Where Central Banks Have Issued Digital Currencies
Central bank digital currencies are controlled by governments like traditional currencies are and therefore represent the polar opposite of the idea of decentralized, self-sovereign bitcoins.
As Statista’s Katharina Buchholz reports, several small nations and – since October 2021, Nigeria – have launched central bank digital currencies, and several more populous countries are getting ready to jump aboard a different crypto hype train.
Countries which are already in a CBDC pilot phase include Russia, Thailand, India, South Korea, Sweden, the United Arab Emirates and Saudi Arabia, according to the source. It is unclear, however, which of these programs could see a proper launch next.
CBDCs were introduced even earlier than in Nigeria in Caribbean countries, for example in the Bahamas and nations and territories that share the currency of the Eastern Caribbean dollar. The Sand Dollar of the Bahamas was the first central bank digital currency of the world upon its launch in 2019 and cleared the way for a rapid adoption around the region’s small nations.
The Chinese digital Yuan pilot made headlines in April 2019, but the project has not moved on since. Like Nigeria, China has a solid digital and mobile payment infrastructure. Large parts of the two countries’ populations leapfrogged card payments and went straight from cash to digital payment options, which became hugely popular – may they be app or text-based. In developing countries, central banks also consider the potential of digital currencies reaching the unbanked.
Another reason for some governments to champion official digital currencies is the collection of data.
Ubiquitous digital payments and tight government surveillance have led to a plethora of payment data already available to Chinese administrators. This knowledge on how people spend money will only grow with the implementation of the digital Yuan, even though the country’s central bank has said it will limit traceability and create what it calls “controllable anonymity.”
These aspects of digital currencies are viewed negatively by Europeans, who according to a survey by the European Central Bank are concerned about payment privacy in regards to the digital euro.
Fed Emergency Bank Bailout Facility Usage Hits New Record High; Retail Money-Market Fund Inflows Continue
After last week’s surprise and sizable outflows from institutional money-markets (likely driven by corporate tax demands), expectations were for a return to inflows but for the 3rd straight week, money market funds saw outflows (albeit a small $2.9 billion)…
Source: Bloomberg
However, we note that once again retail saw a 10th straight week of inflows (+5.8 billion) while institutional funds saw $8.7 billion of outflows (3rd straight week)…
Source: Bloomberg
Is this corporate tax payments or chasing AI stocks?
There remains a significant decoupling between bank deposits and money market funds…
Source: Bloomberg
The Fed’s balance sheet finally retraced all of the increase from the SVB bailout, shrinking for the 3rd straight week (-$21.1 billion)…
Source: Bloomberg
As far as QT is concerned, The Fed sold a decent $7.9 billion of its securities last week to its smallest since Aug 2011…
Source: Bloomberg
The US central bank has over $106 billion of loans outstanding to financial institutions through its two backstop lending facilities…
Source: Bloomberg
As banks’ usage of The Fed’s emergency Bank Term Funding Program rising once again to a new record at $103.1 billion (up $0.8 billion from last week), while discount window usage was unchanged at $3.2 billion…
Other credit extensions (FDIC loans): down $4BN to $168.3BN
The US equity market is starting to catch down to the contraction of bank reserves at The Fed…
Finally, after all the big banks passed the stress test with flying colors, we remind readers that banks have 9 months left under the original 12-month BTFP Fed bailout program to find a way to stabilize their balance sheets.
Not only have they failed to do so, usage of the BTFP facility is at a new all time high, and yields are rising even more (great MTM losses).
The American post-Cold War order from the Ronald Reagan through George W. Bush administration is over.
Barack Obama began its erosion with his tired lectures about the past sins of the United States.
Obama empowered radical Islamists. He invited Russia back into the Middle East after a forty-year hiatus. He snored while Vladimir Putin swallowed large areas of Ukraine. He nonchalantly allowed ISIS almost to take over Iraq. And he authored the Libyan misadventure.
