en Fed Raises Student Loan Rates 15% to 4.75 on 10yr Loans and Your Kid is a G-2 Employee <h2>Student Loan Debt Problem Solved</h2> <p>via <a href="">Soren K. Group</a> and <a href=""></a></p> <p>College ain't what it used to be. And student loans are paving the way to indentured servitude possibly for the next generation.</p> <p>In one admittedly cynical scenario we see in the future a &nbsp;large number of college graduates unable to repay student loans. We also see a government unable to disclose that default to thepublic and risk its own credit rating being downgraded.&nbsp;</p> <h3>Student Loan Breakdown in 2017</h3> <div class="cke_widget_wrapper cke_widget_block cke_widget_image cke_widget_selected"><span class="cke_image_resizer_wrapper"><img src="" width="627" height="374" /><span class="cke_image_resizer" title="Click and drag to resize">?</span></span>picture courtesy of Forbes<span class="cke_reset cke_widget_drag_handler_container" style="background: rgba(220,220,220,0.5); background-image: url(;">&nbsp;</span></div> <p>And we see in &nbsp;this dystopian future recent college graduates being offered deferment and forbearance on their loans if they take government jobs at ridiculously low wages. The deal offered would delay, pay down, or forgive &nbsp;their loans if they work for the US Gov't for &nbsp;10 years.</p> <p>And with one stroke, the US Government has solved unemployment and credit risk to itself. And they have &nbsp;done &nbsp;i t (again) on the backs of the working and middle class that some how still thinks the American dream is anything more than a dream.</p> <p>Sound crazy? it is not. Think of the inverse scenario. Law firms and investment banks pay for your MBA if you sign on with them to work for a few more years. Why is it not logical for the US Government to offer jobs to pay for college.</p> <p>A wise woman once said to us in 1983: "Don't get a degree in finance, drop out and get a skill like plumbing or be an electrician. She was so far ahead of the curve it was scary. And she was an executive &nbsp;at a bank when she said it.</p> <p>(Dedicated &nbsp;to Vivian Stabile)</p> <h2>Student Loan Rates Spike</h2> <p>Via <em><a href="">Grant's Interest Rate Observe</a>r</em></p> <p>That walk to the graduation podium is set to get a little more expensive. &nbsp;Beginning on Saturday, July 1st, interest rates on new student loans will be set higher, to 4.45% on ten year debt from the 3.76% rate seen this year for undergraduate students, according to CNBC.&nbsp; Graduate lending rates are also moving north, to 6% as of July 1st from the prior year’s 5.31%. &nbsp;</p> <p>The upward rate reset, which was established by the May 10 auction of 10-year U.S. Treasury notes, corresponds to a similarly higher yield in the 10-year compared to last year. &nbsp;Legislation signed in the 2013 Student Loan Fairness act tied interest rates to that 10 year Treasury.&nbsp; Christine DiGangi of <a href=""></a> explains the details:</p> <p>Every year, the undergraduate loan rates are calculated by adding 2.05 percentage points to the high yield of the 10-year note at the last auction prior to June 1. Add 3.6 percentage points to the high yield to determine unsubsidized graduate loan rates, and for PLUS loans, add 4.6 percentage points.</p> <p>That the sting of higher borrowing costs will be felt by a growing membership is a now-self-evident fact; according to data from the New York Fed’s consumer panel, total student loan debt has risen to $1.34 trillion in the first quarter, representing about 10.5% of total consumer liabilities.&nbsp; That compares to $663 billion in student loan debt as of the first quarter 2009 equating to 5.3% of total household borrowings.</p> <p>Overall, average Federal debt load per student reached $30,200 in the first quarter, up from $20,500 in the first quarter of 2009, according to the National Student Loan Data System.</p> <p>Not only has student debt grown significantly, but it has done so in near lockstep. In each quarterly period going back to at least the beginning of 2003 (when the New York Fed begins its data series) has total student loan debt grown on both a sequential and year-on-year basis.</p> <p>-Philip Grant</p> <p>&nbsp;</p> <p>Read More by <a href="">Soren K. Group</a></p> <div class="field field-type-filefield field-field-image-blog"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_blog" width="717" height="518" alt="" src="" /> </div> </div> </div> 10 Year Treasury Borrowing Costs Business Credit Debt default Economy Education economics Finance Grant's Interest Rate Observer High Yield K. Group and College Loans Money New York Fed New York Fed Personal finance Stafford Loan Student debt Student loan Student Loans Student loans in the United States U.S. Treasury Unemployment US government Wed, 28 Jun 2017 14:14:02 +0000 Vince Lanci 598828 at Watch Live: Congressional Hearing On How The Fed Is Screwing Main Street And Retirees <p>This morning the House Financial Services Committee is holding a hearing that will evaluate how Federal Reserve policies are adversely affecting households, small businesses, savers, and retirees, and consider policy opportunities that the Federal Reserve could implement to improve economic opportunities for all. </p> <p>The panel will include the following witnesses:</p> <ul> <li>Dr. Norbert Michel, Senior Research Fellow, The Heritage Foundation</li> <li>Dr. Paul Kupiec, Resident Scholar, American Enterprise Institute</li> <li>Dr. Karen Dynan, Nonresident Senior Fellow, Peterson Institute for International Economics</li> <li>Mr. Alex J. Pollock, Distinguished Senior Fellow, R Street Institute</li> </ul> <p>These witnesses should have plenty of fun material to knock this softball out of the park...