That’s Deflation! Value of Manufacturers’ New Orders For Consumer Goods Goes Negative (Along With CPI YoY)

To paraphase Dean Martin, ‘When the value of manufacturers orders go negative, that’s deflation.”

The Value of Manufacturers’ New Orders for Consumer Goods Industries has gone negative YoY.

vneworders

And the Value of Manufacturer’s New Orders for All Manufacturing Industries seems to be on a downhill trajectory,

vmanpng

 

And the Consumer Price Index YoY is deflating as well.

cpiyoy

That’s deflation

deani

Kielbasa Krisis: Poland Central Bank Cuts Key Rate To 1.50 Percent To Combat Deflationary Spiral an (Follows The Central Bank Pack)

Poland is experiencing a deflationary spiral and is cutting their Central Bank reference rate to combat it. Or as Bruce Willis said in Die Hard, “Welcome to the party pal!”

(Bloomberg) — Polish central bank cuts benchmark 7-day rate to record-low 1.5%.

The Polish Central Bank is joining the Bank of England, The Federal Reserve, the Swiss National Bank and the ECB in rate slashing that would make Freddie Krueger jealous.

polandratecbWhy? It appears that Poland is caught in a deflationary spiral.

polandinfl

The poor Poles. They have Angela “Jigsaw” Merkel on one side and Vlad “The Impaler” Putin with troops in Ukraine on the other.

sawtriciclodeformado (1)

It is indeed a Kielbasa Krisis.

kielbasa

 

 

S&P500 Index Continues To Climb As World GDP Forecast Plunges And Atlanta Fed Says Q1 Real GDP Grew At 1.2 Percent

Time to queue the ship’s band to play “Nearer My God To Thee” from the film “Titantic.”

The S&P 500 index has continued to climb over the past year as the World GDP Forecast YoY continues to sink (like The Titanic).

spxworldgp

And now the Atlanta Fed has joined the Titanic band and is playing a mournful tune of … Q1 2015 Real GDP growth of 1.2 percent.

gdpnow-forecast-evolutionAnd up on Constitution Avenue, The Federal Reserve swings into action!

Fortunately, Central Banks have flooded the globe with liquidity.

Maybe the Hindenburg Omen should be renamed The Titanic Omen!

titamicmen

 

“Lookout, do you see any icebergs ahead in this tranquil sea of liquidity?” “No Captain Yellen. Ocean is as still as a mill pond.”

titanic-526653642

Bernanke: Presidents Should Be Able To Declare Economic Emergencies (As Yellen Pleads “Don’t Audit Me, Bro!”)

Former Federal Reserve Chair Ben Bernanke recently suggested that The President should be able to declare ECONOMIC emergencies. What does that mean? Martial law? Prison camps? Probably not. But unlimited borrowing and spending by the Federal government to implement a recovery (and bypassing Congress) is the likely answer.

it might make sense to give “the president some ability to declare emergencies or take extraordinary actions and not put that all on the Fed,” Bernanke said at a conference. “The constitution gives the president significant flexibility to respond to military situations,” in part because they are chaotic, he noted.

This is a Keynesian’s dream! Imagine all the broken windows that will occur to justify the manufacturing and installation of new windows.

Yes and if The President can declare economic emergencies, then The President can spend unconstrained by Congress. No moral hazard problems here!!! [Cough, cough]

If this wasn’t bad enough, we have the current Federal Reserve Chair, Janet “The Shadow” Yellen screaming “Don’t audit me, Bro!” As in, DON’T audit The Fed.

Her argument? An audit would be overly political.

After I stopped laughing, I decided to lay out a few points.

First, The President nominates the Chair of The Federal Reserve Board and the US Senate confirms the nominee. The seven members of the Board of Governors are appointed by the President and confirmed by the Senate to serve 14-year terms of office. If this isn’t already political, I don’t know what is!

Second, losses on The Fed’s asset purchases are sent to the US Treasury for payment. As a taxpayer, I think I should be able to know what I am liable for in taxes. And since The Fed is the largest holder of US Treasury debt, I think knowing what is happening behind the curtain would be helpful.

fedholdingsThe standard comeback is “The Fed is already audited by others” and “The President would NEVER do that!” These comebacks are unconvincing.

Particularly after reading “Obama “Very Interested” In Raising Taxes Through Executive Action.”

 

The Itch Is Back! Zero Down Payment Mortgages Return! (So Much For Learning Any Lesson From The Financial Crisis)

After the financial crisis of 2008 (nicely summarized by this UK Parliament study RP09-34 (2)), the financial system vowed to return to safe underwriting standards such as 20 percent down payments on mortgages. The US financial system returned to high down payments for a while, but …. the itch is back to make zero down payments loans again.