Joe Biden has greatly amplified what Obama inaugurated. He accentuates the Obama-authored foreign policy disasters by his own family corruption.
If the U.S. had an honest media, a disinterested Department of Justice, and a professional FBI, the Biden family would likely be facing felony bribery charges and an impeachment vote for leveraging the interests of the U.S. for a few millions of Ukrainian and Chinese cash.
Biden has forfeited any moral credibility America once had in sermonizing to the world about the advantages of transparent democracy.
Instead, Washington under Biden went full Third-world. His family got rich from his offices, and Joe Biden warped government agencies in efforts to take out his next possible presidential rival.
Antony Blinken, Biden’s current Secretary of State, is known mostly for meekly accepting a dressing down from Chinese diplomats in 2021 and subsequent ritual humiliations.
Blinken was also the author of the 2020 election shenanigan of soliciting former intelligence authorities to publish a preposterous lie that Hunter Biden’s laptop had all the “hallmarks” of “Russian disinformation.” Blinken’s inspired farce was dreamed up to aid a then struggling candidate Biden in his last presidential debate.
The net result of the Obama-Biden continuum has been the moral and material collapse of U.S. foreign policy.
Americans are bewildered that China is now buzzing our jets. It plays chicken with American warships.
It mocks our homeland defenses by sending a spy balloon with impunity across the continental United States.
It is defiantly mum about its creation of a gain-of-function virus under the auspices of the People’s Liberation Army, despite the ensuing Covid epidemic that killed over 1 million Americans.
The weird reaction of the Biden administration to these affronts is either to contextualize Beijing’s aggression or to ignore them entirely.
Under the earlier Obama-Biden “reset” of Russia, we also paid little attention to the past aggressions of Vladimir Putin, appeased his provocations, and earned the 2014 Russian take-over of the Ukrainian border and Crimea.
Then the resetters flipped during the Trump administration.
They now preposterously claimed that Donald Trump—who had neutered Putin by flooding the world with cheap oil, pulled out of an asymmetrical missile deal with Moscow, killed attacking Russian mercenaries in Syria, and greenlighted offensive weapons to Ukraine—was a Putin “puppet.”
After sleeping when Putin invaded Ukraine twice under Obama, and once under Biden (but not at all under Trump), the Left abruptly adopted Ukrainian resistance as their last chance to prove that Russians should have been guilty of “Russian collusion” and “disinformation.”
Their new legacy is a Chinese-Russian-Iranian anti-American axis.
U.S. arms stockpiles are drained so that a beleaguered Ukraine might have the third largest military budget in the world—and a Verdun-like deathscape of static warfare on the borders of Europe.
Biden desperately sought to revive the failed Obama Iran deal. His subtext was to return to the bankrupt notion that by empowering Iran and its henchmen in Lebanon and Syria, and Hezbollah and Hamas, America could leverage allies like Israel and distance itself from friends such as the oil-exporting Gulf monarchies.
China and Russia loved the Obama-Biden resets. Now both are the guardians of Middle East oil and money, while the U.S. alienated our friends and drove allies away.
The Biden administration abandoned billions of dollars in military hardware as it fled in ignominy from Afghanistan.
It sent billions more in arms to Ukraine, while ending U.S. self-sufficiency in oil and gas, inflating the currency, exploding the debt, and ignoring replacing the arms we have sent abroad or abandoned.
Instead of restocking our depleted arms arsenals, Biden started tapping the Strategic Petroleum Reserve for cheap political advantage on the eve of the midterm elections.
A frail and disorientated Biden may be considered useful by his controllers to implement a hard-left agenda.
But otherwise, an enfeebled Biden personified the decline in American stature that he had wrought.
He was recently helped to steady himself by a Mexican President.
He was shuffled into place for a photo-op by a Japanese Prime Minister.
In a conversation with the British Prime Minister, he forgot the name of Winston Churchill, a British icon.
And he entered the G-7 summit by falling down the steps of Air Force One.
It would be hard for a Chinese or Russian strategist to come up with a record better than Biden’s to emasculate America’s military and radically reduce its global stature.