</p> <p><iframe src="" width="600" height="337" frameborder="0"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="643" height="402" alt="" src="" /> </div> </div> </div> American Enterprise Institute Business Federal Reserve Health Heritage Foundation House Financial Services Committee House Financial Services Committee Karen Dynan Main Street Peterson Institute Peterson Institute for International Economics US Federal Reserve Washington, D.C. Wed, 28 Jun 2017 14:11:15 +0000 Tyler Durden 598827 at Pending Home Sales Tumble, Unchanged Since June 2013 <p>After modest bounces in existing and new home sales (despite weakness in starts and permits and mortgage application declines), <strong>pending home sales in May tumbled 0.8% MoM and were revised even lower (-1.7%) in April</strong>. This dismal print was below all economists&#39; expectations, missing by 4 standard deviations. <strong><em>&nbsp;</em></strong></p> <p><strong><em>This is the 3rd straight monthly drop and 2nd straight annual decline in pending home sales.</em></strong></p> <p><a href=""><img height="313" src="" width="600" /></a></p> <p>&nbsp;</p> <p>The biggest MoM decline was in The West (down 1.3%), but as the chart below shows, <strong>Pending Home Sales are now unchanged since June 2013.</strong></p> <p>The index is now 1.7 percent below a year ago, which marks the second straight annual decline and the most recent since November and December of last year.</p> <p><strong>NAR notes that prospective buyers are being sidelined by both limited choices and home prices that are climbing too fast.</strong></p> <p><a href=""><img height="297" src="" width="600" /></a></p> <p><strong>Weaker financial and economic confidence could also be playing a role in the slowdown in contract activity. </strong>NAR&#39;s quarterly Housing Opportunities and Market Experience (HOME) survey, released earlier this week, found that fewer renters think it&#39;s a good time to buy a home, and respondents overall are less confident about the economy and their financial situation than earlier this year.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&quot;Monthly closings have recently been oscillating back and forth, but<span style="text-decoration: underline;"> this third consecutive decline in contract activity implies a possible topping off in sales</span>.&quot;</strong></p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="968" height="479" alt="" src="" /> </div> </div> </div> Business New Home Sales New home sales Wed, 28 Jun 2017 14:09:22 +0000 Tyler Durden 598826 at Steve Keen Rages "There Is No Excuse For Janet Yellen's Complacency" <p><em><a href="">Authored by Steve Keen via,</a></em></p> <p>Janet Yellen has been&nbsp;<a href="" target="_blank">reported by Reuters</a>&nbsp;as saying&nbsp;<a href="" target="_blank">in London</a>&nbsp;yesterday that <strong><em>&ldquo;she does not believe that there will be a run on the banking system at least as long as she lives&rdquo;:</em></strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we&#39;re much safer and I hope that it will not be in our lifetimes and I don&#39;t believe it will be,&quot; Yellen said at an event in London. &ldquo;<a href="" target="_blank">Fed&rsquo;s Yellen: Not another financial crisis in &lsquo;our lifetimes&rsquo;</a>&rdquo;</p> </blockquote> <p>The only word I can use to describe this belief is<strong> &ldquo;delusional&rdquo;.</strong></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 331px;" /></a></p> <p>The <strong>only way in which her belief could be justified would be in financial crises were truly random events, caused by something outside the economy</strong> - or just by a very bad throw of the economic dice.</p> <p><strong>This is indeed the perspective of mainstream &ldquo;Neoclassical&rdquo; economic theory, in which Yellen was trained, </strong>and because of which she was deemed eligible - and indeed eminently suitable - to Chair the Federal Reserve.</p> <p><strong>This is the theory that led the OECD to proclaim, two months before the crisis began in August 2007, that &ldquo;the current economic situation is in many ways better than what we have experienced in years&rdquo;, </strong>and that they expected that &ldquo;sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment.&rdquo; (OECD, June 2007, &ldquo;<a href="" target="_blank">Achieving Further Re-balancing</a>&rdquo;). It is the theory that led her colleague David Stockton, then the Director of the Division of Research and Statistics at the Federal Reserve, to dismiss the possibility of a recession&nbsp;after&nbsp;the crisis had begun, in December 2007&mdash;the very month that the recession is now regarded as having commenced:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Overall, our forecast could admittedly be read as still painting a pretty benign picture: despite all the financial turmoil, the economy avoids recession and, even with steeply higher prices for food and energy and a lower exchange value of the dollar, we achieve some modest edging-off of inflation. (Federal Open Market Committee transcript,&nbsp;<a href="" target="_blank">December 2007</a>)</p> </blockquote> <p><u><strong>So what we are getting from her is not merely her own personal complacency, but the complacency of an approach to economics</strong></u> which has always been grounded in the beliefs that (a) capitalism is inherently stable, (b) that the financial sector can&nbsp; be ignored&mdash;yes that&rsquo;s right, ignored&mdash;when doing macroeconomics, and (c) that the Great Depression was an anomaly that can also be ignored, because it can only have been caused either by an exogenous shock or bad government policy, both of which cannot be predicted in advance.</p> <p><strong>Someone who would&nbsp;not&nbsp;have been deemed suitable to run the Federal Reserve, before the Global Financial Crisis of 2007-08, was the maverick American economist&nbsp;<a href="" target="_blank">Hyman Minsky</a>.