.  And the example is made by none other than America’s best friend – Vladimir Putin:

Russian Prime Minister Vladimir Putin played down Greece’s economic woes on Tuesday, telling his visiting Greek counterpart that the United States were no better than Greece in handling its debt and fiscal deficit.

“As we all know, the global economic crisis started neither in Greece, nor in Russia, nor in Europe,” Mr. Putin told a news conference after talks with George Papandreou. “It came to us from across the ocean,” he said in a clear reference to the United States.

“There (in the U.S.) we can see similar problems – massive external debt, budget deficit,” Mr. Putin added, suggesting Russia and Greece should concentrate on the “real economy” to weather the economic crisis.

It’s not clear what the “real economy” means. However it is clear that for Greece and the US, what they are doing isn’t sustainable and at some point the “real economy” or at least the laws of economics are not going to be denied – for both countries.

~McQ

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House “Jobs” Bills – Addiction To Pork Wins Over Fiscal Responsibility

You remember the headlines Senate Majority Leader Reid got last week when he threw out a bipartisan jobs bill effort crafted by Sen’s Baucus and Grassley with a price tag of about $100 billion for a very scaled down version costing$15 billion?

Not to worry – the House’s version of the job bill is much more like the Baucus/Grassley version than the Reid bill – and even more. In fact it comes in at 10x times the Reid bill and has the usual cornucopia of porky spending and subsidies for perpetual money losing programs we’ve all come to expect from our out-of-touch legislators. This list is classic – subsidies for programs of marginal worth with many completely unconnected with jobs or job creation as well as the usual unemployment benefit extensions. And don’t forget the Medicare “doc fix” – critical to creating jobs [/sarc] – which also finds its way into the bill. Here’s the list:

* $27.5 billion for roads and bridges
* $8.4 billion for public transit
* $800 million for Amtrak
* $500 million for airport improvement projects
* $100 million for maritime interests
* $2.1 billion in Clean Water funding
* $715 million for Army Corps of Engineers projects
* $2 billion in Energy Innovation Loans
* $4.1 billion in School Renovation Grants
* $1 billion for the National Housing Trust Fund
* $1 billion for the Public Housing Capital Fund
* $23 billion for an Education Jobs Fund for states
* $1.18 billion for law enforcement jobs
* $500 million for firefighters
* $200 million for AmeriCorps
* $500 million for Summer Youth Employment programs
* $300 million for the College Work Study program
* $270 million for Parks and Forestry Workers
* $750 million for competitive grants in “High Growth Fields”
* $41 billion to extend expanded jobless benefits for six months
* $12.3 billion to extend COBRA health insurance aid for jobless workers
* $354 million in Small Business Loans
* $2.3 billion in expanded Child Tax Credits
* $305 million to keep certain people eligible for federal aid programs
* $23.5 billion to extend a higher federal match for some Medicaid payments to doctors

If you carefully peruse the list you realize this is “Stimulus II” and will have just about the same effect “Stimulus I” – drive us into a deeper debt hole and create nothing in terms of jobs.  Small business creates about 80% of the jobs in America.  The $150 billion bill sets aside $354 million for Small Business Loans.  $354 million.  Even Summer Youth Employment programs got more.  Yup – a real “serious” jobs bill.

A poll today said that only 6% of Americans believe the $787 billion stimulus bill (which was promised to keep unemployment down to 8%) has had any positive effect whatsoever in creating jobs.  It should be clear that such messages from the unwashed masses has still yet to penetrate the “clueless bubble” many members of the House continue to live under inside the beltway.

~McQ

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Musings, Rants and Links over the 18th Fairway: February Housing Edition

On the heels of last weeks delightfully mixed bag of employment data (job creation looks like it may be out of reverse and into neutral) we get some new housing data. There the signals are more disquieting, if expected (at least by me.) The housing market may now be heading back down.

The interesting aspect of this is that so many people see this as unlikely. So let us list some reasons why this is a real risk, if probably not as rapid a fall as we saw previously.

  • Prices are still above a long term stable level. This could be taken care of by stagnating prices and inflation, but there is little inflation right now.
  • The price to rent ratio is out of whack, and rents are still falling, in fact, accelerating. Little wonder, since there is an 11% vacancy rate.