Rate-Hike Odds Spike After Strong GDP; Bonds & Big-Tech Battered
A big upward revision to Q1 GDP hid the extent of the weakness in pending home sales data and sent US macro surprise index back near recent cycle highs…
Source: Bloomberg
“This is not the disinflationary slowing economy you’re looking for…”
This sent rate-hike expectations spiking higher with around a 50% chance of two more rate-hikes holding into year-end…
Source: Bloomberg
And dragged Treasury yields higher across the curve (with the short-end underperforming – 2Y +17bps, 30Y +10bps) pushing them all notably higher on the week…
Source: Bloomberg
…smashing the yield curve (2s30s) back near pre-SVB lows – screaming recession and/or Fed policy error…
Source: Bloomberg
With 2Y Yields back up near cycle highs right before the SVB collapse…
Source: Bloomberg
The rise in yields this time smacked the long-duration tech stocks, and the ubiquitous rotation into value (banks helped by stress test results at the margin) occurred once again with Nasdaq the day’s biggest loser and Small Caps biggest gainer. The Dow and S&P managed gains…
AAPL was unable to get up to $3 trillion market cap once again (finding resistance at $190.00 today)…
The divergence between yields and the Growth/Value rotation remains extreme…
Source: Bloomberg
Overdone? Is it time for Value/Small Caps to outperform Growth/Nasdaq?
The dollar hit near 4-week highs…
Source: Bloomberg
Bitcoin rallied today, extending its bounce of $30,000, helped by news that Fidelity is pitching a Spot Bitcoin ETF…
Source: Bloomberg
Oil prices managed modest gains, with WTI testing back above $70 – but unable to hold it…
Gold ended lower on the day but well off its spike lows (which tested down to near $1900 and bounced)…
Finally, we note that Nomura’s Charlie McElligott asked yesterday (reflecting oin the equity market meltup) – So what would it take to blow this thing out?
His answer may well be worth paying attention to this morning…
Just spitballing…
Perhaps what is required (easier said than done!) is a proper “Correlation 1” event where the current dispersion wave reverses, especially if Grosses keep growing – potentially requiring some sort of AI crunch from the Long side (earnings expectations mania overshoots reality? – seems too early for that just yet)…
…or maybe from the Short-side, where US economic data does indeed see that aforementioned “animal spirits” trade and actually reaccelerates to such an extent that markets either begin adding-in fresh terminal rate…
…OR where heavily-short economically sensitives begin trading “early cycle” and get grabbed-into / painfully.squeezed.
No one was expecting that kind of ‘animal spirits’ growth? And The Fed can’t stand for that.
Got Any Nude Selfies? Do You Like Porn? Bill Gates’ Private Office Asked Women Sexually Explicit Questions
The private office of billionaire Microsoft founder (and Jeffrey Epstein pal) Bill Gates put women through an extensive screening process which included sexually explicit questions in order to determine whether they might be vulnerable to blackmail, the Wall Street Journal reports.
Some female job candidates were asked whether they ever had extramarital affairs, what kind of pornography they preferred or if they had nude photographs of themselves on their phones, according to the candidates and people familiar with the hiring process. While it couldn’t be determined whether any men were asked such questions, none who spoke to The Wall Street Journal said they had.
In some cases, female candidates were asked whether they had ever “danced for dollars,” while another says she was asked whether she had ever contracted an STD.
A spokeswoman for Gates said his private office, which outsourced the screening process to a security firm that boasts of having “several former CIA and FBI officials” on its staff, says it’s news to them.
“This line of questioning would be unacceptable and a violation of Gates Ventures’ agreement with the contractor,” she said.
The security firm, Concentric Advisors (the headquarters of which shares the same lakefront office park as Gates Ventures), conducted the screenings over the past several years. According to the report, the interviewers were “trying to find any information that had the potential to be used to compromise or blackmail individuals who would be working closely with one of the world’s richest men.”
