Jerome Powell Is Popular. His War on Inflation Could Change That.

    The article emphasizes the possible risks from the outcome of Jerome Powell's war against inflation and how it could bring about a legacy that Jerome Powell would not like to be remembered for. Jerome Powell's administration decided to raise interest rates very quickly (the fastest rise in more than 40 years) to curb inflation in the economy recently. With the decision made by the Jerome Powell administration, the economy could be at risk.

     Powell could either reduce it back to normal quickly (Back Track his plan) which would lead to what happened during the period of Arthur Burn's administration in the 1970s, or stick to his decision, which if not carefully watched, would lead to recession, just as Paul Volcker's administration in the 1980s (1982). The disadvantage of backtracking before inflation is curbed is that people expect high-interest rates and that would result to rapid price increases to linger. The disadvantage of sticking to it before inflation is curbed is that unemployment would rise rapidly because the cost of wage per labor would increase due to the high-interest rate, which then would lead to recession. 

    From the news article, I believe consumers and banks are most fearful of the extreme case of recession than a case of a rapid price increase, which is enough reason for Jerome Powell to backtrack his way in order to prevent a recession. But the personality of Jerome Powell, I believe Powell will not want to break track, even stating that "We will keep at it until we are confident the job is done".

    In my opinion, I believe what Jerome Powell is expecting is a warning sign before he reduces interest rates, which might not happen. From the new article, during Paul Volcker's administration, the unemployment rate started to increase before the recession kicked in. But unfortunately, with the presence of hybrid and online jobs being offered, the unemployment rates would continue to decrease. The decrease in in-person jobs opportunity as a result of high-interest rates would not easily be shown in the unemployment rate. In conclusion, if Jerome Powell can get his hands on the unemployment rates of hand-skilled jobs (such as farmers, builders, carpenters, and car dealers), he can notice from there, when the spikes occur and not be fixated on the real unemployment rates which have been affected by the presence of hybrid and online jobs which fits people comfort.

https://www.nytimes.com/2022/10/31/business/economy/jerome-powell-fed-inflation.html#:~:text=That%20could%20allow%20officials%20to,in%20the%201980s%20so%20far.

Is the US headed toward a housing crash? Experts say it’s not 2008

 Increased mortgage rates, a decline in home sales, and a record high price slowdown, all leads many analysts to believe a crash is soon to come. Mortgage rates have been over 7%(first time in two decades). Home Price has decreased 2.6% in August, and home sales has dropped 11% in September. 

Some say this is the housing market getting ready to crumble while others believe it is just steadying out. During covid, the governments goal was to stimulate the economy. By doing so, mortgage rates were next to nothing. Today, mortgage rates are sky high in hopes to combat inflation(but isn't doing that great of a job). Since the 2008 crisis, economists have worked to fix what they did wrong in the past, so there is still hope for this second go around.

"the housing market boomed because of extremely low mortgage rates, intense competition bolstered by low inventory and remote work options, and soaring home prices."

https://www.google.com/amp/s/thehill.com/policy/3710099-is-the-us-headed-toward-a-housing-crash-experts-say-its-not-2008/amp/

China GDP Data Is Unexpectedly Released After Delay

    The leader of China, Xi Jinping, has been making changes to how the countries economy is shaped and on paper it looks like a good thing. Amidst an almost global halt or recession in county's GDPs, China has increased their GDP from Q2 by 3.9%. The results were slightly delayed, leaving some questioning how reliable these number are but just looking at the overall change things are looking up in China. During this delay, Xi took the opportunity to reorganize the other leaders with him, giving the people loyal to him higher positions and demoting some of the nations top economic minds. In the new GDP data, the statistic show that the 3.9% increase was due to a massive increase in national security spending. There was even drops in the financial markets, currency power, employment, and overall economic growth. This new concept of business showed change in the short run but has not sustainability in the long run and will soon deteriorate the Chinese economy. 

    This biggest impact Xi has made on the Chinese economy is the focus on restricting the technology sector. This is a major source of income for the country, who produces and exports many to all of our devices that we use today. These planned restrictions will continue to eat at the Chinese GDP and will lead to not so favorable data for Xi and his country. Private property developers are having to default on debts and business tycoons are leaving the country in search of a more welcoming economy. The policies that are being put in place are hurting the countries economy and will lead to a decrease in GDP.