First, of course, you have the FHA which stuck by it’s low down payment guns (3.5 percent).

Second, you have mortgage giants Fannie Mae and Freddie Mac pushing the enveloped with 3 percent down payment loans.

Third, you have this story from Housing Wire,  “BBVA Compass launches zero-percent down mortgage program.”  (Banco Bilbao Vizcaya Argentaria, a Spanish bank).

In recent months, the Obama administration has taken several steps to expand the credit box and make it easier for borrowers, especially first-time homebuyers, to buy a home. To that end, in October, Fannie Mae and Freddie Mac announced 97% loan-to-value offerings.

For some borrowers, saving up 3% for a down payment is still a hurdle they can’t quite clear. However, a new program from BBVA Compass (BBVA) will allow borrowers to put down even less for a down payment, in fact.

BBVA Compass announced the launch of a new program, called Home Ownership Made Easier or HOME for short, designed to help low- and moderate-income borrowers become homeowners by helping to overcome one of the “most significant barriers” to homeownership, the down payment.

In the HOME program, qualifying borrowers will be eligible to finance 100% of the home’s value. In addition to offering 100% LTV loans, BBVA will also contribute up to $4,500 toward “certain closing costs” associated with obtaining a home loan.

What could go wrong? 100 percent LTV lending with lenders paying $4,500 of closing costs?

Like this?

bfmB912Fourth, you have the American Enterprise Institute (AEI) repackaging the 15 year mortgage with a maximum LTV (loan-to-value ratio) of 100 percent that allows for repurposing the 5 percent in down payment funds for a 1.25 percent permanent rate buydown. The 15 year mortgage rate already available is 3.03 percent compared to a 3.85 percent 30 year fixed, so the AEI’s plan is to buy down the rate even further.

3015ratediffI am a big fan of the traditional 15 year mortgage because of it’s lower interest rate.

cpm3015

But the 15 year mortgage also requires a larger monthly payment to amortize the mortgage over 15 years. This will raise the mortgage payment considerably and borrower’s may not be able to meet the debt-to-income (DTI) requirement, even at the lower interest rate AFTER the buydown.  AND it is a 100 percent LTV mortgage! How many low income households can afford 30 percent higher monthly payments?

3015pmt

 

In order to make the monthly payment on the 15 year mortgage equal that of a 30 year mortgage, the interest rate would have to be bought down to  0.09%.

This is hardly a mortgage product for low income households. We already have a product for low-income households — it’s called RENTING.

So there you go, sports fans. The financial system is returning to 100 percent (or thereabouts) LTV lending.

And if the system crashes again, we can sing along with another Elton John song, “Saturday Night’s Alright For Fighting!”

yellenlaighing

Bubble Driver: This New Libor ‘Scandal’ Will Cause A Terrifying Financial Crisis(?)

Forbes Magazine has an interesting piece entitled “This New Libor ‘Scandal’ Will Cause A Terrifying Financial Crisis.”

The vastly worse Libor “scandal” that I am referring to is the fact that the Libor has stayed at record low levels for the past half-decade, which is helping to fuel a massive economic bubble around the entire world that will end in a devastating financial crisis that will be even worse than the Global Financial Crisis. Instead of causing a few tens of billions of dollars worth of losses like the Libor rate-fixing scandal, the “Libor Bubble” will gut the global economy by trillions of dollars.

Here the the 1 month LIBOR rate compared to The Fed Fund target rate.

libor1mthfedOther than brief episode in September 2008, The Fed seems to be driving 1 month LIBOR.

fedtarlibor11

To quote Robert DeNiro from Taxi Driver, “Are you looking at me?”

U.S. Federal Reserve Chair Yellen testifies before a House Financial Services Committee hearing on Capitol Hill in Washington

 

 

Dream Lover: Stock Market Continues To Rise As Expected Global GDP Growth Continues To Tank

The S&P 500 stock market index keeps climbing regardless of whether economic information is good or bad. Why? Because Wall Street’s “Dream Lover” is the Chair of the Federal Reserve Board of Governors.

For example, the world GDP forecast keeps falling … and the S&P 500 stock market index keeps rising. Much like a psychotic Energizer Bunny.

gdpfprefedBut Janet is not the Dream Lover of middle class America where real median household income and mortgage purchase applications remain depressed after 2007.

househfed4The M1 Money Multiplier  reamains stalled and below 1 indicating the low interest rate loans are not circulating among the middle class.

m1mfedugh.

Somewhere beyond the sea, Yellen’s comrades in Central Banks are pushing their rates into negative territory. And it is not helping their middle classes either!

negrates

And if Janet Yellen and the Central Banks remove the monetary stimulus, splish-splash, we’ll be taking a bath!

screamlover

Once again, a tip of the hat to the brilliant Jesse’s Cafe Americain!