Wolf Richter on “This Week in Money,” produced by HoweStreet.com, recorded on July 26:
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
Politics will weigh heavy on this decision.
Politics has nothing whatsoever to do with policy decisions made by the Federal Reserve’s FOMC.
Not sure you believe that or looking for comments, but the “nothing whatsoever” line you use a lot, seems to work, you’ve reeled in a big fat toad.
How many upstanding voting FOMC members are we talking about 12. These aren’t the 12 apostles. Deception is the name of their game, politics in one form or another has everything to do with their decisions.
No, politics has nothing whatsoever to do with their policy decisions on the Federal Reserve FOMC.
Correct.
You are in a room with 12 people.
One of them is pick pocketing you.
You catch them, and call them out in front of everyone.
He denies it and the 11 other people back him up, saying you are crazy.
This goes on until you make it stop, or leave, whatever.
The end.
Except when the Republican Presidential Nominee warns the Chairman of the Fed not to cut rates before the election… except maybe then. /sarcasm
Is it the same guy who was badgering the chairman to cut interest rates when the rates were low and the economy is the best ever!
That’s why the “apolitical” Fed raised rates and engaged in heavy QT during the govt overspending and skyrocketing inflation during spring summer fall 2021 and winter spring 2022.
Odd that someone here would think that other commenters were born yesterday.
Is the US the Next Japan?
You mean like clean streets and untattooed slender women? Sign me up.
“You mean…”
Goofball. It’s helpful to listen to it before commenting about it.
Any notable auto makers actually cut prices so far, excluding Tesla?
Was re-reading your note on inventory by car maker back in May so curious if that’s changed and/or forcing [price] cuts yet.
Right now they’re applying discounts and incentives, rather than cutting MSRP, after jacking up the MSRP. But obviously, that’s not enough, especially at the Stellantis dealers that are drowning in inventory. Ford was forced by Tesla to actually cut prices on its EVs.
…LTTGDFS?
Laughing Through This Gall-Durn Freak Show?
Me too!
If not a problem, in future posts, could you add where your segment starts and ends? I am a fast reader and generally avoid videos, podcasts (don’t drive too much either to listen to them). The title contents sound interesting. Thanks.
My segment starts instantly when you click on the video. I set it that way. You will instantly hear the first question addressed to me, and then my reply. No wait time. Try it.
Wolf, normally the video starts in the right place but this video started at 49:09 and your segment begins at 37:37.
On purpose. The first part of my segment are topics that I have discussed here a lot, and I thought they were less interesting, so I wanted to skip them and go to the fun part right away. People rarely listen to the whole thing, so I try to start with the good parts. Sometimes that’s at the beginning of my segment, and sometimes it’s later.
I remember when people were concerned the US wasn’t enough like Japan. And regarding one particular topic you mentioned, a secular decline in house prices, we should be.
Hats off to you Wolf, a GREAT presentation!!
In contrast to Benjamin Strong’s “coup de whiskey” delivered to the 1927 investment markets, perhaps Jay Powell will administer a “spoonful of ipecac.”
Warning: “Likely to induce vomiting.”
My household has been spending at the fastest rate ever this summer, at least 20% ahead of inflation. The next CPI report for core services will be interesting.
Ok thanks for the heads up JeffD. Just relayed this to Powell so he can explain at the press conference.
Ok, you win the internet today!
Ok, you win the internet today!
How do dealers make money on servicing EVs? There is almost nothing mechanical to service! No wonder there is pushback on selling EVs!
They won’t make much on servicing. Another example of disruption. They will continue to make money on financing, and add-ons and the manufacturers will quickly figure out service items that will be required.
Do you know how to change a flat tire on a Tesla?
I don’t, but I have heard it goes something like:
Get a flatbed and get the vehicle to the shop
Remove the wheel and attached electric motor
Remove/ replace the tire
Reconstruct the wheel/motor assembly.
I’m sure it’s not overly complicated but labor intensive. I can guess that the lights (head, tail, interior etc) are over involved (no EV required here), touch screens and other neat gadgets are designed to last decades and 10-20% will experience early failure.
That’s stupid BS. You take the wheel off a Tesla the same way you do with any car. You loosen the lug nuts, jack up the car, remove the lug nuts, remove the wheel, and then take the wheel to a tire shop to put a new tire on and rebalance the wheel. Then you go back to your garage in reinstall the wheel (make sure you have a good torque wrench and look up the torque you need for the lug nuts). Or you can take the car to the tire shop and they’ll do it for you in 10 minutes. Would be nice to have matching tires though.
Why are you spreading this stupid anti-EV propaganda bullshit here? Just google it and watch a YouTube on how to remove a wheel from a car.
Also from Tesla:
“For the duration of your New Vehicle Warranty or Used Vehicle Limited Warranty, Roadside Assistance is provided at no cost. If your tire is damaged and prevents you from safely operating your vehicle, you can request roadside assistance immediately from the bottom of the Tesla app home screen.
The Tesla Model S does not come with a spare wheel/tire or a traditional jack. Instead, it is equipped with a tire repair kit and an air compressor.
I get that EVs have a much simpler powerplant, but don’t they still need regular maintenance on brakes and suspension etc.?
Yep, brakes, suspension parts, axles, CV joints, cooling systems, A/C, body hardware, cabin electronics, window motors, etc, etc.
I have one, there are many parts that can fail and some that require periodic maintenance.
