💰 FISCAL RESPONSIBILITY 💰
Profound Financial & Economic Shift
The first transformational trend, El-Erian says, is the shift from insufficient demand to insufficient supply. The second is the end of boundless liquidity from central banks. And the third is the growing fragility of financial markets.
These help to explain “many of the unusual economic developments of the last few years,” he wrote, and looking forward he sees even more uncertainty as economic shocks “grow more frequent and more violent.” Analysts aren’t waking up to this yet, he added.
50/50 Recession Risk
As some have since telegraphed in public, US Federal Reserve officials concluded in private earlier this month that they should soon moderate the pace of interest-rate increases, likely leaning toward a 50 basis-point hike in December. And while some economic observers have predicted a recession with near certainty for months, Fed staff told officials during a Nov. 1-2 gathering that their assessment of the risk is about 50-50. - David E. Rovella for Bloomberg Evening Briefing 11/23/22
Stagflation Risk - Bloomberg 5 Things to Start Your Day 11/28/22
Stagflation is the key risk for the global economy in 2023, according to investors who said hopes of a rally in markets are premature following this year’s brutal selloff. Almost half of the 388 respondents to the latest MLIV Pulse survey said a scenario where growth continues to slow while inflation remains elevated will dominate globally next year. The second most likely outcome is deflationary recession, while an economic recovery with high inflation is seen as least probable…
From Joe Wiesenthal: Everyone is still talking about rate hikes. But what people are thinking about, more and more, is rate cuts. This is evidenced by the steepest inversion of the 2-10 spread in decades. The more inverted the curve, the more it implies that in the future the Fed will be lowering rates below where they are in the short term. In other words, as Bloomberg's Michael Mackenzie notes, traders are making a big bet on a forthcoming recession.
This could get treacherous. While "pivot" talk has picked up, inflation is still extremely high. There are reasons to hope or believe that inflation has peaked, but not a ton of hard evidence yet. The fear, of course, is that economic activity starts turning lower before price gains really start to moderate, putting the Fed in a bind.
It Pays to Procrastinate…
- Brian J. O’Connor for Yahoo Finance 11/28/22