</strong> Minsky began from the perspective that, to be realistic, economic theory had to answer the question:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Can &quot;It&quot;&mdash;a Great Depression&mdash;happen again? And if &quot;It&quot; can happen, why didn&#39;t &quot;It&quot; occur in the years since World War II? These are questions that naturally follow from both the historical record and the comparative success of the past thirty-five years. (Minsky,&nbsp;<a href="" target="_blank">Can &ldquo;It&rdquo; Happen Again?</a>&nbsp;1982, p. xii)</p> </blockquote> <p>To do this, Minsky made the obvious point that economic theory had to be able to explain how Great Depressions came about:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>To answer these questions it is necessary to have an economic theory which makes great depressions one of the possible states in which our type of capitalist economy can find itself. </strong>(Minsky, 1982, p. xi.)</p> </blockquote> <p>He specifically rejected the dominant Neoclassical approach to economics on this basis:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The abstract model of the neoclassical synthesis cannot generate instability. When the neoclassical synthesis is constructed, capital assets, financing arrangements that center around banks and money creation, constraints imposed by liabilities, and the problems associated with knowledge about uncertain futures are all assumed away.&nbsp;For economists and policy-makers to do better we have to abandon the neoclassical synthesis. (Minsky, 1982, p. 5. Emphasis added.)</p> </blockquote> <p><u><strong>Minsky argued instead that financial crises are&nbsp;not&nbsp;random, but are a manifestation of the innate nature of capitalist economies.</strong></u> They can be anticipated by trends in private debt (though their precise timing can&rsquo;t be determined because their occurrence depends in part on firms&rsquo; willingness to borrow, or banks&rsquo; willingness to lend terminating in response to levels and rates of growth of private debt that are too high relative to GDP). But most conventional economists don&rsquo;t know that Minsky argued this, because he could only get published in journals that most conventional economists never read.</p> <p>I say&nbsp;most&nbsp;conventional economists don&rsquo;t know of Minsky&rsquo;s arguments, because some have now read him&mdash;and that includes Janet Yellen.</p> <p>She knows who Minsky was. She has spoken at conferences at the Levy Institute at Bard College, in upstate New York, where Minsky worked for his final years. <strong>She gave a speech there just 18 months after the crisis began, at a conference named after Minsky, in which she praised Minsky</strong> (Janet Yellen, April 16 2009, &ldquo;<a href="" target="_blank">A Minsky Meltdown: Lessons for Central Bankers</a>&rdquo;). She noted in it the irony of her giving such a speech, when the previous time she had spoken at the Levy Institute, she had extolled the virtues of derivatives (the CDOs and the like which, a decade later, helped trigger the biggest crisis since the Great Depression):</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>It&rsquo;s a great pleasure to speak to this distinguished group at a conference named for Hyman P. Minsky. My last talk here took place 13 years ago when I served on the Fed&rsquo;s Board of Governors. My topic then was &ldquo;<a href="" target="_blank">The &lsquo;New&rsquo; Science of Credit Risk Management at Financial Institutions.</a>&rdquo; It described innovations that I expected to improve the measurement and management of risk. My talk today is titled &ldquo;<a href="" target="_blank">A Minsky Meltdown: Lessons for Central Bankers</a>.&rdquo; I won&rsquo;t dwell on the irony of that.</p> </blockquote> <p><strong>She might not want to dwell on the irony, but I do</strong>. When she spoke at the Levy Institute in the Spring of 1996, she clearly had no idea of Minsky, nor of his diametrically opposed view of how financial markets operated. <strong>But&nbsp;<a href="" target="_blank">Minsky was alive when she spoke</a>, and may well have attended her talk. If he had, he would have shaken his head at the naivety of the views she expressed then (as I do now at her views today):</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Despite the complexities I have attempted to describe today&mdash;indeed, partly because of these complexities&mdash;I remain highly optimistic that both our system of financial intermediation and our system of financial regulation will remain strong and resilient. We know much more about risk measurement and management than we did a decade ago&mdash;and a decade from now we will know still more. Just as I cannot imagine that our present system of regulation will remain unchanged forever, I cannot imagine that we will ever reach a &quot;perfect&quot; system of regulation and supervision. However, we can, and I believe will, make the system better as we strive to adapt to changing realities. Perhaps a future Federal Reserve governor will appear before you a decade hence to discuss the continuing evolution of our financial system. (Yellen, &ldquo;<a href="" target="_blank">The &lsquo;New&rsquo; Science of Credit Risk Management at Financial Institutions</a>&rdquo;, Levy Institute, Spring 1996).</p> </blockquote> <p><strong>So back then she said she couldn&rsquo;t imagine a &ldquo;perfect&rdquo; system of regulation, but now she can imagine a world in which another financial crisis doesn&rsquo;t occur in the lifetime of her audience in London yesterday.</strong></p> <p>Clearly, what she read of Minsky after the crisis has completely slipped her mind, because in the one paper of Minsky&rsquo;s she cited in her 2009 speech (Minsky, &ldquo;<a href="" target="_blank">The Financial Instability Hypothesis</a>&rdquo;, 1992), the bare bones of Minsky&rsquo;s &ldquo;Financial Instability Hypothesis&rdquo; are outlined.</p> <p>But even her choice of a paper to read by Minsky&mdash;and from the bibliography, she did read only one paper&mdash;shows a fatal lack of imagination. It was merely the first in&nbsp;<a href="" target="_blank">a brief list of 13 papers</a>&nbsp;by Minsky on a readily available archive site. However, Minsky had published three books and over 100 papers by the time she deigned to read just one of them.