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Inflation

Maher: SVB Collapse, Inflation Are ‘the Result’ of Government Spending

March 17, 2023 by Ian Hanchett Leave a Comment

On Friday’s broadcast of HBO’s “Real Time,” host Bill Maher stated that the collapse of Silicon Valley Bank (SVB) is “connected” to and “the result of” the massive deficit spending during the coronavirus pandemic because the fact that “uncle sugar was very generous during COVID,” is “a lot of what caused the inflation.” Because “You cannot put $6 trillion that you don’t have in people’s pockets and not expect some inflation.” And this inflation caused the Federal Reserve to hike interest rates, which subsequently led to SVB’s downfall.

Former presidential candidate Andrew Yang stated that recent interest rate hikes caused the collapse of SVB because of how much money the bank had invested in buying Treasury bills and the rate hikes made Treasury bills risky.

Maher then said, “And interest rates spiked because of inflation, that’s why they had to — okay, so, when uncle sugar was very generous during COVID, that was the result of that. That’s what caused the inflation — a lot of what caused the inflation. You cannot put $6 trillion that you don’t have in people’s pockets and not expect some inflation. That’s what caused this rate [hike] and so, it’s all connected.”

Follow Ian Hanchett on Twitter @IanHanchett

Filed Under: Bill Maher, Breitbart, Clips, Entertainment, Government spending, Inflation, News, Politics, Silicon Valley Bank, SVB

Breitbart Business Digest: Light at the End of the Housing Tunnel

March 16, 2023 by John Carney Leave a Comment

Housing Start(ing) to Recover

Privately owned housing starts in February came in at a seasonally adjusted annual rate of 1,450,000. This is 9.8 percent above the revised January estimate of 1,321,000, a much bigger jump than the expected 0.1 percent increase.

This suggests an increase in confidence among home builders. Yesterday, the monthly survey of homebuilder sentiment from the National Association of Home Buildings showed improved sentiment for the third month in a row. But the upside surprise in starts indicates that sentiment is even stronger than the survey suggests.

To put this in perspective, starts are still down tremendously from a year ago. February was the last full month before the Fed began hiking rates and starts are down 18.4 percent in the 12 months since. A year ago, of course, mortgage rates were much lower. In mid-February, the average 30-year fixed rate was 3.92 percent. Today, it is 6.6 percent, down a bit from recent highs thanks to banking sector turmoil leading to lower expectations for the fed funds rate.

The big driver in the increase was in multifamily starts, which rose 24 percent to 620,000. The multifamily sector tends to be less interest rate sensitive than the single-family sector. Still, single-family starts showed a better-than-expected improvement, rising 1.1 percent to an 830,000 annual rate.

If the Fed were not so distracted by the ongoing run on regional banks, this nascent recovery in housing might be a cause for concern. It suggests that the Federal Reserve’s interest rate hikes are not as much of a drag as they were last year, which in turn suggests that the Fed has a lot more work to do if it wants to keep monetary policy restrictive for a prolonged period to bring down inflation.

Permissive Outlook

The permits side of the February report also indicated a rebound. New private housing unit authorizations were up a sharp 13.8 percent in February after being near flat in the prior two months. Single-family permits rose for the first time in a year, jumping 7.6 percent to 777,000.

Single-family permits are a reliable economic indicator. They are not typically subject to big revisions. They are accurately measured. And most importantly, they tend to be a reliable indicator of construction spending, employment, and the direction of the housing market.

One month’s increase does not equal a trend, but it does suggest that perhaps housing has found a bottom. If permits continue to rise, that would suggest both that financial conditions have effectively loosened and that the housing market was staging a recovery.

The Yield Curve Is Still Inverted Only Less So

Last week, the yield curve reached a record level of inversion after adjusting for interest rate levels. The difference between two-year and 10-year Treasuries fell to negative 110 basis points following Powell’s hawkish testimony on Capitol Hill. Although it is tempting to say it was Powell’s words that were responsible, the inversion was already plunging following hotter than expected employment and job openings reports.

The yield curve has inverted prior to every modern recession. While that makes the yield curve a leading indicator, the lead time between inversion and recession is highly variable. According to Joe Lavorgna at SMBC, the shortest time from inversion to recession is eight months and the longest time is 22 months, with a mean of 13 months.

Since the curve inverted in July of last year, that means we would expect on average the recession to start in August.