    This information about the economic unrest in China is important for Americans because when the country had their last recession in 2008, they highly relied on China's strong economy for support. With the glooming recession that America is about to face, a weaker Chinese economy is not something either country can afford right now. Both countries will be faced with hard times and neither will be able to help the other with a strong currency and/or economy. Hopefully there is another country that can maintain stability in their economy in the near future to help support economies around the world.

https://www.nytimes.com/2022/10/23/business/china-gdp-economy.html

US economy grows, despite surging inflation

 The U.S. economy grew at a 2.6% annual rate from July through September, a strong comeback after the GDP shrank in the first two quarters of the year. The resurgence comes as consumers and businesses are grappling with soaring inflation and as rising interest rates rapidly cool the housing market. The outlook for the world economy grows bleaker, the longer that Russia's war against Ukraine drags on. In the short-term, the latest growth figures are likely to ease concerns that the U.S. is on the brink of a recession. But the stronger than expected economic activity in last quarter raises concerns that the FED will continue to aggressively drive up interest rates. Economists say they expect economic growth to slow in the fourth quarter as the boost from exports decreased. But a bigger concern may be whether the U.S. could enter a recession within the next year, Hiring has been decelerating, although employers have added an average of 420,000 jobs a month this year, putting 2022 on track to be the second-best year for job creation, behind 2021, in Labor Department records going back to 1940. The unemployment rate was 3.5% last month, matching a half-century low, job growth is likely to slow further in October. The future outlook remains bleak as a recession is expected but not before the start of the new year.

Dow Closes Lower on Monday, But Still Posts Best Month Since 1976

 According to the article posted on Oct 31 at 5:47pm, the Dow fell 0.39%. While the S&P 500 shed 0.75% and the Nasdaq Composite fell 1.03%. But for the month of October all of them have made comebacks with the Dow gaining the most of 13.95%, the S&P 500 8% and Nasdaq 3.9%. This is the best gain the Dow has had since 1976. Mainly because of investors investing in more traditional companies like banks, which lead to the next bull in the economy. All of this increase is in spite of slowing growth from tech companies causing mixed earnings. 

https://www.cnbc.com/2022/10/30/stock-market-news-futures-open-to-close.html

The Fed is Expected to Raise Rates by 75 Basis Points to "Lay the Ground Work for a Step Down"

 The Fed is expected to raise interest rates by 75 basis points. After two days of Federal Open Market Committee, they are expected to raise rates for the fourth meeting in a row. It is also expected that the central bank will stand down a bit on their stance to help lower inflation and to slow down the rapid growth of rates. Michael Pearce, a senior US Economist of Capital Economies, wrote a letter to clients saying, "We do expect Chair Jerome Powell to… use the post-FOMC press conference to lay the ground for a step down in the pace of rate hikes". 

After the September meeting, officials felt that the central bank could have slowed the pace of rate hikes so they could've assess the impact and damage that previous rate hikes have made on inflation. Fed officials are also expected to think about balancing raising rates to cool down the current rate of inflation. This will run the risk of rates getting too high and creating a recession. Mary Daly, President of the San Francisco Fed says that the Fed should be "talking about 'stepping down' when inflation show signs of abating".

Domestic demand appears to be being pushed down by high interest rates according to data. Final sales to private domestic purchasers only increased by 0.1% this past quarter, a significant step down from the increases compared to the first two quarters of the year, that being 0.5% in the second quarter and 2.1% in the first quarter. 

Consumer spending also seems to be having a hard time, as imports fell by 7% in the third quarter. Along with that, job markets are slowing down with job openings falling as well. The job report that will be released on Friday only projects that 200,000 nonfarm payroll jobs were created. This is significantly lower than the monthly average of 2022, that being 420,000. The employment cost index was raised by 1.2% this past quarter, which shows that the inflationary pressures are getting lighter. The official measures aren't easing as quickly as they were hoping it to. The PCE only rose by 5.1%, much higher than their goal of 2%. They are also projecting interest rates to raise between 4.5%-5% to help lower inflation down to their 2% goal.

This is an interesting article because this is projecting what we could expect from the economy and the potential recession that will occur from the inflation and interest rate hikes. 

https://finance.yahoo.com/news/fed-expected-to-again-raise-rates-223821317.html

Inflation in everything but pay

    The prices of the Wendy's baconator have risen and people have taken to tik-tok to talk about the inflation of prices of the baconator. While it appears based on price listings that the claim of a $14 baconator is exaggerated it still is clear that the prices are higher than they have been in the past, but people in the comments have taken to a discussion of how the prices have changes but their wages have not.