According to employment attorneys and security consultants, the process described by the women could run afoul of state and federal employment discrimination laws – though for certain high-security government roles, such questions might have been more appropriate. Questions about illegal drug use could possibly violate the same laws, since they may reveal addition – considered a disability. Instead, they would be in the clear asking if a candidate is currently using illegal drugs, and/or obtain consent for a drug test.
According to Carol Miaskoff, legal counsel of the federal Equal Employment Opportunity Commission, questions about a candidate’s health or psychiatric history is “just flat out prohibited by the federal Americans With Disabilities Act.”
“There’s not a black letter law prohibition on asking questions related to sex,” she continued, adding that “getting the information and taking some adverse action with that information” such as rejecting them from the applicant pool could lay the basis for a legal challenge.
The Gates spokeswoman said Gates Ventures, which was previously known as bgC3, follows careful due diligence when hiring staff and that it works with contractors to perform industry-standard pre-employment screenings for men and women. She said it requires all vendors to operate in compliance with state and federal laws and regulations. -WSJ
Concentric CEO Mike LeFever (and his fleet of attorneys?) defended the company, telling the Journal that they provide industry-related background checks for hundreds of companies, and that their pre-employment screening process is identical for men and women, and complies with laws in each state and nation where they operate.
A spokesman for the company has also denied that they asked questions about sexual or medical histories, but that ‘such information can be volunteered by job candidates when asked about public records,’ (what?) and that the security screening involves “assessing a candidate’s truthfulness and vulnerability to blackmail, which often starts with voluntary statements by the candidate with follow-up questions by company interviewers.”
The job candidates say they’re lying, and that they were asked about sensitive information that they didn’t volunteer. They also said they were informed that the job offer was conditional on passing the assessments.
Concentric’s consent form also appears to be at odds with the company’s official position.
A consent form, reviewed by the Journal, said a behavioral assessment by a Concentric professional would be used to “assess suitability for employment” by Gates’s private office and would include drug and alcohol history as well as past medical and psychiatric history as it relates to the job.
The form, requiring a signature from the job candidate, gave permission to disclose the results from the assessment to Gates’s private office, including “highly sensitive information,” and “does not allow for the re-disclosure of sexually transmitted diseases,” the document shows. -WSJ
Concentric advertises itself as a risk-management firm that employs several former CIA and FBI officials on its staff, and has worked with private family offices for nearly two decades. They claim to be able to root out individuals with “potentially nefarious motives.”
And hey, they can probably root out who Bill can try and seduce without a condom too.
Despite an ongoing scandal involving the United Nations Educational, Scientific, and Cultural Organization (UNESCO) leadership and the agency’s decision to flout U.S. law by admitting the “State of Palestine” as a member state, the United States is now formally seeking to rejoin.
However, lawmakers may scuttle the effort by refusing to provide necessary funding.
If it moves forward, rejoining the U.N. education and culture agency is expected to cost U.S. taxpayers more than half a billion dollars just to rejoin, with additional funding expected each year going forward.
There has been some criticism in Congress already. And congressional appropriators dealing with foreign operations and State Department funding have vowed to terminate funding for UNESCO in the 2024 budget.
The Biden administration and defenders of the move argue that rejoining the agency would help counter the influence of the Chinese Communist Party (CCP).
A spokesman for the U.S. State Department told The Epoch Times that the move would advance U.S. interests and restore American leadership.
In a June 8 letter to UNESCO Director-General Audrey Azoulay obtained by The Epoch Times, U.S. Deputy Secretary of State for Management and Resources Richard Verma also argued that the international agency had made progress in addressing the concerns that caused the U.S. government to withdraw in 2018.
But critics contend that, among other concerns, rejoining the U.N. agency would actually be a boon to the CCP, which has members serving in senior positions.
It would also benefit other forces hostile to U.S. interests and allies such as Israel, according to experts, lawmakers, and former officials.