This week, however, the yield curve retraced a big part of the inversion. At minus 42 basis points, the curve is now less inverted than any time since last October. That’s largely because the yield on the two-year Treasury has plunged at a record pace on the expectation that the Fed will pivot away from hiking interest rates due to financial disorder in the wake of the failure of Silicon Valley Bank.

The latest odds from the CME Group’s FedWatch tool have the chance of an outright pause at next week’s Fed meeting at just under 20 percent, a big decline from 45 percent a day earlier. That seems about right to us. The Fed probably should not halt rate hikes altogether because that risks reigniting inflation when it is already running high. But if Friday brings more bank failures, the outlook could change dramatically.

Filed Under: Breitbart, Breitbart Business Digest, Economy, housing starts, Inflation, inverted yield curve, News, Yield Curve

Exclusive — Speaker McCarthy: ‘We’re Not Going to Pass a Clean Debt Ceiling,’ ‘We Have to Spend Less Money’

March 16, 2023 by Matthew Boyle Leave a Comment

U.S. House Speaker Kevin McCarthy told Breitbart News in no uncertain terms that the House of Representatives this year will not pass a clean debt ceiling hike without spending cuts and that the House will not raise taxes.

“The one thing I firmly believe,” McCarthy said, is “We’re not going to raise taxes and we’re not going to pass a clean debt ceiling.”

“I told the president we have to spend less money,” McCarthy added.

McCarthy said that without serious reforms to discretionary spending the U.S. could be on the brink of serious financial calamity.

“Every great society collapses when they over-extend themselves,” McCarthy told Breitbart News.

Such a dire warning from the nation’s highest-ranking elected Republican came just hours before Silicon Valley Bank (SVB) collapsed on Friday, setting off fears of a broader financial crisis possibly looming in the United States. SVB’s collapse came in large part as a result of high and persistent inflation. In an attempt to tame inflation, the Federal Reserve hiked interest rates rapidly, which undercut the bank’s long-term investments in lower-interest rate government-backed securities.

McCarthy’s comments were taped last Wednesday during an exclusive long-form on-camera interview with Breitbart News in the ceremonial speaker’s office in the Capitol, the latest in the On The Hill in-depth video series. McCarthy, in the hourlong interview, covered many topics including his release of the January 6 U.S. Capitol surveillance tapes, corruption investigations into President Joe Biden’s family business operation, the wide open U.S. southern border, and the rising threat of the Chinese Communist Party (CCP).

While McCarthy has made it clear he wants serious cuts to non-essential discretionary government spending in order to slow inflation—he does not intend to cut Medicare or Social Security—he was not specific in this interview about exactly how much in terms of such cuts he was looking for.

“I do not predetermine what that is, but what I laid out with the president is: We’re going to spend less money,” McCarthy said when asked if there is a specific dollar amount worth of cuts that would win his approval for a debt ceiling deal.

McCarthy also pointed to savings Americans can achieve by securing the border and pushing for energy independence as possible pathways to a broader deal.

“Another dollar amount you would look at is not just all the savings, but what if you were able to secure the border?” McCarthy said. “What if you were able to become energy independent? That’s a lot of savings in itself because you have the price of fuel lower so people can work, that more jobs would come to America.”

When asked to explain what the debt ceiling is, and lay out the terms of the looming battle with Biden and a Democrat-controlled U.S. Senate, McCarthy compared it to the spending limit on a maxed-out credit card a parent would give their child.

“Look, the debt ceiling is very serious—and we’ve got to understand what the debt ceiling is and just to put it down it’s like providing your child with a credit card,” McCarthy said. “They charge all the way up to the limit, and you’re responsible for paying it. But do you raise the limit without changing the behavior or do you change the behavior?

McCarthy pointed to previous times in fairly recent U.S. history, like specifically the Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985 from then-Sens. Phil Gramm (R-TX), Warren Rudman (R-NH), and Fritz Hollings (D-SC), as proof of Republicans and Democrats working together to curb spending. He said reforms like those throughout history “made America stronger.”

“Right now we have inflation because of the Democrats’ runaway spending,” McCarthy said. “Really, what people want to look at: Is it a spending problem or is it a revenue problem? Our spending is $31 trillion of debt. You just had the Congressional Budget Office just come out a couple weeks ago and tell us a forecast for the next 10 years. What they say is in the next 10 years we will end up paying $10.5 trillion just in interest. So it’s just like paying the interest on your credit card and never taking on the principle. Now put that in perspective. How much interest have we paid in the last 80 years? Let’s go back to 1940. If you add up all the interest that we paid for our debt since 1940 today it’s $9 trillion. So what took you more than 80 years, you’re going to pay more in 10 years.”

