Family members have bank CDs. Sometimes we talk when its time to roll ’em over. The talks have taken a turn. No longer do we discuss maturities in terms of priced-in market expectations and Fed chit-chat. Not 6 months vs 12 months for a few basis points, with an eye to the next roll over. Now, it’s a binary choice – go long to lock in a positive nominal return over the next few quaters or face the risk of zero rates.
Suddenly, my family members see the choice as an easy one. That’s a bad sign.
second half of this year is when you are going to see the sh!t hit the fan. layoffs are still low. people are cutting back and shifting time frames. but those changes are modest compared to what happens with layoffs. if they layoffs don’t occur, then no recession. if the layoffs pick up, it will probably snowball pretty fast. this summer you will see the inflation get into the numbers. how we respond to that will be critical. layoffs, or pay raises to accommodate inflation? or no pay raises and stagflation?
The dollar index shed about 3/4% today and is back near the mid-April low. In other words, back near the lowest level since the Fed began hiking rates. The TACO notion can only do so much when tariff noise and a Truss-like budget are both working to undermine the economy and investors’ trust in the U.S.
In other news, this comes from today’s (contractionary) ISM factory report:
“Most suppliers are passing through tariffs at full value to us. The position being communicated is that the supplier considers it a tax, and taxes always get passed through to the customer. Very few are absorbing any portion of the tariffs.”
That was also the experience with the first Trump tariffs. The most damaging part is the tariffs on metals, because they are part of so many products, including export products. Not sure if he will chicken out on his recent hike on metal tariffs, but that will pretty much destroy our exports of final products in most sectors that compete with foreign companies. China must be ecstatic.
Sometimes it amazes me how simplistic his narratives are and how uneducable he seems to be. There doesn’t seem to be any space for reflection of second order effects on any of his actions. It’s all A will cause B and we want B so we do A – end of discussion. I agree we want a viable supply of domestic metals, but tariff protection is the most destructive way to get that – so many negative secondary effects.
In this millennium the superpower is the place where capital wants to reside. US is giving away its power, by scaring away money.
The least bad residency for money may be EU. In the old days European countries at times elected governments that socialized industries. But that is a long time ago and Trumps irrationality may be more scary that that ghost of past sins.
Good News for Republicans! The Penn/Warton Budget Model folks produced a dynamic scoring model of the Big Bloated Budget Bill, just like Speaker Johnon wanted:
The dynamic model shows an additional $400 billion in deficit over ten years. That’s right, folks, by taking account of the likely economic impact of the Bloated Bill, we learn that the deficit will be WORSE than estimated by conventional, static models. So thank you, Speaker Johnson, for being such a little whiner.
Increasing the federal debt by 7.2% percent over 10 years actually would stimulate growth to the tune of (another drum roll, please) 0.4%. In other words, for the cost of balooning the debt by trillions and the interest cost of that debt by hundreds of billions, we get nothing more than statistical noise in new growth. And wages would fall over that period.
This is not a surprise to anyone who has followed federal budget debates and the results that tax cuts have provided, since the days of Reagan. Tax cuts distribute wealth to the wealthy and do nothing for long-term growth.
Trump and the GOP want to devalue the dollar and turn the U.S. into a low-cost manufacturing economy – GOP needs to take a look at our demographics – not going to happen unless we let in a lot more immigrants – or Trump and GOP just don’t care – they have their golf resorts in Saudi Arabia or other locations. .
“The sign of USD correlation with the US term premia has flipped, meaning that the higher term premia is now associated with a weaker dollar. This suggests that the market is challenging the US’s safe-haven status and trading the dollar in line with US policy concerns.”
and this: “Macquarie’s Viktor Shvets shows that EM excluding China last month recorded the largest net inflow since December 2023. Greatest beneficiaries included India ($2.3 billion), Taiwan ($7.6 billion), and Brazil ($2 billion). ” https://www.bloomberg.com/opinion/newsletters/2025-06-03/us-plans-to-tax-foreign-capital-is-alarming-the-bond-market
Where are all the Serious GOP Senators screaming about the death of American American exceptionalism?
As far as I know, an important detail is missing from our national conversation regarding tariffs. Typically, historically, tariffs are of course used to protect existing industries, hence the term ‘protectionism’. Trump’s tariffs are however different in that he expects to create new industry, and thus, he is not purely a protectionist, but more of a pioneer in some deranged way. He does keep things interesting though, but ‘things’ will not likely end well. Using tariffs to create industry and stimulate growth is missing from the historical record for a reason, it is simply a bad idea.
Unless Trump gets a clue? Ain’t happening. There will be three and a half more years of this.
Family members have bank CDs. Sometimes we talk when its time to roll ’em over. The talks have taken a turn. No longer do we discuss maturities in terms of priced-in market expectations and Fed chit-chat. Not 6 months vs 12 months for a few basis points, with an eye to the next roll over. Now, it’s a binary choice – go long to lock in a positive nominal return over the next few quaters or face the risk of zero rates.