Opponents of the move who spoke to The Epoch Times, including senior officials behind the 2017 decision to leave UNESCO, slammed the Biden administration’s move to rejoin.
“They ought to be paying us to be involved,” argued former U.S. Assistant Secretary of State for International Organization Affairs of State Kevin Moley, who, along with former U.N. Ambassador Nikki Haley, shepherded the withdrawal through to completion.
Speaking to The Epoch Times in a phone interview, Ambassador Moley said the decision would not serve U.S. interests. Instead, he argued, it will benefit U.S. adversaries such as the Chinese Communist Party (CCP).
Citing a variety of issues including anti-Semitism, waste, corruption, and extremism within the U.N. education agency, the Trump administration announced that the U.S. government would withdraw from the organization in 2017.
Pointing to murderous dictatorships on the agency’s “human rights” committee and other policies, then-U.N. Ambassador Haley at the time said the “extreme politicization” of UNESCO had “become a chronic embarrassment.”
“Just as we said in 1984 when President Reagan withdrew from UNESCO, U.S. taxpayers should no longer be on the hook to pay for policies that are hostile to our values and make a mockery of justice and common sense,” Haley said.
Even before that, federal laws barring U.S. support for international organizations that accept the “State of Palestine” as a member forced the Obama administration to stop U.S. taxpayer funding to UNESCO over a decade ago. The laws were aimed at forcing Arabs to negotiate a settlement with Israel rather than unilaterally seeking statehood via international organizations.
The Reagan administration pointed to similar problems as those cited by the Trump administration decades later.
As previously reported in November of 2021, the Biden administration was hoping to rejoin the organization after having rejoined various other U.N. entities and agreements. At the time, U.S. law made that impossible due to the membership of the Palestinians.
But in December, with Democrats getting ready to hand over power in the House of Representatives, Congress approved the omnibus bill with a waiver purporting to allow the administration to rejoin and fund UNESCO if it believed the move would serve U.S. interests. The bill also authorized more than $500 million of taxpayer money in arrears for the agency.
However, sources on Capitol Hill tell The Epoch Times that Republicans intend to terminate funding for UNESCO and numerous other international agencies and programs.
A document outlining the priorities of Republicans on the House Appropriations subcommittee dealing with international organizations confirmed that UNESCO funding is on the chopping block, along with funding for the U.N. general budget.
Impact on US Classrooms
Even without being involved in UNESCO, its influence was still felt in American classrooms, explained former Arizona Superintendent of Public Instruction Diane Douglas.
“While I most certainly do not agree with the U.S. rejoining it, nonetheless I can’t help but wonder how truly removed we are from UNESCO policy and influence,” she told The Epoch Times, adding that U.S. officials continued working on international education initiatives involving UNESCO even after withdrawal.
She also warned that U.S. involvement with UNESCO was a way of “allowing foreign governments—including dictatorships—a voice in the education of American children.”
“As if the nationalization of education through Common Core Standards wasn’t bad enough, in returning to UNESCO we will once again allow international ideology to be part of the indoctrination of our children,” she warned, pointing to biblical admonitions on child rearing and warning about the danger of allowing U.N. or even federal agencies to be involved in educating children.
“The Bureau of Labor Statistics says real average hourly earnings have fallen 3.16% during the Biden Presidency.”
As we noted yesterday ahead of Biden’s speech, real wages are down on a YoY basis for 26 straight months (i.e. since the president’s term began), but that never stopped the exaltation of so-called “Bidenomics” by The White House and its media lackeys…
…despite the shockingly low approval rating on the economy confirming that ‘we, the people’ ain’t buying the Biden bullshit.
The answer can be found in one lesson by looking at the nearby chart. It tracks average real hourly earnings for all workers in the private economy across the Biden Presidency, and it tells an ugly story about the impact of the worst inflation in 40 years and the standard of living.
This is the inflation that Mr. Biden did so much to ignite with all of his spending.
That’s a 3.16% decline in real earnings for the average worker across the 29 months of the Biden Presidency.