McCarthy said that Democrat President Joe Biden’s position is that taxes should be raised to pay for this, but he fundamentally disagrees and argues that revenue is not the issue and that revenue as compared to Gross Domestic Product (GDP) is at or near an all-time high.

“Now let’s compare: Is the problem we need more revenue?” McCarthy said. “Well, when you look at the revenue that’s coming in, it’s about 20 percent of GDP. Well is that high or low? The 50-year average is 17 percent.”

McCarthy said that only a few times in history has revenue hit 20 percent of GDP, “so really we’re getting more money coffers into the coffers of government, but what the Democrats have done is they have increased discretionary spending by more than 30 percent.”

“They increased all this spending and that’s what put us into this problem, the $6 trillion that the Democrats added,” McCarthy said. “So we’re in a real problem.”

Biden has essentially already caved to the Republicans on the debt ceiling since his initial position was he would not negotiate at all. But now, Biden is having conversations—in public, like during the State of the Union address, and in private. like with his first one-on-one meeting with McCarthy a little over a month ago—and calling for Republicans to put forward their plan and begin negotiations, as he did in a speech this month rolling out his budget plan.

“What I told the president is we can sit down and we can talk,” McCarthy told Breitbart News. “He thinks you should just raise the debt ceiling and not negotiate. That’s not what history tells us. That’s not what the American people want—74 percent want us to sit down and solve this problem. Why? Because if you keep spending more, inflation comes. That’s what brought us inflation.”

McCarthy added that failure to rein in government spending only helps American adversaries, particularly the Chinese Communist Party (CCP), because the U.S. is paying tens of millions of dollars in interest payments on the debt to China every single day.

“It gives an advantage to China over us,” McCarthy said. “We’re going to spend $60 million today paying China because of the interest. We’re going to do that tomorrow, and the day after and the day after. I’d rather invest it in America. And we’re going to hurt our children and grandchildren.”

Republicans have yet to as a conference formally coalesced behind any specific plan, though some ideas have been offered by different factions, like the House Freedom Caucus or the Republican Study Committee on some principles they would like to see in place on this. McCarthy, for his part, called a formal briefing for the full U.S. House of Representatives in an auditorium normally reserved for classified intelligence briefings on U.S. military operations earlier this month, where he brought in leaders from the Congressional Budget Office to brief members on the debt.

“I just brought in the Congressional Budget Office director and I brought every Republican and every Democrat to the auditorium,” McCarthy told Breitbart News. “Normally, we have only done that for a classified briefing when there are some challenges to America, be it the military. Well, I think this is just as big an issue. I think it’s our biggest issue out there. So we’re all coming together because we’re not going to solve this problem just by ourselves.”

In addition to discretionary spending cuts, McCarthy also argued for energy independence, border security, reinstatement of some work requirements that Democrats have undercut, and a “recapture” of unspent COVID pandemic relief funds disbursed across the country.

“So there’s a lot of places we can find savings and we can make government more efficient—more effective,” McCarthy said. “We can end the pandemic, which would save us money. We could have federal employees go back to work. We passed a bill on that, and there were 47 percent of federal employees aren’t at work today in the office. So what I look at is a number of things. But we’ve got to get our fiscal house in order—it is the fundamental thing we have to do and put us on the path to balance.”

McCarthy was also particularly upset with Biden’s false claim during the State of the Union address that Republicans were seeking to cut Medicare or Social Security, programs he had even before the speech made very clear Republicans do not intend to touch at all.

“He knew it was a lie when he said it,” McCarthy said of Biden’s false statement during the joint address.

The reaction in the chamber was swift in response to Biden: Shouts from members that he was lying drowned him out, and then he started bargaining from the podium with them over what to do over the debt ceiling.

“It’s even louder in person than it is on television,” McCarthy said when asked what it was like in the room as he watched from sitting the behind the president as this moment played out. “What’s really sad is the president loses a lot of credibility when I publicly said we’re not cutting Medicare and Social Security, but he loses a lot of credibility when the reason why in this new Congressional Budget Office report for the next 10 years for the first time all three trust funds become insolvent in the next 10 years–the Highway Trust Fund, Medicare, and Social Security. So when they put in Obamacare, they raided Medicare. When they just did their inflation bill, they raided Medicare. So why do we have a problem? Why is it becoming insolvent even quicker? What the Democrats have done to Medicare. To turn around and know it’s a lie and to try to tell the American public that the Republicans are going after [these programs], we are the ones who have been trying to save it.”