Source: Gary Shilling

  • There are 231,000 newly built housing units sitting vacant.
  • There are 3.29 million vacant homes for sale.
  • Then there is the shadow inventory of homes that are off the market for various reasons (such as foreclosed homes banks are unwilling to sell yet to avoid realizing losses.)
  • Defaults are accelerating, with the largest source of pain now prime loans. As I have maintained for a long time this is not, and never has been, a subprime problem. Subprime was just what collapsed first being the weakest link in the housing market.

Source: Gary Shilling

  • That acceleration is unlikely to slow any time soon as not only are workers still losing jobs and few new potential owners getting jobs, but the length of unemployment is unprecedented in the post war era. The longer a worker is unemployed, the more likely they are to default.

Source: Gary Shilling

  • Lending is still tight for many mortgage seekers.
  • We are forming households at a reduced rate, thus lessening demand for new homes.

Source: Gary Shilling

  • More than 20% of homeowners are currently underwater. Nothing correlates more closely with default rates than negative equity.
  • Worst of all, we need to revisit an old topic of mine that is no longer a longer term risk, but right around the corner. The likely huge wave of defaults represented by Alt-A and Option Arm Loans about to reset. Defaults have followed with a lag each wave of resets, and the largest wave, from the era with the worst underwriting is about to hit. Notice, subprime is receding. With the system as fragile as it is now, what will this wave bring on?

I always am nervous about calling anything a prediction, but further housing deterioration is a very grave possibility.

Needless to say, this has led to further problems at Fannie, Freddie with more to come. Not that you should be concerned about that, the mission has changed. On their way to probably 400 billion in losses (I remember when I was an alarmist claiming that the losses would be far more than the 20-30 million the government was claiming, probably 200 billion. It turns out I was a cockeyed optimist) the government has officially eliminated any limit on their exposure. Why? It seems to be so that they can take losses!

Freddie’s federal overseers nevertheless have instructed Mr. Haldeman to focus on something that isn’t likely to make the bleak balance sheet look any better: carrying out the Obama administration plan to allow defaulted borrowers to hang onto their homes.

On a recent afternoon, employees at Freddie’s headquarters here peppered Mr. Haldeman with concerns about the company’s future. He responded that they were “fortunate” to have such a clear mission—the government’s foreclosure-prevention drive. “We’re doing what’s best for the country,” he told them.

Then there is the poor FHA:

FT Alphaville is certainly in the skeptical camp referred to by Ms Burns, and we were not reassured when the housing agency released its December monthly report on Tuesday.

According to the report, the default rate in the FHA’s single-family portfolio hit 9.12 per cent in the fourth quarter of 2009, compared with 6.82 per cent in the same period a year prior.

In absolute terms, that means the number single-family mortgages insured by the FHA and in default reached 531,671 in the fourth quarter of 2009. That’s a 66 per cent increase versus the same period in 2008.

The agency is being hit hardest by the 2007 and 2008 mortgage vintages; the performance of these loans is so dismal the FHA expects to have to pay claims on at least one out of every four loans made in those years.

Cross Posted at: The View from the Bluff

Musings, Rants and Links over the 18th Fairway:02/09/2010

We finally got a mixed bag on the employment front this month, a welcome change from the purely awful. However, with everyone focused on “creating” jobs I think this quick synopsis attacking the unrealistic expectations of when and where jobs will come from is well worth reading. This chart gives you an idea of how bad it really has been (click image for larger version)

PercentJobLossesJan2010

Yves Smith looks at the problem of how to handle the prospect of the financially weaker members of the European Union possibly defaulting. neither the PIIGS nor their colleague states want to take the steps they may need to take. Markets however are sending a clear message, “Do Something!” The risk goes beyond the direct damage from the potential losses from holding these countries debts. European banks are already shaky, with shaky assets and still a lot more leverage than is safe. I believe Europe’s bear market is likely back on.