    It is interesting seeing how people have taken to talking about the economy over different social media platforms as a way to spread information and discuss things like inflation and wages. I am curious to see how platforms like tik-tok and discussion about this will impact the economy if at all because many companies may not see posts like these at all or if they do ignore them and write them off as just whining about little things when they may actually be a much bigger deal and paying attention to what people say could help some companies tremendously with getting more workers with better work ethic,

 'Everything Is Going Up Besides Our Pay': Wendy's Customer Is Flabbergasted By Having To Pay $14 For A Combo Meal (msn.com)

The Fed may have to blow up the economy to get inflation under control

This article discusses the implications of the Fed’s policies in recent times while looking ahead to the releases of new data, and the changing leadership of the Fed. It is looking likely that the Fed will raise interest rates again this Wednesday by 0.75 percentage points as they continue to battle inflation. The article raises the question that many Americans have been questioning, namely whether the current fiscal policy will lead us into a recession. However, as pointed out by the business writer, Paul La Monica, this situation is not something that the Fed has much experience dealing with, noting that previous Fed electives have never had to raise rates by such a significant margin this many months in a row. With that being said, there have already been signs of the housing market showing strain, as well as bond yields spiking.

One of the main worries which are referenced in the article is that policymakers will not slow down to think of the lag effect that raising interest rates can create. Current changes in policies will likely only show at a point much later than the initial change. On top of this, with the rotation of regional Fed presidents occurring in early 2023, there will likely be a change in the willingness to follow current policies.

The article also looks toward the upcoming release of labor market data, where growth is expected to continue but at a much slower rate than previously experienced so far in 2022. Even with this being the case, the labor market remains tight and has experienced an increase in average hourly earnings that have been higher in the last 12 months than in previous years. The article closes with a quotation from economists at the Hamilton Group; “The pace of hiring is very high, unsustainable, and is pushing up wages and inflation”.

           

https://www.cnn.com/2022/10/30/investing/stocks-week-ahead/index.html

Federal Reserve Expected to Raise Interest Rates

 This coming week, experts expect the Federal Reserve to raise interest rates to stop inflation again. This would make it the 6th week in a row that the Federal reserve has raised interest rates. The 6 consecutive rises in interest rates strongly signal a panic at the federal level about inflation, this should not come as a surprise to most people who have been paying attention to the economy at all, because inflation has been rising for more than 6 months. 

If the Fed does increase the interest rates this could affect the general public in a few ways. The first and most common would be credit cards. Since credit card interest rates are variable a hike in Federal Interest Rates could easily trigger credit card companies to raise their interest rates at the same or higher level as the Federal Reserve. CNBC reports that rates have already raised from 16.3 percent at the beginning of 2022 to almost 19 percent here in October. 

The same goes for Auto Loans and many other types of small loans have already increased their interest rates and are expected to keep rising if the fed does keep the interest rates increasing. Auto loans have already increased from 3.86% to 5.63% and are expected to rise to 6% by the end of the year.

https://www.cnbc.com/2022/10/31/another-fed-rate-hike-is-on-the-way-heres-how-it-could-impact-you.html 

Unexpected rise in inflation despite the rate hikes

 CPI increased by 0.4% for the September 2022 and the October data will be released on at 8:30am Eastern time 10th November 2022. The food index made headlines after jumping 0.8% which was similar to the month of August and was up by 11.2% from last year. Inflation is continuing to rise despite the efforts of the Fed to keep to keep prices under control. 9,000 increase in the jobless claims from last year indicated that the layoffs are still low.

Consumer price index September 2022: (cnbc.com)

Investors Fear the Fed will tighten rates too much because of inflation

 NBC News posted an article concerned with the Fed’s response to inflation. With inflation rates rising to painful levels, investors are looking to the Federal Reserve to do something about it. However, some investors now worry that the Federal Reserve may move too quickly on monetary policy and cause a recession. The Fed considered raising rates by 50 to 75 basis points in early September. By late September, however, that number changed to raising rates by 100 points instead. This is causing investors to be concerned. Jeffrey Sherman, chief investment officer for DoubleLine believes that this issue has happened many times before, with the Fed having “overtightened…more often than they have not”. It has also been stated that a rise in rates to 4.5% would come with the consequence of stocks sinking by 20%. Although it is currently unknown how far the Fed will go, the worry alone of Fed tightening has contributed to a decline of 19% in the S&P 500 this year. Some may say that the Fed should be aggressive when fighting inflation, but others believe that rising rates too high will do more harm to the economy than good.