As for whether or not Biden and Democrats will negotiate in good faith—it seemed from that moment during the State of the Union address that he might actually do so after that—McCarthy said it remains to be seen.

“I think only time will tell,” McCarthy said. “I mean, the president’s answer is to tax more. That’s the worst thing to do in an economy right now that has no growth. It’s the worst thing you can do with inflation, what he’s wanting to do as well. I think government spending less curbs inflation and it makes us stronger economically and eliminates waste in government.”

Filed Under: Breitbart, Congressional Budget Office (CBO), Debt ceiling, Government spending, House of Representatives, Inflation, Joe Biden, Kevin McCarthy, Medicare, News, On the Hill, Politics, Social Security, State of the Union

Retail Sales Down in February by 0.4%

March 15, 2023 by Jacob Bliss Leave a Comment

U.S. retail sales decreased slightly less than half a percent in February after jumping a revised 3.2 percent in January.

The Department of Commerce said Americans spent $697.9 billion at retail stores and online, down 0.4 percent from the previous month but up 5.4 percent since February 2022. The data also adjusted last month’s data to show Americans spent $700.7 billion in January 2023.

The sales figures are not adjusted for inflation, but the month-to-month statistics are seasonally adjusted.

The Department of Labor said this week that consumer prices were up 0.4 percent in February. Still, compared to a year ago, consumer prices are up six percent, lower than the 12-month gain of 6.4 percent recorded in January.

Bars and restaurants saw a 15.3 percent gain from February 2022. However, it is down 2.2 percent since January 2023. Meanwhile, general merchandise stores were up 10.5 percent since last year but down 0.5 percent since January.

Sales at auto dealers fell 1.8 percent from a month ago and are down 0.2 percent from a year ago.

Excluding autos, sales dropped 0.1 percent when compared with the previous month, and economists had expected this figure would rise by 0.2 percent. Excluding both autos and gas, sales remained the same from the last month.

Furniture store sales dropped 2.5 percent for the month before. Sales at electronics and appliance stores were up 0.3 percent. Building materials and garden center sales were down 0.1 percent. Grocery store sales were up 0.6 percent. Health and personal care store sales rose 0.9 percent.

Clothing store sales dropped 0.8 percent. Sporting goods and bookstores saw a 0.5 percent drop.

Department store sales rose four percent, and sales at general merchandise stores rose 0.5 percent.

Sales at gas stations were down 0.6 percent.

Jacob Bliss is a reporter for Breitbart News. Write to him at [email protected] or follow him on Twitter @JacobMBliss.

Filed Under: Breitbart, Department of Commerce, Economy, Inflation, News, Politics, retail sales

Businesses Expect Joe Biden’s Inflation to Significantly Rise

March 15, 2023 by Wendell Husebo Leave a Comment

Business leaders expect President Joe Biden’s inflation to rise more than expected in March, according to the Federal Reserve Bank of Atlanta’s business inflation expectations (BIE).

The Federal Reserve Bank of Atlanta’s measure of business expectations for inflation showed that, on average, firms in March expect prices to spike by 3.1 percent, a significant increase. The previous forecast was for it to be unchanged at 2.9 percent.

This measure had been steadily dropping since April 2022 before increasing 11 months later in March 2023.

The inflation survey covers businesses in the Sixth District of the Federal Reserve system, which includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.

The increase in inflation expectations comes a week after the government said core consumer prices, which exclude the volatile categories of energy and food, rose by 0.5 percent and overall prices climbed 0.4 percent. The increase in core prices was faster than the 0.4 percent expected and faster than the January pace of 0.4 percent. Compared with a year ago, core prices are up 5.5 percent, a tick down from the 5.6 percent 12-month increase in January.

Measures of underlying inflation showed that the Fed has still made very little progress in bringing inflation down to its two percent target. The Cleveland Fed’s median CPI measure came in at a 0.6 percent increase compared with the prior month, a 7.2 percent annualized rate of inflation. The 16 percent trimmed mean inflation, which excludes the top and bottom eight percent of price moves, came in at a 0.5 percent rise, a 6.48 percent annual rate of inflation.

In a separate report on Wednesday, the Department of Labor said the producer price index fell by 0.1 percent in February. The index for core producer prices — which excludes food, energy, and trade services — rose increased 0.2 percent in February, a deceleration from the 0.5 percent recorded in January.

Filed Under: Breitbart, Economy, Inflation, Joe Biden, News, Politics

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