European banks are shaky? How provincial of me not to mention our own banks. The coming wave of defaults in the Alt-A and Prime mortgage space are not getting enough attention, Yves helps out there as well. Not only are the losses coming (pretending loans are good only works until they actually default) but the banks are in for some serious lawsuits from all kinds of parties that bought the toxic loans. First in line are Freddie and Fannie. They will still lose at least 400 billion, but they’ll take a good chunk out of the banks hide on the way down.

the phrase “credit specialists at Citi” is not exactly the kind of thing which instills enormous confidence in analysts and investors these days

I think that is an understatement. They want to sell another fancy derivative designed to remove all risk if there is a systemic crisis when, of course, those supposed to pay up will certainly have the money to do so….Right?

Please imagine me banging my head against the keyboard. And no, the response of the Citi Spokesman doesn’t make me feel any different, in fact, it makes me feel worse.

The term liquidity is the pixie dust the financial commentariat uses to obscure what is really going on. I maintain, and have throughout the last few years, that our difficulties have not been a liquidity crisis (though many who had no business exposing themselves individually to liquidity drying up for them certain had a liquidity crisis) but a solvency crisis. David Merkel points out that liquidity always exists, it just goes where the marginal credit buyer has gone. Where insolvency risk seems to be increasing, the marginal buyer can become very scarce and will provide it to areas seemingly exposed to less risk. At the end of the day it is solvency that is our problem, and until we solve that liquidity will go to those perceived to be least at risk. Right now that is the government and those they are backing. Hence a credit crunch for much of the economy.

Speaking of credit, consumer credit has now declined for 11 straight months. A record, and by a long shot. (Click image for a larger version.)

ConsumerCreditDec2009

In the “no big surprise department,” and paralleling the argument I made at the time, it has now been shown that the ban on short selling during the crisis did not help support prices and damaged stock market liquidity. In the no surprise at all department the biggest complainers turned out to have fundamental problems that short sellers were pointing out accurately (much better than our regulators.) The loudest complainer of all, Overstock.com and their bizarre CEO, Patrick Byrne. The upshot, they have been cooking their books for years, just like the short sellers were claiming.

Cross posted at The View from the Bluff

Counting Unemployment

The most recent release of unemployment data has raised some questions, namely, how can we lose 20,000 jobs in the same month that the unemployment rate declined to 9.7%.  The answer is simple: The unemployment rate is essentially a made-up figure.  And I can give you a much more accurate way to measure the unemployment rate.

First, let’s take a brief look at how the monthly Employment Situation figures are compiled by the Bureau of Labor Statistics.  The BLS combines two surveys to compile the Employment Situation.  The first survey is the Establishment Survey.  That’s a pretty accurate survey, because it consists of asking businesses to provide hard payroll data on the number of existing jobs.   The second is the Household Survey, which is where the train runs off the rails.

For the Household survey, they ask if you are employed.  If the answer is “No”, they then ask if you if you’re actively looking for a job. If the answer is no, then they just simply take you out of the labor force.  They don’t care whether you aren’t looking for work because you know there are no jobs available, or whether you’ve retired and are planning to sail a sloop across the Pacific.  If you aren’t actively looking for work, you aren’t part of the labor force.  So, the official unemployment rate generally understates–sometimes substantially–the real level of unemployment.

Fortunately, there is a better way to calculate the rate of real unemployment, and the BLS web site conveniently provides you with all the data you need to do it.  From here, we only need three items: The Civilian Noninstitutional Population, the Participation Rate, and the number of Employed.

The first thing we need to do is figure out the Labor Force Participation Rate during the most recent period of full employment.  If you take the average monthly labor force participation rate from the 70 months between Jan 04 and Oct 08, you get a participation rate in the labor for of 66% of the Civilian Noninstitutional Population.

Next, you multiply the Civilian Noninstitutional Population by 0.66.  That gives you the size of the normal labor force at full employment.

Next, you take the number of Employed, and calculate the actual rate of unermployment using the following equation:

1-(Employed/Normal Labor Force)=Unemployment Rate.

