Fed chief Powell just hiked rates for last time

Federal Reserve chief Jay Powell hiked rates a fourth time this year on Wednesday to 2.5% for the Fed Funds Rate. He also told reporters that the committee is looking at two additional hike in 2019, taking one prospective hike away for next year.

This is the classic overshoot by the Fed. Seeing inflation that’s not there, Seeing bogeyman that will never materialize.

In the face of a global trade slowdown as Europe falls into a rioting mess over socialist policies to curb emissions with higher taxes on fuel consumption and other government intrusions into the people’s lives.

The Asian market has been weakening for all of 2018 as demand for tech goods have cratered. Apple has little market penetration for its new iPhones as consumers say $1,000+ models are too rich. I’ll stick with my older model.

Tariffs — in an attempt to level the trade playing field — have rocked China after decades of favorable trading terms. No longer having advantages against domestic producers is producing a boom for US manufacturers.

So where are Powell & Co. looking for this bogeyman called inflation? Gas is trading below $48 a barrel, however you still see problems here in the US.

Fedex reported troubling results this week in their quarterly results. This in the face of allegedly growing online sales the trucking industry is moving less freight.

This pullback by the US consumer can be put at the feet of Powell & Co. since there jawboning and hikes have taken 401(k)s into the red for the year, which has Americans pulling back. The numbers for this will come out in early 2019.

I’ll put myself on the line today, this is the last rate rise Powell will oversee. It will go so horribly wrong in 2019 that the Fed will actually have to cut rates by September 2019. This will be because of how the global slowdown will affect US growth.

If this post in interesting please retweet or hit the like button. Thank you


ObamaCare: No prescription for spending

Here’s what ObamaCare has done to the US economy in the last month and it’s certainly is not healthy for growth.

  • There’s no benefit rise for Social Security¬†recipients because there is no inflation, although Medicare rates and co-pays are jumping 15% for those under Affordable Care coverage.
  • Coverage for working families is expected to cost 8% more as lower cost companies closed up during the year on big losses. Industry-wide losses are projected to be $2.5B.
  • All the additional health-care spending by consumers added 30% to the Q3 GDP, which is a tax and should not be included in the survey.

Under these conditions, US consumers will be constrained with their spending next year to afford health coverage. Not an ideal position for an economy looking raise rates.

If the consumer is 68% of the US economy, then picking their pocket further to allow greater coverage will not help discretionary spending.

A new study shows what Americans are doing with their gas cost savings.

While more well-off consumers spent the money at restaurants and on groceries, lower middle-class consumers actually put the savings in their tank. Instead of buying $5 in gas, they were more likely to fill it up.

Since there is no interest inducement to bank the savings and therefore have the cash available to pay down debt, consumers are spending it.

The idea of improving the economy on the back of oil-price decline is really superficial, since spending is not growing, just shifting from the Mobil station, to McDonald’s.

That’s fuel for thought.