</p> <p>One of those books,&nbsp;<a href=";ie=UTF8&amp;qid=1498627267&amp;sr=1-1&amp;keywords=can+it+happen+again" target="_blank">Can &ldquo;It&rdquo; Happen Again</a>, which was released in 1982 provides 13 of his best essays in an easily accessible format. If she pined for maths, then my 1995 paper &quot;<a href="" target="_blank">Finance and Economic Breakdown: Modeling Minsky&#39;s &#39;Financial Instability Hypothesis</a>&rdquo; was available and findable by anyone who knows how to use&nbsp;<a href="" target="_blank">EconLit</a>, the journal abstracting service of the American Economic Association.</p> <p><em><strong>In other words, she didn&rsquo;t read Minsky to understand him, in the aftermath to a crisis which his theory predicted and which hers treated as unpredictable. She read him simply so that she could say she had read him, and then continued to ignore him and persist with the beliefs that had led her and her predecessors blindfolded into the greatest crisis since the Great Depression.</strong></em> And of course, the political leaders of the world were led with her, and us citizens too, because politicians then did defer to economists like Greenspan and Bernanke as not merely experts on the economy, but sages whose oracular advice could be trusted.</p> <p>That was then. We&rsquo;ve since been through the crisis they thought couldn&rsquo;t occur. We live in its aftermath today, and there&nbsp;will&nbsp;be another crisis in our lifetimes&mdash;as I&rsquo;ll explain in my next post (if you can&rsquo;t wait for the explanation, it&rsquo;s all in my short book&nbsp;<a href=";me=" target="_blank">Can we avoid another financial crisis?</a>). And yet the Federal Reserve continues to be led by, and staffed by, economists who can&rsquo;t imagine that another crisis might occur.</p> <p><strong>That is not the sort of imagination we need in charge of the Federal Reserve&mdash;unless, that is, we actually enjoy running blindfolded into catastrophes.</strong></p> <p><u><strong>Yellen&rsquo;s confidence that another financial crisis will not occur &ldquo;in our lifetimes&rdquo; is sufficient reason to remove her from the Chair of the Federal Reserve, and replace her with someone who is less confident.</strong></u></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="715" height="394" alt="" src="" /> </div> </div> </div> American Economic Association B+ Bard College Business Economic bubbles Economics Economy Federal Reserve Fed’s Board of Governors Fellows of the Econometric Society Financial crisis Financial Regulation Great Depression Great Recession Hyman Minsky Hyman Minsky Janet Yellen Janet Yellen Levy Institute Macroeconomics Meltdown OECD Open Market Committee Post-Keynesian economists Recession Reuters Risk Management Steve Keen Systemic risk Unemployment US Federal Reserve Wed, 28 Jun 2017 13:57:43 +0000 Tyler Durden 598817 at Cable, Gilt Yields Spike After BoE's Carney Hints At Stimulus Withdrawal <p><a href="">It's deja vu all over again in Sintra. </a></p> <p>Yesterday, Draghi sent EUR and Bund yields surging on his 'hawkish' comments, which he was forced to talk back just over an hour ago, and today the confusion is back and it is the UK's turn as Bank of England governor Carney just hinted that the removal of stimulus is likely to become necessary, reversing on his own dovish stance unveiled just last week. </p> <p>The section in question is the following (<em>h<a href="">is full speech is here)</a></em>):</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional. </strong>The extent to which the trade-off moves in that direction will depend on the extent to which weaker consumption growth is offset by other components of demand including business investment, whether wages and unit labour costs begin to firm, and more generally, how the economy reacts to both tighter financial conditions and the reality of Brexit negotiations. These are some of the issues that the MPC will debate in the coming months</p> </blockquote> <p>The reaction, just as yesterday, is a spike in cable and gilt yields. As Bloomberg adds <strong>“</strong>the comments mark a shift in emphasis after the governor signaled last week that now was not yet the time to start that process. In his speech on Wednesday, he clarified that that was his position as of when the MPC last met on June 15. Lifting rates hinges on whether spare capacity in the economy erodes and the balance between supporting growth and tolerating faster inflation becomes less stark, he said."</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>“When the MPC last met earlier this month, my view was that given the mixed signals on consumer spending and business investment, it was too early to judge with confidence how large and persistent the slowdown in growth would prove,” he said. “Moreover, with domestic inflationary pressures, particularly wages and unit labor costs, still subdued, it was appropriate to leave the policy stance unchanged at that time.”</strong></p> </blockquote> <p>And the reaction is clear - sterling buying:</p> <p><a href=""><img src="" width="500" height="237" /></a></p> <p>and Gilt selling...</p> <p><a href=""><img src="" width="502" height="265" /></a></p> <p>As Morgan Stanley notes, a<span id="" dir="ltr"> number of central banks including the Fed, BoC,&nbsp;BoE, Norges Bank and &nbsp;importantly the ECB have turned hawkish relative to&nbsp;previous market expectations.&nbsp;<strong>Central banks taking the punch bowl of liquidity&nbsp;away does not bode well for the outlook for volatility &nbsp;in the short term, leading&nbsp;to position adjustments. </strong>Bond yields have moved sharply higher taking the lead&nbsp;from Germany’s 2 year Schatz yield (5.9bp), the US yield curve has steepened&nbsp;and equity markets have seen the previously strong tech sector selling off hard&nbsp;as investors shift back from growth towards value.