Suddenly, my family members see the choice as an easy one. That’s a bad sign.
GDPNow for Q2 jumps to 4.6%. Weird stuff going on. I still think its about tariffs and Q1 mport stockpiles being sold off.
second half of this year is when you are going to see the sh!t hit the fan. layoffs are still low. people are cutting back and shifting time frames. but those changes are modest compared to what happens with layoffs. if they layoffs don’t occur, then no recession. if the layoffs pick up, it will probably snowball pretty fast. this summer you will see the inflation get into the numbers. how we respond to that will be critical. layoffs, or pay raises to accommodate inflation? or no pay raises and stagflation?
The dollar index shed about 3/4% today and is back near the mid-April low. In other words, back near the lowest level since the Fed began hiking rates. The TACO notion can only do so much when tariff noise and a Truss-like budget are both working to undermine the economy and investors’ trust in the U.S.
In other news, this comes from today’s (contractionary) ISM factory report:
“Most suppliers are passing through tariffs at full value to us. The position being communicated is that the supplier considers it a tax, and taxes always get passed through to the customer. Very few are absorbing any portion of the tariffs.”
That was also the experience with the first Trump tariffs. The most damaging part is the tariffs on metals, because they are part of so many products, including export products. Not sure if he will chicken out on his recent hike on metal tariffs, but that will pretty much destroy our exports of final products in most sectors that compete with foreign companies. China must be ecstatic.
Sometimes it amazes me how simplistic his narratives are and how uneducable he seems to be. There doesn’t seem to be any space for reflection of second order effects on any of his actions. It’s all A will cause B and we want B so we do A – end of discussion. I agree we want a viable supply of domestic metals, but tariff protection is the most destructive way to get that – so many negative secondary effects.
In this millennium the superpower is the place where capital wants to reside. US is giving away its power, by scaring away money.
The least bad residency for money may be EU. In the old days European countries at times elected governments that socialized industries. But that is a long time ago and Trumps irrationality may be more scary that that ghost of past sins.
Good News for Republicans! The Penn/Warton Budget Model folks produced a dynamic scoring model of the Big Bloated Budget Bill, just like Speaker Johnon wanted:
https://budgetmodel.wharton.upenn.edu/issues/2025/5/23/house-reconciliation-bill-budget-economic-and-distributional-effects-may-22-2025
Drum roll, please…
The dynamic model shows an additional $400 billion in deficit over ten years. That’s right, folks, by taking account of the likely economic impact of the Bloated Bill, we learn that the deficit will be WORSE than estimated by conventional, static models. So thank you, Speaker Johnson, for being such a little whiner.
Increasing the federal debt by 7.2% percent over 10 years actually would stimulate growth to the tune of (another drum roll, please) 0.4%. In other words, for the cost of balooning the debt by trillions and the interest cost of that debt by hundreds of billions, we get nothing more than statistical noise in new growth. And wages would fall over that period.
This is not a surprise to anyone who has followed federal budget debates and the results that tax cuts have provided, since the days of Reagan. Tax cuts distribute wealth to the wealthy and do nothing for long-term growth.
Trump and the GOP want to devalue the dollar and turn the U.S. into a low-cost manufacturing economy – GOP needs to take a look at our demographics – not going to happen unless we let in a lot more immigrants – or Trump and GOP just don’t care – they have their golf resorts in Saudi Arabia or other locations. .
“The sign of USD correlation with the US term premia has flipped, meaning that the higher term premia is now associated with a weaker dollar. This suggests that the market is challenging the US’s safe-haven status and trading the dollar in line with US policy concerns.”
and this: “Macquarie’s Viktor Shvets shows that EM excluding China last month recorded the largest net inflow since December 2023. Greatest beneficiaries included India ($2.3 billion), Taiwan ($7.6 billion), and Brazil ($2 billion). ”
https://www.bloomberg.com/opinion/newsletters/2025-06-03/us-plans-to-tax-foreign-capital-is-alarming-the-bond-market
Where are all the Serious GOP Senators screaming about the death of American American exceptionalism?
So we are exporting American Exceptionalism – at least one product we are exporting more of.
Nope. Low cost manufacturing they don’t care about. Its a rich mans grift. You still don’t get it.
As far as I know, an important detail is missing from our national conversation regarding tariffs. Typically, historically, tariffs are of course used to protect existing industries, hence the term ‘protectionism’. Trump’s tariffs are however different in that he expects to create new industry, and thus, he is not purely a protectionist, but more of a pioneer in some deranged way. He does keep things interesting though, but ‘things’ will not likely end well. Using tariffs to create industry and stimulate growth is missing from the historical record for a reason, it is simply a bad idea.