https://www.nbcnews.com/business/economy/investors-fear-higher-interest-rates-inflation-rcna48308

Manufacturing is a Bright-spot for a Weakening Economy

 

    Reports of surging inflation and a looming recession are highlighted daily in the media across the U.S. However, some sectors of our economy have strengthened during this time of economic uncertainty. The article, "U.S. factories emerge as a strong point in a weakening economy", details how it has been a strong year for U.S. manufacturing, despite higher interest rates. According to the Federal Reserve, this September saw factories add 467,000 jobs and experience the highest production rate in 14 years. Auto manufacturing, which has had it ups and downs over the recent months, also managed to increase production by 1% in September. These increases in production in addition to jobs are an impressive feat given these industries have dealt semiconductor shortages since the beginning of the pandemic. Despite recent success, manufacturing is well off its 1979 high in terms of employment. Less than 9% of U.S. jobs today are manufacturing jobs, compared to 22% in '79. The combination of increased efficiency, manufacturing jobs moving overseas, and the need for more tech savvy laborers have been cited as reasons why manufacturing employment has fallen over the past 40 years. 

    Although many are pleased with the performance of the manufacturing industry, as look toward the future there are two main causes for concern. Increased mortgage rates have lowered home sales, leading to lower demand for manufactured goods that go along with the purchase of new home. And the appreciation of the U.S. dollar, which is likely to have a negative effect on manufacturing exports. As we learned in class, the appreciation of a country's currency makes its exports more expensive. This is a real life application of what happens when the dollar strengthens. 

https:/www.mpr.org/2022/10/20/1130021630/factories-factory-industrial-production-employment-jobs-economy

Elon Musk says a global recession could last until the spring of 2024

    Elon Musk, Tesla founder and CEO, publicly commented on how long he thinks the global recession could last. Musk, who has a following of 112.6 million on twitter, responded to a tweet asking how long he thinks the recession would last, he said, “Just guessing, but probably until spring of ’24.” 

    If the IMF’s predictions are correct, Global GDP will decline to 3.2% this year and 2.7% in 2023, being the weakest pace of growth since 2001, outside of the financial crisis in 2008 and in the beginning of the Covid-19 pandemic. While we all know the pandemic has caused lasting effects, many corporate titans have commented on what think will happen to our economy in the coming years. Not only successful founders and CEO’s, such as Jeff Bezos and David Solomon, have voiced their opinions on the economy and a potential recession, but also high earning celebrities such as Cardi B. While influencers have shared their predictions about the future economy, their ideas and concern are all a bit different. 

    Musk also expressed that North America is in pretty good health overall, interest rates being slightly high by should be brought down. Despite worries of a recession, Brian Moynihan, Bank of America CEO, assures Americans should continue to spend freely as there isn’t any immediate concern of a recession. 

https://www.cnbc.com/2022/10/21/elon-musk-says-a-global-recession-could-last-until-the-spring-of-2024.html

https://www.axios.com/2022/10/21/elon-musk-global-recession-jeff-bezos

Concering Inflation Rates in Turkey

    Inflation has become a problem throughout many different countries as of recently, to the point that the FED in the US has decided to raise interest rates in order to reign it in. Internationally, inflation seems to be even more out of control, with Turkey having one of the most ridiculous rises in interest rate in recent times. Inflation in Turkey has reached 83%, a 24 year high. The annual rate is estimated to be 186.27%, with very little to stop it due to Turkish president Erdogan claiming interest rates as the "mother and father of all evil". The country seems to have reached an economic crisis impacted by both local and global events. 

    Although Turkey is not the only country currently suffering from the consequences of inflation, they are definitely one of the most impacted. With the global economy heading towards a recession, the country looks to be in dire straits. Changes in leadership or financial policies may be needed to help recover from the current situation. However, with a looming recession it could already be a bit too late for Turkey.