&nbsp;<strong>Conditions for the emergence&nbsp;of a proper bear market are not yet in place, even so, yesterday's high trading&nbsp;volume suggests that corrective activity may stay with us for several days.</strong></span></p> <p>How long before his remarks are walked back or "clarified."?</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="2185" height="1036" alt="" src="" /> </div> </div> </div> Bank of England Bank of England Bank of England Bear Market BOE Bond Business Central Banks Cognitive science Deja Déjà vu Draghi Economic policy Economy Equity Markets Europe European Central Bank European Central Bank European Union Financial markets Fiscal policy Fixed income market Geography of Portugal Keynesian economics Morgan Stanley MPC Norges Bank Norges Bank Public policy Reality Sintra Spike Stimulus US Federal Reserve Volatility Yield Yield Curve Yield curve Wed, 28 Jun 2017 13:42:45 +0000 Tyler Durden 598823 at Watch Live: Draghi, Kuroda, Carney, & Poloz Set The World's Markets Straight At The ECB Forum <p>Draghi&#39;s speech at the ECB Forum yesterday was intended to strike a balance between recognizing the currency bloc&rsquo;s economic strength and warning that monetary support is still needed, according to Bloomberg, and it <a href="">only took two post-speech clarifications to get the market to understand exactly what he was saying</a>... which was nothing has changed.</p> <p>The main event today at the ECB Forum in Sintra is a policy panel with<strong> ECB&#39;s Draghi, BOE&rsquo;s Carney, BOJ&rsquo;s Kuroda, BOC&rsquo;s Poloz due to appear at 2:30pm London</strong> explain to markets exactly what their policies mean.</p> <p>Live Feed:</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="" width="560"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1200" height="523" alt="" src="" /> </div> </div> </div> Bank of England Bank of Japan BOE Eurogroup European Central Bank Eurozone Group of Thirty Mario Draghi Wed, 28 Jun 2017 13:25:40 +0000 Tyler Durden 598822 at Goldman No Longer Believes Republicans Can Repeal Obamacare: Here's Why <p>One month after Goldman gave up on Trump being able to pass any major (or minor) tax package in 2017, overnight - in the aftermath of Senate GOP's deplorable failure to find the needed 51 votes to " repeal and replace" Obamacare- Goldman's Washington analyst Alec Phillips throws up his hands, and no longer believes that passage of Obamacare is possible.</p> <p>In a note that looks at the current state of health legislation, titled appropriately enough "Nearing the End", Goldman summarizes that Senate Republican leaders have postponed the vote on health legislation that had been tentatively scheduled this week. A vote is possible in two weeks, but further delays are possible.&nbsp; </p> <p>Phillips does note that there are still some arguments in favor of eventual enactment: Republicans will be under pressure to follow through on a long-standing political commitment, and the estimated deficit reduction and tax cuts in the health bill could be useful in passing tax legislation later. Fixing the existing program for the coming year will also be necessary. </p> <p>However, he is skeptical and says that "<strong>these factors are likely to be outweighed by the political obstacles. Estimates of the potential increase in the uninsured population seem unlikely to improve substantially even after revisions to the bill. Public support for the effort is also weak, and intraparty divisions appear to pose too many obstacles. At this point, enactment of broad health legislation like the House passed or the Senate is contemplating seems unlikely.</strong>" </p> <p>That said, Goldman is not too worried about the implications of the Senate's failure, saying that <strong>"the prospects for passage should also be somewhat less important to broader financial markets than they might have been several months ago.</strong> The debate over health legislation is likely to end—either with enactment or a failed vote—by mid- to late July, allowing the rest of the budget process to proceed, eventually leading to consideration of tax legislation. In the less likely scenario that broad health legislation is enacted, there would be few near-term economic effects as most of the changes do not take effect until 2020."</p> <p><em>Goldman's full note:</em></p> <p><strong>Health Legislation: Nearing the End </strong><em><br /></em></p> <p>Markets are once again focused on the potential for a congressional vote on health legislation, this time regarding the Senate’s Better Care Reconciliation Act (BCRA). This is presumably due to the need to move beyond the health bill before tax legislation can be addressed, as discussed below, and because of the broader signal that passage of a health bill might send regarding the rest of the Trump agenda.</p> <p>However, the effort to replace the Affordable Care Act (ACA) has been set back once again with the announcement that no vote will be held for at least another two weeks. At that point, there are three potential options:</p> <ul> <li><strong>Passage</strong>: If Senate Republican leaders are able to muster a majority in favor of a health bill, the bill would move back to the House for at least one more vote. The outcome there would depend on the details of the final product, but a bill that can manage to win support of 50 of 52 politically diverse Senate Republicans would probably be able to pass the House and become law.</li> <li><strong>Defeat</strong>: Major legislation is rarely rejected on the House or Senate floor, since congressional leaders usually know whether there is adequate support. However, it is clearly possible that this bill could end in a failed vote; if Senate Republican leaders determine that there is very little chance of ever coming up with an acceptable compromise, they might allow a vote against the bill to provide a more definitive end to the process and, possibly, as a way to pivot to a short-term bipartisan effort to stabilize the individual health insurance market for 2018.