These are official Labor Department statistics which means Mr. Biden can’t deny them.
So, as WSJ notes, he had someone fudge the point by writing in his Chicago remarks that, “Look, pay for low-wage workers has grown at the fastest pace in over two decades.”
We’d like to see how his economists cherry-picked the data to justify that one.
All of which reminds The WSJ Editorial Board of the old Marx Brothers joke: Who are you going to believe, me or your own eyes? Regarding Bidenomics, Americans should believe their own eyes.
Banks Crippled As $1 Trillion in Deal Value Vanishes in 1H Slump
By Shikhar Balwani, Bloomberg ECM reporter and strategist
The world’s dealmakers are roughly $1 trillion down in one of the worst years for takeovers and stock market listings in a decade.
That’s the year-on-year drop in the value of mergers and acquisitions and initial public offerings in the first half, a period in which inflationary pressures, financing constraints and geopolitical tensions nixed activity across regions and sectors.
And with the traditional summer lull on the doorstep, and fears of a recession lingering, the next six months could bring more pain on Wall Street, where banks have already been slashing bonuses and jobs in response to the slump.
“Deals are being delayed,” said Dominic Lester, head of investment banking for Europe, the Middle East and Africa at Jefferies Financial Group Inc. “Boards are having difficulty valuing assets, and are therefore taking longer to commit to transactions.”
Companies raised just $68 billion via IPOs in the opening six months of 2023, Bloomberg-compiled data show. That’s down more than a third year-on-year, with only 2016 having seen a lower first-half total since the global financial crisis.
The forces dragging down listings are much the same as those for M&A: concerns about a global economic slowdown and a mismatch in pricing expectations between companies and investors.
“The elephant in the room really is that we are expecting a recession. The timing of that recession is challenging and it will be largely consumer-led,” said Stephanie Niven, a London-based portfolio manager at investment firm Ninety One. “That’s why investors are cautious. The market itself hasn’t exactly priced a recession.”
For ECM bankers, brights spot have been found in the east, with China accounting for roughly half the money raised via IPOs this year. The country has cut curbs on local companies seeking listings overseas and made rule changes to encourage more at home.
Seed giant Syngenta Group this month won exchange approval for its 65 billion yuan ($9 billion) IPO, moving the world’s biggest potential listing this year a step closer to completion.
“The next six months of 2023 will definitely have some IPOs, the market is not closed and good companies can always get out,” said Mike Bellin, partner and IPO services leader at PricewaterhouseCoopers LLP. “A lot of the companies we’re talking to are thinking it’s more of a 2024 timeframe.”
France Mobilizes 40,000 Police After All Hell Breaks Out
Social unrest exploded across France this week, forcing the government to deploy 40,000 police officers to quell the violence. The turmoil was sparked after police fatally shot a 17-year-old teenager of North African descent during a traffic stop.
The police killing of the teenager occurred on Tuesday, captured on video, shocked the country, and has since unleashed riots across major cities.
France Police Shooting a 17year-old teen: Police said he refused to obey traffic rules ❗ pic.twitter.com/G51bMQ9pNc
The epicenter of the unrest is around Nanterre, located on the western outskirts of Paris. A map of the unrest shows riots are occurring nationwide.
On Wednesday night, chaos worsened, leading Interior Minister Gérald Darmanin to announce that 40,000 officers would be immediately deployed. He said:
“The professionals of disorder must go home. There will be a lot more police and gendarmes present tonight.”
#News: The country of #France has been plagued with riots since Tuesday afternoon, after a police officer shot and killed a 17 year old Muslim migrant in the city of #Nanterre, after the teenager drove with a car without a driver license and he had not insurance, resulting the… pic.twitter.com/WSajGoxpYA
France 🇫🇷: While screaming “Allah Hu Akbar” Muslim immigrants fatally attacking Security Forces with molotov cocktails, destroying cities, looting Banks/ATMs/Shops in French cities !