So, with this method, we can compare the unemployment level of Oct 08, right before the economy cratered, to last month.  When we do so, we get the following results:

OCT 08:
Civilian Noninstitutinal Population:
234,612,000
Participation Rate: 66%
Labor Force:
154,843,920
Employed: 145,543,000
Unemployment Rate: 6.0%

Jan 10:
Civilian Noninstitutinal Population:
236,832,000
Participation Rate: 66%
Labor Force:
156,309,120
Employed: 136,809,000
Unemployment Rate: 12.5%

Note that this calculation for Oct 08 is very close to the official unemployment rate of 6.1%.  But as the economy gets worse the official employment rates show greater and greater variance.  In other words, the official unemployment rate becomes progressively less accurate as the Employment Situation worsens, substantially understating the actual rate of unemployment.  This is, by the way a feature of the BLS’s method, not a bug.  It is no coincidence, as our Soviet friends used to say, that discouraged workers fall out of the labor force calculations.

Now, this measure I’ve explained doesn’t tell us anything about people who are working only part-time, when they’d prefer a full time job, so it doesn’t tell us much about underemployment.  But it does tell us, based on the recent historical labor force participation rate, what the size of the labor force should be.  Once we know that, it becomes very easy to see what the actual rate of unemployment is in real terms, rather than the notional terms provided by the Household Survey.

According the BLS, however, the Civilian noninstitutional population has increased by 2,220,000 people  from 234,612,000 to 236,932,000, while, at the same time, the civilian labor force has shrunk by 2,055,000 people  from 155,012,000 to 153,455,000.  Using the BLS numbers, then, the labor force participation rate is 64.6%.  That kind of demographic change might be expected in a couple of years when the baby Boomers begin retiring in large numbers, but for right now, it seems…counter-intuitive.

In any event, 12.5% unemployment is a far more realistic number than the BLS estimate of 9.7%.

154843.9

Bernanke’s Plan To Drain The Monetary Swamp

Interest rates are at record lows and literally trillions of hastily printed dollars have been pumped into the economy by the Federal Reserve in an effort to stem an even deeper recession. While it is debatable as to whether or not it has really accomplished that goal, what isn’t debatable is at some point, the Fed has to wring that excess money from the economy or risk all sorts of dire consequences.

The Wall Street Journal carries the Bernanke plan for doing so. The centerpiece of that plan is found in the interest rate the Fed pays banks on the reserves it keeps. Right now, that’s .25%. The plan is to gradually raise that rate with the assumption that such rate raises will give an incentive to banks to keep even more money on reserve and thus out of circulation. This “interest on excess reserves” then is the primary vehicle the Fed plans to use to begin to pull money out of circulation.

But that’s a process fraught with risk. Because the immediate effect of any such interest rate increase will be to tighten credit. And depending on the strength of the economy, it has the potential to affect it negatively. Says the WSJ:

Extricating itself from these actions [low interest rates and trillions of infused dollars] will require both skill and luck: If the Fed moves too fast, it could provoke a new economic downturn; if it waits too long, it could unleash inflation, and if it moves clumsily it could unsettle markets in ways that disrupt the nascent economic recovery.

It’s pretty easy to drop interest rates and pump money into a down economy. But going the other way is not at all as easy. “Skill and luck” are understatements. Timing will have to almost be perfect. The problem is, should markets get skittish because of moves by the Fed that it sees as having a negative effect, things could break negatively quickly and spiral out of control. While the Fed would like everyone to believe this is a piece of cake – and will continue to tell us it is – it’s not at all an easy thing to do. The desire of those talking positive about the ease of draining the monetary swamp is to bolster confidence and allay fears if possible so a panic which could undermine the whole plan doesn’t develop. That, however, is going to be extremely difficult:

The nature of its exit from today’s unusually low interest rates will affect everything from mortgage rates and what companies pay on short-term borrowings to the rates savers earn. The timing and sequence of the steps are the subject of intense speculation in financial markets.

At the risk of boring the living hell out of you, I want to stress that this plan may be one of the most important plans in quite some time. If it isn’t executed perfectly, we could see a quick slide back into recession or rampant inflation. Read the whole article if you get a chance. The Fed has some other contingencies and plans as well. But as you’ll see as you read through them, all present the possibility of having a very negative downside if the strength of the economy is misread and/or the execution of each portion of the plan isn’t almost perfect.

The economic high-wire act – without a net – the Fed is about to embark upon is a very difficult one. Yes, it’s necessary and, in fact, critical – but it isn’t going to be easy. And if screwed up, could be pretty devastating to a recovering economy.

~McQ

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