Inversion deepens (see sky blue line vs. green line):
Figure 1. Treasury yield curve, %. Source: US Treasury.
Over time:
Figure 2: 10yr-3mo Treasury term spread (blue, left scale), 10yr-2yr Treasury term spread (red, left scale), 1yr-Fed funds (light green), all in %, VIX at close (green, right scale). Source: Treasury, CBOE via FRED.
Funniest headline yet on Bloomberg was something like, ‘Wall Street Traders Want to Buy The Dip, But When?’ Changed it to, “Why Buy the Dip When You Can Buy the CRATER!”, after the tears of laughter cleared enough for me to see the screen again.
The next ROFLMAO headline was, ” Republicans Debate Hiking Top Tax Rate to 40% for Millionaires “. As always, the secret to comedy is timing, Timing, and TIMING. Only a complete ninny-hammer would believe this headline’s timing had nothing to do with the jaw-dropping economic incompetence of Trump’s first 87 days if the Republican’s weren’t in a panic their adult Pampers where about to run out. I doubt these pols feel any remorse, but, I’d wager what’s really giving them the rub is the import duties they’ll have to fork over for another 53 Pamper pallets betwixt now and the mid-terms. Just stop and think about that story’s headline!!! Trump the Great Tax-cutter has scared his Party of Sycophants so badly they have tossed the tax-cuts out the window and are now scrambling to put up headlines about how their going to RAISE TAXES in less than 88 days of their OJ’s ascendancy to the WH’s 35 residential porcelain thrones!!!!!!!!!! How is this not hilarious? Putin and Xi are probably having cardiac aneurysms their laughing so hard. Don’t get me wrong, if that happens I’ll be the first to nominate The Donald for The Medal of Honor, heck I’ll nominate him for the Hero of the Russian Federation chest ribbon if he prefers, either way he’ll have the Free World’s eternal gratitude for at least a week or two.
Senor Econ Wizard:
Please analyze the tariff formula in this article,
https://www.bloomberg.com/news/articles/2025-04-03/trump-s-reciprocal-tariff-formula-is-all-about-trade-deficits
Federal Reserve Governor Lisa Cook said today that the Fed can take some time in deciding how to respond to the felon-in-chief’s tariff hikes. I doubt the very first Board member to speak since the announcement that the existing world order is coming to an end spoke without checking in with her colleagues. She also said the mostly likely outcome is higher inflation and lower growth – echoing the stagflationary drift of the FOMC’s latest Summary of Economic Projections. The problem for the Fed’s dual mandate is obvious.
I’ve rounded up a few inflation forecasts made in response to the felon’s tariff announcement.
Nomura Securities expects “underlying” (presumably core PCE or CPI) inflation to rise to 4.7%.
Sam Tombs at Pantheon Macroeconomics revised his 2024 inflation forecast from 2.8% to 4.8%.
RBC puts inflation at 3.5% y/y in Q2 and likely end the year at 3.3% y/y.
Oxford Economics has core inflation rising to 3.9% this year.
Capital Economics puts CPI inflation at around 4.5% this year.
Markets have brought forward Fed rate cut expectations, but Fitch, for one, takes the contrarian view that tariffs will make the Fed less likely to cut rates. That disagreement is consistent with Cook’s (the FOMC’s?) “thinking about it” attitude. Volcker is still the central banker of legend, even if his one-sided approach might now be out of fashion. Volcker would not accommodate inflation.
The VIX above 30 is not a sure-thing recession indicator, but is routinely a part of the recessionary landscape. Of course, the erasure of $2.5 trillion in domestic equity-market value doesn’t happen every day.
Maybe it’ll all be better tomorrow. Brucie? Maybe?
Has the VIX ever risen by 8.5 points in a single day until today? I can’t find any evidence that it has. Anybody?
Republicans own this economic policy. Trump was just the messenger. Congress is majority ruled by republicans. And it is congress who has tariff authority. Republican tariffs are killing the market right now. And based on treasury yields, the economy will soon follow.
Himmler consulted astrologists, and advised Hitler on the winter campaign. Trump has Navarro, and Loomer.
Elon’s apes have screwed up the delivery of Social Security and veterans’ benefits, threatened our reffort to contain bird flu, shut down scientific enquiry, screwed up emergency preparedness and response, without having any substantial effect on the size of the federal workforce:
https://fred.stlouisfed.org/series/CES9091000001#
Look past the big spikes associated with the census. Nothing outside the range of monthly noise as happened to the total federal workforce while service to the public has been badly screwed up. What a farce.
As always the sheeple is being distracted by the wrong parameters. Getting the government work done by government employees is the most cost effective way to get the job done. But the DOGE fools the dopes to focus on “number of federal government employees”, not the cost of government services. Same thing with “saving” money by moving responsibilities from Federal government to state governments. Sure the spending number on federal government ledgers go down, but they just go up for the states. No savings just shuffling expenses to somewhere else, and false claims of “savings”.
However, it is still a great win for our Wall Street overlords. The privatized work funnels huge amounts of taxpayer money into their pockets. That $trillion Iraq war became absurdly expensive because we replaced $50 per day government employed soldiers with Halliburton no-bids contracts that charged $500 per day to have one of their $150 per day employees, do the same job. The VA contracts out work to outside doctors who charge twice as much, with 3 times longer wait time to get an appointment, and slightly lower quality of work. But their actual goal is not government efficiency or better outcomes for lower prices – their goal is the grift, and fleecing of taxpayers. Government work at the federal level is funded by a progressive income tax, whereas states often fund by flat income taxes or regressive sales taxes. So moving the cost of government services from federal to state levels, is a win for the rich.