Liberals around the world justifying these behaviors “They are demonstrating because of a young… pic.twitter.com/LrkWtEbGLf
— Ashwini Shrivastava (@AshwiniSahaya) June 29, 2023
French President Emmanuel Macron held a crisis meeting after clashes over the police killing of a teenager spread beyond Paris’ suburbs
⚡️Police detained 150 people during the riots in the French region of Ile-de-France, which began after the death of a 17-year-old teenager by a policeman in the Paris suburb of Nanterre. pic.twitter.com/uyhuQ7tvxo
Riots spread across France overnight, set off by the deadly police shooting of a teenager of North African descent on Tuesday during a traffic stop in a Paris suburb. pic.twitter.com/098a0vO2ty
French President Emmanuel Macron held an emergency security meeting today about the violence. He said the “violence against police stations, schools, town halls, against the Republic, is unjustifiable.”
“The unrest across France, set off by the deadly police shooting of a teenager of North African descent during a traffic stop, has revived memories of riots in 2005 that gripped France for three weeks,” The Independent said.
A lot of the economic data this month looks strong. But when you dig a little deeper, you find that this “strength” is an illusion.
Following is a breakdown of several of these data points with some help from our friends at Passant Gardant.
Consumer Confidence
The Conference Board Consumer Confidence Index came in at 109.7 versus an expectation of 104. Last month, Consumer Confidence was 102.3.
“Consumer confidence improved in June to its highest level since January 2022, reflecting improved current conditions and a pop in expectations,” Conference Board chief economist Dana Peterson said. “Greater confidence was most evident among consumers under age 35, and consumers earning incomes over $35,000. Nonetheless, the expectations gauge continued to signal consumers anticipating a recession at some point over the next 6 to 12 months.”
But what exactly is driving consumer confidence higher?
And lower inflation expectations were primarily driven by a big drop in energy prices.
Gasoline prices are down over 20% from this time last year.
Falling gasoline prices aren’t a sign of a healthy economy. In fact, the expectation of a recession has put a drag on oil prices.
Rising Home Sales
Home prices rose 0.5% month-on-month in April and new home sales surged 20% year-on-year in May. But this sale of new homes is primarily a function of tight inventory in the existing housing market. Existing home sales were only up 0.2% and were down 20.4% from a year ago.
Home sales typically rise in the spring, so these positive numbers may well be an anomaly. Rising prices (another sign of sticky price inflation) coupled with rising interest rates will continue to put a drag on the housing market.
Durable Goods Orders Up
Orders for manufactured US goods jumped 1.7% in May. Economists had expected a decline. This was immediately sold as a sign of a strong economy. But even MarketWatch conceded, “The industrial side of the economy is just muddling along.”
In fact, the entire increase was attributed to the extremely volatile transportation sector and defense spending for the war in Ukraine.
Excluding transportation, the last two months balance out to zero. Excluding defense, durable goods orders fell. Far from signaling a strong economy, the actual economic signal is contraction.
May Retail Sales Beat Expectations
Retail sales increased by 0.3% month over month and grew by 1.6% year-over-year. That sounds like Americans are buying a lot of stuff. But in reality, they are paying the inflation tax.
Retail sales are not adjusted for inflation. When you factor in rising prices, sales of actual stuff were basically flat month-on-month. And year-on-year the sale of goods and services on a quantity basis is down substantially when you adjust for 4% price inflation.
Furthermore, much of this spending is being put on credit cards. Again, this is not a sign of a strong economy.
Jobs
Month after month, we get strong employment reports.
Don’t reflexively believe the headlines. Just because headline numbers look good doesn’t mean the economy is humming along. You always need to dig deeper.
Passant Gardant summed it up this way.
“The government and mainstream media always try to paint data as rosy as possible in order to support consumer confidence, falsely believing that keeping people spending will somehow improve the economy.
In reality, all it does is trick people into further overextending themselves and make things much worse.
True economic growth is supported by a high savings rate and investment with low consumer spending.
What we have is an extremely sick economy made much worse by central planners and mainstream media.”