Suspension has been a money pit for my (ice) car lately. Lots of potholes in New England and the winter road salt eats away at the undercarriage.
In southern Arizona with this god awful heat had to replaced my battery and radiator.
Just saw a coyote with a small dog in its mouth trotting across the park.. Reminded me of what the economy will be doing to powell
Instead of rate cuts in September , Powell should increase the rate of balance sheet normalization to get it back where it was prior to the pandemic at a minimum. He’s way off base as usual and contributing to the collapse of the confidence in the Fed and increase in inflation in the future.
“collapse of the confidence in the Fed”
Not sure equities would be at ATHs and bond yields so low were that at all happening.
Wolf, your concern about the Fed possibly bowing to market pressure on rates is making me concerned. Or maybe I misunderstood that bit.
Fingers crossed for higher for longer.
I didn’t say anything about the Fed “bowing to market pressure on rates.” Not sure where you got that. What I did say was that the market is nearly 100% certain that the Fed will cut, and that concerns me, I said, because the Fed itself is not 100% certain, far from it, a rate cut is hooked on a big IF… IF inflation continues to decline. And then I said that this was a big IF, and explained why, and given that IF, that there’s a pretty good chance the Fed isn’t going to cut in September.
2 more CPIs, 2 more PPIs, one more PCE, two more JOLTS (including today), plus GDP and housing data… all falling between now and September 18-19.
Lots more data coming at us in the next 6 weeks.
Re-hike risk helps keep Powell in a narrow path forward — I think the misstep fear weighs heavy — the Fed will look totally idiotic if they cut early and then get it wrong. They have nothing to lose by being patient and staying the course — especially since Fed rates haven’t had a great impact (yet).
Thanks, Wolf. Listening to you in this latest interview has once again helped me to withstand being gaslighted by the hordes of “experts” calling for rate cuts. Yesterday’s most egregious example was Princeton Professor Alan Blinder’s op-ed in the Wall Street Journal titled, “The Fed Should Cut Interest Rates This Week.” He’s the same expert who said inflation wasn’t going to be a problem a few years ago before we saw cumulative inflation of 22%. How can he be so wrong for so long and still get to write articles in the Wall Street Journal?
There was another opinion piece in the WSJ yesterday, but it actually made a lot of sense and was very good (behind paywall):
“The Case Against Low Interest Rates”
https://www.wsj.com/articles/the-case-against-low-interest-rates-3906dc55
Agreed. Lots of great points in that piece, but here are my favorite two paragraphs:
“The surge in federal spending and concomitant central-bank asset purchases in 2021 and 2022 contributed to the harmful surge in inflation. The monetary base is up 60% since the pandemic. Another measure of money, M2, is up 36% in the past four years. The inflation surge over the same period—cumulatively about 22%—shouldn’t have been a surprise. The American people are still paying a high price for the central bank’s policy error.”
“A dollar four years ago can buy less than 80 cents of goods and services today. But a dollar in the stock market is worth about $1.80. Much of Wall Street applauds the Fed’s big balance sheet and monetary dominance in Washington. Households and businesses on Main Street have far less reason for enthusiasm.”
Pretty much sums up what has happened with inflation and stock prices over the last four years.
The 2nd paragraph was their intended upon goal, they just don’t state it aloud much anymore – their precious “wealth effect” that is a lie. “Trickle-down economics” doesn’t work. It’s “trickle up poverty” as the pigmen play a real life game of monopoly on their way to owning everything under the sun.
I do not care if he’s done anything good since the inflation inferno he created; Jerome Powell should not have a job. He should have been fired along with the entire board of voting members on the FED.
An entity charged with maintaining price stability which intentionally, diabolically sets out to cause massive inflation is harmful to mankind and should cease to exist. Do we allow lifeguards to actively start drowning swimmers? No. Then why do we allow a central bank to create an inflation firestorm?
Blinder thinks oil prices determine inflation, not inflation is “validated” by monetary policy.
Some people like to say there is a big conspiracy that the Government wants us to be debt slaves. Listening to the Japan piece sort of leads me to believe that the absurd personal financial behavior (taking on debt to buy an overpriced vehicle from the worst of the Big Three, for example) we have in the US is highly desired by the Government, indeed. Maybe if we never became like this, we’d still be rich without having to continue the overspend?
I know families seem to be very responsible financially in Germany. I know they’re not doing so great now as a country, but they thrived being responsible for years. Or will something go wrong like it did for Japan and we’ll all find out debt was the way after all?
Or maybe, rich countries all just get lazy and entitled, and can only continue to be rich with more financial shenanigans?
In 1900 Argentina was one of the richest countries in the world. No joke although it seems like one now. In the subsequent decades whenever they faced a choice, they made the wrong choice and little by little their economy degenerated until they became the basket case they are today. We are well along the same path in the US and we will get what we deserve.
These comments all point to the cyclical nature of human behavior.
I am no historian, but Germany’s “years of responsibility” came after: global armed conflict, destructive hyperinflation and collapse into a second global conflict, including a massive physical destruction across the country and continent.
We all choose to behave more responsibly after some form of punitive action(s), some learn faster than others.
The Argentina example seems more apt: “Exploitation of the rich land” and pushing aggressively into global trade combined to make incredible wealth. They failed to latch onto the military prowess that the USA had (only a blessing of geography: Europe and Japan decimated/ USA more industrialized than ever to build the war machine).
We successfully ran with that baton, until we couldn’t find even one honest man or woman to lead and have fallen into being the laughingstock rather than defender.