</li> <li><strong>Delay</strong>: As of this writing, Senate Republican leaders have opted to delay the vote for at least two weeks, until the week of July 10. A delay could be interpreted as a sign that Republican leaders believe there is a chance of gaining support over the next two weeks for a modified bill. However, it might also simply signal that leaders are not quite ready to give up on the effort, even if they recognize that the odds of eventual enactment are low. Further delays cannot be ruled out, though we would be very surprised if the Senate debate continues past late July.</li> </ul> <p><span style="text-decoration: underline;"><strong>The situation is fluid but at this point our expectation is that the Senate will ultimately fail to pass broad health legislation similar to the House-passed bill or the recently introduced Senate legislation. </strong></span>While we see this as a fairly close call, our view is based on the following considerations:</p> <ul> <li><strong>Coverage estimates: </strong>While it is certainly possible that the Congressional Budget Office (CBO) will estimate that the next iteration of the Senate proposal will increase the projected uninsured population by less than the 22 million increase it estimated would result under the most recent proposal, this seems unlikely to change substantially. Repeal of the individual mandate alone has been estimated to reduce coverage by 15 million, and the repeal of the Medicaid expansion and the cap on the future growth rate of the program would reduce coverage further. </li> <li><strong>Public support: </strong>The Affordable Care Act (ACA) is much more popular than the pending legislation, and even among Republican voters views are mixed (Exhibit 1). One problem congressional Republicans face is that public sentiment regarding the ACA has shifted since the debate began, possibly because the public has become more aware of the coverage expansion under the ACA.</li> <li><strong>Thin margins: </strong>Even with Vice President Pence casting the tie-breaking vote, 50 of 52 Republicans would need to support the bill. This means bridging the gap between the most conservative senators (shown at the top of Exhibit 2) and centrist Republicans (toward the bottom of Exhibit 2) and those representing swing states (to the left of Exhibit 2). </li> <li><strong>Medicaid politics: </strong>20 Republican senators represent states that have expanded Medicaid under the ACA. While many of them appear likely to support the bill, the proposed cuts have been difficult for some expansion-state Republicans to support, including Senators Capito, Heller, Murkowski and Portman. </li> </ul> <p><strong>Exhibit 1: The ACA has become more popular recently </strong><br /><a href=""><img src="" width="500" height="295" /></a><br /><em>Source: Real Clear Politics, Goldman Sachs Global Investment Research </em></p> <p><strong>Exhibit 2: Opposition at both ends of the political spectrum <br /></strong><img src="" width="500" height="284" /></p> <p><em>Source: Federal Election Commission, Voteview, Goldman Sachs Global Investment Research </em><br />&nbsp;</p> <p><strong>Of course, there are arguments in favor of eventual passage. These include:</strong></p> <p><strong>Campaign commitments: </strong>After House Republican leaders postponed a long-awaited vote on their health legislation earlier this year, it had appeared that debate might turn to other issues on the agenda. However, the health effort was of such political consequence that Republican leaders ultimately returned to the issue. It is possible that congressional Republicans will continue to press the issue until health legislation is enacted, even if it takes a while longer. That said, our sense is that Senate Republican leaders like Sen. McConnell have a limited appetite for further debate on health care, as discussed below.</p> <p><strong>Fiscal benefits: </strong>The Senate health legislation has two potential benefits for the rest of the fiscal agenda. First, CBO estimates that the bill would reduce the deficit by $321 billion over the next ten years. These savings could potentially be redirected toward other legislative efforts, like tax reform. Second, the bill repeals the taxes enacted in the ACA, reducing revenues by $563 billion over ten years. By offsetting these tax cuts with the spending cuts in the health legislation, this would relieve pressure on congressional Republicans to address the repeal of ACA taxes in tax reform legislation later. That said, our expectation is that the final Senate bill, if it passed, would probably not save more than the $119bn the House bill was estimated to save. While helpful, this would not meaningfully change the outlook for tax reform.</p> <p><strong>Fixing the existing program: </strong>The Senate legislation includes $50bn over the next four years for this purpose, as well as explicit funding for cost-sharing reduction (CSR) payments (the uncertainty surrounding the Trump Administration’s willingness to continue making CSR payments had led some insurers to increase their proposed premiums for 2018). If the Senate does not approve the pending legislation or something similar, congressional Republicans may attempt to pass a more narrowly focused package to stabilize the individual insurance market which includes the subsidized plans offered through “exchanges”. </p> <p>While the health debate is clearly relevant, in our view it is becoming less important to the broader agenda, for a few reasons:</p> <ul> <li>The debate on the current health bill will end soon, one way or the other: Market participants have focused on the health vote in large part because it is seen as a prerequisite to passing tax reform. The health bill is being considered under the 2017 budget cycle, through the “reconciliation” process that allows for Senate passage with a simple majority (i.e., potentially only Republican votes). Since Congress can consider only one reconciliation bill for tax and spending per budget cycle, and budget cycles cannot overlap, Congress must conclude its debate on the healthcare bill before it can formally begin considering tax reform. If the Senate passes the bill in the next few weeks, the process could then turn to the FY18 budget resolution, followed by tax reform. But it seems unlikely that the Senate will debate health legislation after July, so whether it passes or whether it fails, health legislation seems unlikely to delay tax legislation much further.