Money For Nothing And Their Bank Deposits Are Free (And ECB Still Can’t Generate Inflation)

There seems to be an inability of Central Banks to generate inflation. Take Mario Draghi  and the European Central Bank.

This morning, ECB head honcho “Super” Mario Draghi pulled a Captain Obvious press conference.

(Bloomberg) — Mario Draghi signaled the European Central Bank probably won’t stop its quantitative-easing program without tapering it first, indicating that the stimulus is likely to run past the currently scheduled end-date of March 2017.

“An abrupt ending to bond purchases, I think, is unlikely,” the ECB president said in a press conference in Frankfurt on Thursday. A sudden stop “is not present in anybody’s mind.”

Thank you, Captain Obvious. None of us were expecting a sudden stop of Central Bank QE.

Europe has an inflation rate of 0.4%, below the ECB’s 2% target for inflation.


The US is having better success … at getting near 2% inflation (defined as Core PCE growth YoY). But the US is still only at 1.7% (still below the 2% target).


With low inflation and near zero cost of funding for banks, we have seen an explosion in non-interest bearing deposits at the big banks in the US.


It truly is “Money for nothing and the bank deposits are free.”

And “All Quiet on the Western Front” on inflation.


Currency Crush! UK Pound Sterling And China’s Renminbi Continue Downward Spiral

Like that annoying game, the UK Pound Sterling and China’s offshore currency (the Renminbi) are experiencing their own crushes since 2014. Slowing global economic prospects are a likely suspect not to mention a slowing US economy.


Currency crush indeed!


5+ Unit (Multifamily) Housing Starts Plunge By Most Since April 1973

It was a tough month for 5+ unit (multifamily) housing starts in September. They fell by the largest amount since April 1973.


The good news is that 1 unit housing starts rose 8.15% in September.


Unfortunately, 1 unit housing starts are only back to 1991 levels.


Permits rose across the board, with 1 unit permits flat (but 5+ unit permits rising 17%.

Generally speaking, it is not a good idea to sit in a chair in an apartment when the floor is covered with newspaper or a plastic tarp. Especially if the host is playing Huey Lewis and The News.


Hardy Boys: The Secret Of The Public Debt (And The Mystery Of Vanishing GDP Growth)

Some economists spin a story that the public debt can be expanded rapidly to facilitate GDP growth.

Since 2001, public debt has increased YoY and has only been less than GDP growth when the debt ceiling wasn’t raised. Otherwise. public debt growth is always higher than GDP growth.


Even Federal Reserve Vice Chair Stanley Fischer is now warning of the dangers of low rates.

“Federal Reserve Vice Chairman Stanley Fischer on Monday warned of the dangers of low rates.

In prepared remarks for a speech at the Economic Club of New York, Fischer suggested that low rates can lead to longer and deeper recessions, making the economy more vulnerable.

He added they can also threaten financial stability, although the evidence so far doesn’t show a heightened threat of instability.

Fischer said the central bank has a limited ability to combat recessions because it does not control all the factors leading to depressed rates.”

As in nominal GDP growth has not exceeded 5% since The Fed began their zero interest rate policies.


The guy on the left kind of looks like a young Stanley Fischer.


Gimme (Expensive) Shelter: 11th Straight Month Of Core CPI YoY Of 2% And Higher

Well, today’s release of consumer price indices revealed that … this is the 11th straight month of core CPI (less energy and food) on 2% of higher.


And in terms of rent (as in owner’s equivalent rent of residences), this is 54 straight months of 2% and higher growth in rent.


In terms of effective apartment rents, they have risen rapidly since peaking in 2008.


Gimme (expensive) shelter!


Zuckerburg: San Francisco Area Home Sales Plummet 12% YoY, Largest Quarterly Decline In Homeownership Since 2005

Apparently, more than hearts are being left in San Francisco. Home sales are being left behind as well.

As of August, home sales in the San Francisco Bay Area have plummeted around 12% YoY.


Of course, when home prices become outrageously expensive, we expected that a threshold would eventually be reached. Now, San Francisco home prices exceed the peak of the infamous housing bubble. And San Francisco home prices soared along with
The Fed’s third round of quantitative easing (QE3).


The result? The homeownership rate in San Francisco suffered the largest quarterly decline since 2005 in Q2 2016.


Perhaps San Francisco should have a welcome sign saying “The Unaffordable City By The Bay … If You Aren’t Facebook’s Mark Zuckerberg or Apple’s Tim Cook.”


Or rename San Francisco as Zuckerburg.

US Industrial Production Drops -1.03% YoY For September, Capacity Utilization Continues Below 80%

Although Bob Dylan won a Nobel Prize (for singing off key), his song “Don’t Think Twice, It’s Alright” is appropriate for this economy.

That is, don’t think about why the US is really slow to recover from The Great Recession (or why we suffered a massive credit bubble and home price burst that began in 1995).


But back to industrial production. Industrial production YoY fell -1.03% in September. And has been declining since last summer. That is 13 straight months of contraction!


And capacity utilization still remains below the 80% target and has not hit 80% since Q1 2008.


The temptation is to say, “But we are a service economy!!!” But don’t think twice, it’s alright.

Bill Clinton at the last Presidential debate: “Don’t mention my National Homeownership Strategy!” national_homeownership_strategy1

Chelsea Clinton, daughter of Hillary Clinton and former President Bill Clinton watch during the second presidential debate sbetween Republican presidential nominee Donald Trump and Democratic presidential nominee Hillary Clinton at Washington University in St. Louis, Sunday, Oct. 9, 2016. (Jim Bourg/Pool via AP)

From Clinton’s National Homeownership Strategy: “The goal of this strategy is ambitious: to generate up to 8 million additional homeowners from 1995 through the year 2000. The strategy recommends a series of concerted actions to help middle-income and low-income families, racial and ethnic minorities, families with children. and young adults overcome current barriers to homeownership. These actions will be undertaken by private industry, national nonprofit organizations, nonprofit community groups, and Federal. State. and local governments working in cooperation at the national, State, and local levels.”