Source: https://www.bbc.com/news/world-europe-63120478

     

The Fed may have to blow up the economy to get inflation under control

CNN posted an article regarding the Federal reserve possibly raising by almost 1 percent this coming wednesday which will be its 4th increase this year. The interest rate is also projected to increase this December. With the constant rising in interest rates the public is concerned that the Federal Reserve is sending the economy into a recession. There are many indications that point to the possibility of a recession on the horizon, the housing market is beginning to show struggles for the future with mortgage rates increasing in massive increments. The Fed is also adamant about continuing to increase interest rates as they feel it will allow the economy to slow down and hopefully bring down inflation rate.  By looking at the trends and how well the job market is doing right now it can be assumed that the Federal Reserve will continue to hike up interest rates at the rate they are because as per statistics the job market is up almost 200,000 jobs this month compared to last month where we experienced almost 300,000 jobs lost. Looking at this activity the main question is when will the end of this seemingly never ending price increase begin, with this being said it is likely that the Fed will continue to increase interest as many professionals feel we as a country are coming to the end of this recession very soon. I think this economic activity will cause another housing market crash, we are already seeing signs of the housing market slowly declining.  

https://www.cnn.com/2022/10/30/investing/stocks-week-ahead/index.html

 

                        Higher Interest Rates Fuel Losses at the Federal Reserve

The Fed has been aggressively rising the interest rates to fight inflation due to the high inflation the economy is currently experiencing. But what has this been causing? The Fed has actually been losing money. 

The Fed operating losses have been growing in recent weeks. This is due to the money it has been paying to banks and money market funds, it now exceeds the income it has been earning $8.3 trillion in treasury and mortgage backed securities. The head economists at Barclays have predicted it wont see a profit until 2026. If the Fed continues to do so they won’t have to tuen to congress for funding, they will instead create an IOU. This will go on their balance sheet and be listed as a deferred asset. Then in the future when they have a surplus it would then pay off the IOU. 

In September when the Fed raised rates to 3%-3.25%, they began earning less on its assets than it pays out in liabilities. They are now expected to raise rates by .75% on Wednesday after their two day meeting concludes. However this operating loss does not affect our monetary policy.

"Wonking Out: It’s a Lagged, Lagged, Lagged, Lagged World"

     Several days ago in the New York Times, there was an article that was released by Paul Krugman entitled "Wonking Out: It’s a Lagged, Lagged, Lagged, Lagged World." In this article, Krugman talks about how the Federal Reserve is a way of shaping the current Economic Policy in the United States by raising interest rates, which should cool down the rising inflation. 

    Krugman says that so far the Fed has been successful in tightening financial conditions. He also says that with this policy, the Fed operates in two channels "Tight money raises mortgage rates, which causes a housing slump, and it also leads to a strong dollar, which eventually makes U.S. goods less competitive on world markets." On both channels thus far, the policy has been successful in financial terms but so far Economists have yet to see any evidence of Economic cooling. 

    The evidence that has been released in the last week has seen the opposite of what the Fed has hoped. The latest inflation report provided by the Bureau of Labor showed still rising rates though the GDP report that has been recently released in a way disputed claims of us already being in a recession because it was relatively strong though. Krugman hints that numbers rarely "speak for themselves," which has led to many heated arguments among Economists. A majority of these arguments have sprouted from not knowing what figure to look at. Some think that looking at the growth rate in terms of annually helps to understand what is happening in the economy. Others believe that the number to watch out for is the "core GDP," which is a figure that excludes " net exports, inventory changes, and government purchases."

    Throughout the rest of the article, Krugman talks about the issue of inflation. He believes that the reason why we have not seen the cool-down effect from the Fed's new policy is that "there are good reasons to believe that there are long lags between policy changes and the reported numbers." Overall I really enjoyed this article and I thought it was a good extension of what we have learned so far in this course. 

https://www.nytimes.com/2022/10/28/opinion/fed-inflation-interest-rates.html

 China's Covid Policy Could Have Dire Effects on the Global Economy.

Hunter Mariotti

    According to an article in the Wallstreet journal, Chinese president Xi JinPing has responded to recent, "outbreaks" of Covid-19 with incredibly strict lockdowns, including shutdowns of major production centers of China. The president continues to pursue a "zero-Covid" policy which is having considerable effects on the production of Chinese goods in areas such as Zhengzhou, one of the country's pivotal production centers. 

    China is obviously one of the largest contributors to the world economy being the second largest individual economy in the world. It's main offering to the world is production of goods at relatively cheap prices. Many staples of consumer goods companies outsource production to China such as Apple. 