</li> <li>There isn’t much signaling value left: Earlier this year, the health debate was seen as a signal of how successful the Trump Administration and congressional Republicans might be in getting other aspects of the agenda through Congress. However, at this stage, it seems fairly clear that intraparty disputes and a thin margin in the Senate have made sweeping reforms difficult. As a result, eventual Senate passage of the health legislation wouldn’t meaningfully change our expectation of what might be possible regarding tax reform, for example.</li> <li>Health legislation is unlikely to have substantial economic effects in the near-term. While the current legislative debate on health care could have important consequences for those enrolled in subsidized benefits and, to a lesser extent, enrollees in the individual market more generally, it seems unlikely to meaningfully affect the economic outlook, for two main reasons. First, most of the reduction in benefits would take place in 2020 and beyond. In 2018 and 2019, the bill would actually increase the deficit by about $30bn each year, as the value of the tax cuts starting in 2018 more than offsets the spending cuts. Second, the ACA’s disinflationary effect is unlikely to reverse as a result of this legislation. We previously estimated that two policies accounted for most of the policy-related slowdown in medical inflation over the last couple of years: the cuts to the growth rate of Medicare reimbursements and the shift of the uninsured into the Medicaid program, which pays less for a given service than most other sources of coverage. The legislation would not reverse the Medicare cuts. If legislation is enacted it might result in a gradual reversal of the coverage effect but probably only in 2020 and beyond. </li> </ul> <p>Over coming days, we expect to hear more regarding potential modifications to the original Senate proposal. If progress is made during the remainder of the week, it is possible that a revised CBO estimate could be produced not long after the Senate returns from recess on July 11. A vote looks possible anytime between late in the week of July 10 and the end of July, though at this point the odds seem stacked against Senate passage.</p> <p></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="288" height="175" alt="" src="" /> </div> </div> </div> 111th United States Congress 115th United States Congress American Health Care Act Barack Obama Congress Congressional Budget Office Congressional Budget Office Fail Federal Election Commission goldman sachs Goldman Sachs Internal Revenue Code Medicare Medicare Obamacare Pat Tiberi Patient Protection and Affordable Care Act Patient Protection and Affordable Care Act replacement proposals Politics Presidency of Barack Obama Reconciliation Republican Party Republicans Senate Social Issues Statutory law Trump Administration United States Wed, 28 Jun 2017 13:18:52 +0000 Tyler Durden 598821 at N.Korea Issues Standing Order To Execute Former S.Korea President <p>Two days ago, Japan’s Asahi Shimbun newspaper reported that former South Korean President Park Geun-hye had made plans to assassinate North Korean leader Kim Jong-un, adding that Ex-president Park, who was impeached in a corruption scandal earlier this year, signed a document approving a “leadership change” in North Korea back in 2015. According to the Japanese outlet, South Korea’s intelligence agencies were to prepare operations to carry out the plan.</p> <p>The report noted that the plotters considered arranging accidents, with a car accident or the derailment of a train carrying Kim Jong-un on the table. Park’s administration also reportedly considered staging a coup in North Korea. </p> <p>The military activities of South Korea’s communist neighbor, including its nuclear arms development programs, apparently motivated the alleged plot, Asahi Shimbun notes. Tension between Seoul and Pyongyang spiked in August of 2015 as the countries exchanged fire after the North fired a projectile at the border city of Yeoncheon. However, the plans to assassinate the North Korean leader were not picked up by President Moon Jae-in’s administration after Park’s impeachment, the daily reports.</p> <p>One month ago, North Korea accused US and South Korean spy agencies of plotting to kill Kim Jong-un with some “biochemical substances,” the country’s Ministry of State Security said, as quoted by AFP. </p> <p>Turns out he was right. And, as of today, he is out for revenge. </p> <p>According to <a href="">Reuters</a>, North Korea has issued a standing order for the execution of former South Korean President Park Geun-hye and her spy chief for a plot to assassinate its leader. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The North's official KCNA said "revelation showed" Park had masterminded a plot to execute its "supreme leadership" in 2015 and it was imposing the "death penalty on traitor Park Geun-hye". </p> <p>&nbsp;</p> <p>KCNA did not disclose the source of the revelation but a Japanese newspaper reported this week that Park in 2015 approved a plan to overturn the North Korean regime of leader Kim Jong Un. </p> </blockquote> <p>While recently Syria had once again stormed to the front line of nations who will be attacked by the US next, following Monday's cryptic White House announcement that Syria was preparing a chemical attack, interpreted by many that Trump was about to launch another ballistic missile attack, should Kim continue with such aggressive statements, North Korea's odds of hosting operation "wag the dog" will surge. That said, somehow doubt that the impeached former South Korean president is too concerned about the Kim's latest bloodlust. </p> <p><a href=""><img src="" width="500" height="278" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="900" height="500" alt="" src="" /> </div> </div> </div> Corruption Government KIM Kim dynasty Kim Jong Kim Jong-il Korea Korean Central News Agency Ministry of State Security Moon Jae-in’s administration Newspaper North Korea Park Park Chung-hee Park Geun-hye Park’s administration Politics Politics President Park Presidents of South Korea Reuters SPY White House White House Wed, 28 Jun 2017 12:52:10 +0000 Tyler Durden 598816 at EURUSD, Bund Yields Plunge After ECB Tells Market 'You Misjudged Draghi's Comments' <p>Just as we warned was likely (how many times have we seen this game played), The ECB has come out this morning to explain to the market that <strong>the reaction to Draghi&#39;s hawkish speech yesterday was entirely mistaken</strong>. The reaction is clear - EUR and Bund yields are tumbling.</p> <p><strong>Vice President&nbsp;Vitor Constancio&nbsp;scrambled to set the record straight,</strong> saying the remarks were &ldquo;totally&rdquo; in line with existing policy and the response by investors was hard to understand.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Following the euro&rsquo;s biggest daily jump in over a year, in what could be interpreted as verbal intervention,<strong> ECB&rsquo;s Constancio said that market reactions aren&rsquo;t always understandable</strong> and that <strong>Draghi didn&rsquo;t say anything new in regards to recent ECB policy.</strong></p> <p>&nbsp;</p> <p>Mario Draghi&rsquo;s speech in Sintra on Tuesday was<strong> &ldquo;totally&rdquo; in line with recent ECB policy,</strong> ECB Vice President Vitor Constancio said in an interview on CNBC.</p> </blockquote> <p>&nbsp;</p> <blockquote class="twitter-tweet" data-lang="en"><p dir="ltr" lang="en">Never a good thing though when you&#39;re the Master of Communication but you need to explain your speech twice.</p> <p>&mdash; Frederik Ducrozet (@fwred) <a href="">June 28, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>And the reaction is clear...</p> <p><a href=""><img height="265" src="" width="507" /></a></p> <p>And Bund yields are down 5bps already...</p> <p><a href=""><img height="264" src="" width="502" /></a></p> <p>It is very clear now that The ECB is terrified of a new bond tantrum... just as we noted earlier when previewing Draghi&#39;s parting statement at Sintra.</p> <blockquote class="twitter-tweet" data-lang="en"><p dir="ltr" lang="en">Global Bonds Sell Off, Sparking Fears of Further &lsquo;Taper Tantrum&rsquo; <a href=""></a></p> <p>Don&#39;t worry, Draghi will be dovish in 90 minutes</p> <p>&mdash; zerohedge (@zerohedge) <a href="">June 28, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>As <a href="">The Wall Street Journal reports, </a><strong>investors were rattled on Tuesday when ECB President Mario Draghi talked of a &ldquo;strengthening and broadening recovery&rdquo; in the eurozone&rsquo;s economy.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Analysts are now weighing whether these moves will turn into a full-scale &ldquo;taper tantrum&rdquo; </strong>or whether investors&rsquo; continued hunger for fixed-income assets will temper any wider selloff.</p> <p>&nbsp;</p> <p><strong>&quot;Yesterday was the first explicit sign that [the ECB will] be looking to remove some of the stimulus,&rdquo; </strong>said Mike Bell, global market strategist at J.P. Morgan Asset Management. &ldquo;Clearly not everybody was expecting that.&rdquo;</p> <p>&nbsp;</p> <p><em><strong>&quot;I don&rsquo;t think his speech was a big surprise, but you saw the market reaction,&rdquo;</strong></em> said&nbsp;Joachim Fels,&nbsp;global economic adviser at Pacific Investment Management Co., who attended the forum. <em><strong>&ldquo;It&rsquo;s a warning sign that there are some unintended consequences as central banks head toward the exit.&rdquo;</strong></em></p> </blockquote> <p>Well clearly The ECB doesn&#39;t want that - and so they jawboned back everything Draghi said yesterday!</p> <p>To summarize:</p> <blockquote class="twitter-tweet" data-partner="tweetdeck"><p dir="ltr" lang="en">&quot;You traded... poorly&quot;: ECB <a href=""></a></p> <p>&mdash; zerohedge (@zerohedge) <a href="">June 28, 2017</a></p></blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1200" height="833" alt="" src="" /> </div> </div> </div> Banks Business Central Banks Eurogroup Europe European Central Bank European Central Bank European Union Eurozone Eurozone Financial services Group of Thirty Mario Draghi recovery Twitter Twitter Wall Street Journal Wed, 28 Jun 2017 12:45:08 +0000 Tyler Durden 598813 at Wholesale Inventories Bounce In May But Remain Drag On Q2 GDP <p>After tumbling in April, <strong>Wholesale Inventories bounced modestly in May</strong> (up 0.3% MoM) based on preliminary data. </p> <p><a href=""><img src="" width="600" height="318" /></a></p> <p>Interestingly <strong>Retail Inventories rose 0.6% in May, the biggest jump since January.</strong></p> <p>However, <strong>Q2 GDP still faces a headwind</strong> as wholesale inventories are down 0.13% so far in April and May.</p> <p><a href=""><img src="" width="600" height="304" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="939" height="498" alt="" src="" /> </div> </div> </div> Business Business Distribution Economy Gross domestic product Inventory Lean manufacturing Manufacturing National accounts Operations research Supply chain management Wholesale Inventories Wed, 28 Jun 2017 12:36:13 +0000 Tyler Durden 598815 at