“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
The PCE inflation measure rose 0.2% in October, under the forecast, while the personal savings rate fell to 2.3%, the lowest since 2005. @bloomberg
A key gauge of US consumer prices posted the second-smallest increase this year while spending accelerated, offering hope that the Federal Reserve’s interest-rate hikes are cooling inflation without sparking a recession. The personal consumption expenditures price index, excluding food and energy, which Fed Chair Jerome Powell stressed this week is a more accurate measure of where inflation is heading, rose a below-forecast 0.2% in October from a month earlier, Commerce Department data showed Thursday. The saving rate fell to 2.3% in October, the lowest since 2005, the Commerce Department report showed.
The run-up in energy prices has driven an increase in trade imbalances, with a ~ $1 Trillion surplus largely ending up in the hands of autocratic countries: China, Russia, Saudi Arabia, and the Gulf. @Brad_Setser
There was an enormous swing in the trade surplus of the energy-exporting economies, and surprisingly, China’s surplus also has continued to rise. Russia’s surplus is set to top $250 billion. Saudi Arabia’s surplus should top $200 billion. The other monarchies in the Gulf should have a surplus comparable to that of the Saudis—if anything, it will be a bit bigger. Summed up, these autocratic countries’ surpluses should total about $1 trillion in 2022. But there is an important difference between now and then: the big autocratic surplus countries are not adding to their formal foreign exchange reserves. By implication, private financial intermediaries somewhere around the world will need to absorb Treasury bonds. Just as financial intermediaries globally had to absorb U.S. “subprime” (household) risk prior to the global crisis, now they have to absorb U.S. interest rate risk.
.@PaulKrugman suggests that wage growth for lower-income families has more than offset inflation, even accounting for their higher food and energy consumption.
The labor economist Arindrajit Dube has estimated hourly wage changes — by decile rather than quartile — over a longer period since the beginning of the pandemic recession. He finds that real wages for the bottom 40 percent of workers have increased. Lower-income families spend a higher than average share of their income on food and energy, which are also the categories that have seen the most inflation recently. My rough calculations suggest that even when you take these food and energy costs into account, lower-income families have done better, not worse, than others, at least in terms of inflation’s effects. But it does lessen that difference somewhat.
An Oliver Wyman model argues that the increase in inequality has driven equity valuations @jmackin2
Oliver Wyman has constructed a model of demand for stocks that tries to assess the effect of inequality and two other long-running shifts. These are the rise in willingness of pension-fund managers to hold stocks since the 1950s and the easier access to stocks for ordinary investors, both through lower fees and the popularity of funds. This “demand-weighted income” measure is then compared with household equity wealth to come up with something akin to a slow-moving price-to-earnings ratio. A price-to-inequality ratio won’t replace a simple price-to-earnings gauge. Inequality data are slow to be produced, so this can’t be used as a real-time indicator.
While global debt declined slightly from last year, the total outstanding debt is $290 Trillion, up 1/3 from a decade ago, as borrowers face rising interest rates globally, report @mccormickliz @atanzi @endacurran
The total debt owed by households, businesses, and governments stands at $290 trillion, up by more than one-third from a decade ago, according to research by the Institute of International Finance. Although the world’s debt has declined from a pandemic-driven record early this year, the risks it poses to economies and financial markets are intensifying.
Since the start of the current tightening cycle, increases in the Investment Grade Corporate Bond Market Distress Index (CMDI) have been relatively modest. The index remains close to historical medians. @NewYorkFed
The increases in the Investment Grade Corporate Bond Market Distress Index since the start of the current tightening cycle have been relatively modest. Overall, the IG CMDI has trended sideways recently, with the 2022 peak not substantially above that observed in the 2015 tightening cycle.
The president of the German federation of industry argues “more than a fifth of German medium-sized companies they had polled were considering packing up and leaving the country,” given expected structurally higher energy costs going forward.
FAZ quotes the president of the German federation of industry as saying that more than a fifth of German medium-sized companies they had polled were considering packing up and leaving the country. Despite recent market moves, end-user energy prices will not revert to the pre-war times on a sustained level. What we expect to see in Germany is not so much large de-industrialization but a shift in production technologies. We expect to see a shift away from energy-intensive production, like bulk chemicals and steel, towards lower energy-intensive industrial segments and a shift towards low carbon technologies, in particular, a process that will be accompanied with friction and possibly lower GDP growth.
2021 saw a record 48,953 gun deaths or 15 fatalities per 100,000 people. Black men aged 20-24 suffered 142 firearm homicides per 100,000 people in 2021, a 74% increase since 2014. @wsj
A record 48,953 deaths in the US, or about 15 fatalities per 100,000 people, were caused by guns last year, said the analysis published Tuesday in the journal JAMA Network Open. Since 1990, rates of gun-related homicide have been highest among Black men aged 20 to 24, the analysis said, with 142 fatalities per 100,000 people in this group in 2021—a 74% increase since 2014. Homicide rates are as much as 23 times higher among Black men, and as much as nearly four times higher among Hispanic men than among white men, the analysis said. Gun fatality rates from suicide were highest among white men aged 80 to 84 years, at 47 fatalities per 100,000 people in this group in 2021—a 41% increase since 2007, the analysis showed.
Inflation-adjusted home prices are 3.3% under their recent peak, but affordability decreased as mortgage rates increased. @calculatedrisk
In real terms, the National index is 3.3% below the recent peak, and the Composite 20 index is 4.4% below the recent peak in 2022. In real terms, house prices are still above the bubble peak levels. There is an upward slope to real house prices, and it has been over 16 years since the previous peak, but real prices are historically high. Affordability worsened in September as mortgage rates increased, even though house prices declined.
Jack Ma has been living in central Tokyo for the last six months in the aftermath of the Chinese government’s regulatory crackdown on his businesses. @ft
Jack Ma, the Alibaba founder and once the richest business leader in China, has been living in central Tokyo for almost six months amid Beijing’s continuing crackdown on the country’s technology sector and its most powerful businessmen. Since his fallout with Chinese authorities, Ma has been spotted in various countries, including Spain and the Netherlands. People involved in Japan’s modern art scene said that Ma had become an enthusiastic collector. Friends close to the billionaire in China said he had turned to painting watercolors to pass the time after being forced to retreat from his frenetic public life, jet-setting between meetings with top officials in China and around the globe.