    A halt of production in China could exacerbate the looming problems of much of the global economy. The U.S. and Europe are likely to fall, if they are not already, into recession, which could lower demand for Chinese goods. Chinese production of goods could serve as a slight dampener for the struggles that are slowly coming to fruition in the global market. However, the Chinese production system is, unfortunately, a victim of the predations of the Chinese Communist Party. The regime has made Covid-19 a focal point of their nation's policy, and continue to do so in a time when the Covid-19 virus has become less and less harmful to people. Not to mention a fully functioning vaccine that prevents people from contracting severe cases of the virus. 

    On the whole, the actions and policies currently being pursued by Chinese leadership will not only substantially stunt their own growth, but will create a larger issue for the rest of the world in a time of already grim economic outlook. 

https://www.wsj.com/articles/chinas-factory-slowdown-worse-than-expected-under-weight-of-covid-policies-11667213933

Quarter 3 GDP Numbers Better Than Expected

     The Bureau of Economic Analysis reported that, for the first time in 2022, the economy has posted its first positive growth. These numbers are a potential sigh of relief for Americans for the time being. For the period, GDP has increased at 2.6% pace, which is 0.3% better than expected. A common principle for an economy to be in a recession is two consecutive quarters of negative GDP growth, and this positive reading is following two consecutive negative readings, so hopefully this is a sign for better times. Ultimately, the National Bureau of Economic Research will decide if America is truly in a recession. This growth came mostly from a narrowing of the trade deficit, and most economists do not believe that this level of deficit will happen again in later quarters. With that being said, it is unlikely that this strength will be able to be sustained. However, there may still be hope for a soft landing, but it's hard to believe that this is actually good, forward momentum. The fed is now under pressure to make a decision due to this positive growth. Should they continue to hike up interest rates with inflation being lower and GDP higher? In the last six recessions, there was a positive growth of GDP right before the downfall, so anything is possible, but it does look like a soft landing is unlikely, and the fed will most likely continute to raise interest rates higher than the economy can keep up with.

https://www.cnbc.com/2022/10/27/us-gdp-accelerated-at-2point6percent-pace-in-q3-better-than-expected-as-growth-turns-positive.html

Dot-com Bust 2.0 is Becoming a Reality

 Are we experiencing the second dot-com bust? Some commentators are starting to draw comparisons between this year's tech crash, which has already cost the Nasdaq $8 trillion in value, and the dot-com bubble bust in 2000–2002, during which the Nasdaq suffered losses amounting to $8.6 trillion in today's dollars. On the other side, the industrially oriented Dow is on course to have its greatest October ever.

https://www.axios.com/2022/10/28/stock-market-tech-dot-com-bubble-2022

GDP, LNG, Meta's Q3

The first Q3 GDP estimate was released and for the first time in 2022 the estimate was positive. GDP was estimated to have grown at an annual rate of  2.6%. However, one of the largest reasons for this turnaround is a swing in international trade. Exports rose significantly as the U.S. is exporting oil and national gas abroad. Imports also fell leading to a substantial decrease in the deficit. It'll be interesting to see how estimates change in the near future. Consumption still remains strong, however, the housing market has been dropping in recent months leading to decreases in investment. 

Last Wednesday, Meta reported its Q3 earnings, and they fell well short of their estimated revenue. The market responded accordingly as the stock dropped 24%. Meta stock has seen a severe drop in the past year. This is due to competition in the social media market with the people using other platforms such as TikTok. Investors are also skeptical of the significant investment being made into building the metaverse. 

This past week, one megawatt hours' worth of natural gas cost -$16 in Europe. Since the start of the Russia Ukraine war, the supply of natural gas in Europe has declined immensely. Europe relies heavily on gas coming in from Russian pipelines. Recently, the adjustment being made has been importing liquid natural gas or LNG from other parts of the globe such as the U.S.. However, Europe lacks the infrastructure to hold high levels of LNG. Thus, there is a bottleneck of ships carrying LNG in European ports. As ports get congested, and the fuel needs to be unloaded, prices have dropped substantially so that ships can unload the fuel and depart. As Winter grows near, it will be interesting to see how the energy market fluctuates in Europe

https://www.npr.org/2022/10/28/1132364114/gdp-lng-and-metas-q3

The Fed may have to blow up the economy to get inflation under control

 The first part of this article explains how the Fed is probably going to raise interest rates by three quarters of a percentage point, making it the fourth straight increase. With the massive increase of interest rates these past couple months, people are wondering if the Fed will send the economy into a recession. This is a scary couple months for the economy because the former central bank chairs and current Treasury Secretary never had to raise rates this many times in a row by such large amounts. 

Due to the increase of interest rates, the effects have already started to show. The housing market is in some strain, bond yields have been spiking, and mortgage rates have skyrocketed this year. The thoughts of a recession keep growing and growing, but as long as the jobs market remains semi healthy, the Fed is most likely going to focus on the price stability mandate. A big worry in the Feds strategy is that they are looking too much into he current data and not thinking enought about the lag effect in the future. It is almost a given at this point that a recession is going to happen, so the Fed should worry about lessening the damage it actually causes to the US.

There’s another factor at play that could lead the Fed to raise rates sharply at its next two meetings and then slow down its pace. Every year there is a rotation of regional Fed presidents who vote at centraal bank meetings. The change takes place before the first meeting of the new year which could call for a change in support from a hawk stance (higher rates) to a dove stance (against future raises). Which would drastically change how our economy would function. 

https://www.cnn.com/2022/10/30/investing/stocks-week-ahead/index.html 

U.S. economy rebounds in Q3 on boost from trade, but demand stalling

The economy bounced back rather strongly during the third quarter and had a shrinking trade deficit. The data was overstated and portrayed the economy as performing better than it actually was. The demand was the lowest it has been in two years due to the high interest rates of the Federal Reserve. The third quarter GDP report showed residential investment for another quarter bringing it to six straight quarters. This is the longest continual stretch since the collapse of the housing market in 2006.

The report showed a substantial decrease in inflation since the second quarter but price pressures continued to increase. The return to growth after two consecutive declines in the GDP gave some evidence that the economy was not in a recession. The risks of a downturn have increased and the Federal Reserve is increasing the interest rates to balance out inflation (some of the highest inflation we have seen in 40 years). A senior economist from BMO Capital Markets in Toronto, Sal Guatieri, believes that the U.S economy is losing steam even though it seems to be doing well. The GDP increased at 2.6% rate in the previous quarter post-contracting 0.6% pace in the second quarter. Economists polled by Reuters had forecasted GDP growth bouncing back at a 2.4% rate with the highest estimates at 3.7% pace and the lowest at a 0.8% pace.

The trade deficit narrowed substantially and exports increased. The smaller trade gap increased GDP growth percentage points by 2.77. The rise in demand was slow. The collected data will not likely have substantial impact on monetary policy. Spending was slowed by a decrease in goods mainly for motor vehicles and food and drinks. Services increased (lifted by healthcare and travel abroad).

Employers remain hesitant to lay off workers that have been difficult to acquire. Companies spent more on capital (especially in transportation) last quarter. Businesses also invested in software. Government expenditures rebounded after 5 quarters of decline. Defense spending led this. Household incomes rebounded at 1.7% pace after decreasing in the second quarter. With slowing demand, retailers are acquiring excess merchandise in their inventories which is causing them to slow production.

https://www.reuters.com/markets/us/us-economic-growth-rebounds-q3-trade-demand-is-slowing-2022-10-27/

"Economic Pressures Weigh on Voters in Final Midterms Campaign Stretch"

 The Wall Street Journal's article, "Economic Pressures Weigh on Voters in Final Midterms Campaign Stretch" connects the economic struggles of many Americans at this time to the impacts it may have on the upcoming Midterm elections.  Midterm elections often do not have nearly as high of a turn-out rate as presidential elections, but midterms can have significant impacts on the laws passed and voted upon in upcoming elections.  The Wall Street Journal interviewed a number of people with varying political perspectives and many said that they are likely to vote for Republicans in the Midterms given the current economic worry amongst the general population.  The article also supported, as we have mentioned in class, that approval for the current president and/or political party is directly correlated to the economic situation the country is in at the time.  Many people will blame the political party in power for the economic downfall.  According to the Wall Street Journal, many site inflation and President Biden's student debt relief program as reasons for currently distrusting the Democratic Party.  I expect the prediction that many people will vote for Republican candidates in the Midterms will be accurate, but I am especially interested to see the voter turn-out rate because the article mentions that the last Midterm election received an incredible turn-out rate, and that was when the economy was doing really well in 2018.

https://www.wsj.com/articles/economic-pressures-weigh-on-voters-in-final-midterms-campaign-stretch-11667035804