Linking ≠ endorsement.
⇧ Worries about the yield curve
... if the Fed were to raise the short rate by another 100 basis points without any move up in long rates, we would be into inverted territory, and I would be very concerned.
They are threatening to raise the rate 100 points. We don't see inflationary pressures. In fact, the unemployment rate went up this last round. Plus, the negative aspects of the corporate-tax cuts have yet to really kick in (but they will).
⇧ Trade Wars: Trump loads decisive volley against China
Neoclassical-economics-based articles, such as this one, always talk about negatives for the US and not the net result after everything is said and done.
China will blink if it has any brains whatsoever.
⇧ Temps rise, records fall: Things to know about the heat wave
Jeff Masters, director of meteorology for the private forecasting service Weather Underground, said the past week's heat wave "is the kind of thing you expect to see on a warming planet ... it's easier to set a heat record." He notes that 2016 was the warmest year on record globally, and that year saw the most all-time heat records broken around the world.
⇧ Multifamily Investors Are Getting Used to 'Normal'
This entire article is about national aggregate-rates. Some locales are still experiencing 10%+ rent rate increases. However, state and local taxes have gone up in many places, including property taxes, to make up for cuts in revenue sharing from the federal level.
⇧ An Update on State Responses to the Federal Tax Bill
⇧ Protect Your Investment by Taking Proper Care of Your Granite Countertops
⇧ The indiscreet aggression of the bourgeoisie
One challenge that this elite aggression has to address is the loss of legitimacy of and support for forces advocating neoliberalism. The neoliberal propaganda machine attributes this apparent loss of legitimacy to the misdirected turn to "populism" of citizens confronted with government failure. José Ramón Elizondo of Grupo Vasconia, for example attributed the turn to populism to people being "mad at politicians because of corruption, impunity, insecurity, poor services and the lack of opportunities." In Mexico and much of Latin America too, the turn away from establishment politicians and parties is attributed to corruption, impunity and the inability to combat crime. The aim of such explanations is to deny that popular anger and protest is triggered by the inequalising, marginalising and exclusionary effects of neoliberalism itself.
They know that but work at avoiding it. They mention everything but. They do that to distract, to misdirect.
We need, and can have, an economy that lifts everyone higher than anyone can now apparently even imagine.
⇧ The robots helping NHS surgeons perform better, faster — and for longer
What this article avoided was saying that with artificial intelligence, the robots will actually not only not need a human controller but will do vastly better work and more quickly without one.
Did somebody say that no human job will be "safe" from being completely automated? Yes, I did. Have I changed my mind about that? Absolutely not.
⇧ Italy should prioritise an exit of the Eurozone madness
... those who dared question the Monetarist supremacy at the time, and instead, advocated Keynesian remedies to reduce the entrenched European unemployment, were met with derision from the bulk of the profession who had embraced the new economic theory and its policy implications.
I also argued that by insisting on economic and monetary union under these terms, and then imposing self-defeating austerity onto the nations suffering the most from that dysfunctional design, the European political elites had undermined the long-standing European Project.
That's Billy Mitchell just warming up. By the way, I had the exact same view before I'd ever heard of Billy Mitchell.
Bill is one of my favorite economists. I have several: Steve Keen, Michael Hudson, and Yanis Varoufakis. There are others I like, but these are way out front (highly visible, highly active, not shy at all).
Steve Keen is not as radical as I am. I wouldn't count him a total economic-democrat. He's really good on understanding and explaining debt (both public and private) and that there is no equilibrium or comparative advantage. Hudson and Varoufakis are economic democrats though. Michael is the best economic historian I know of. Yanis is trying mightily to democratize Europe to ward off fascism. As you can read from Bill's article, he doesn't think Yanis has a prayer of democratizing Europe as it stands. I'm not sure just how radical Bill is, but he is, as I am, a fiscalist (if I may coin that term) versus a monetarist. I think he's about as democratic as the Modern Money Theory crowd gets. In fact, I'd say he's actually transcended MMT.
Anyway, they are all good reads and worth watching whether you agree with them completely individually or not. I've learned things from each, though I've not altered my basic economic ideas a bit. I just have ideas I've not heard anyone else express, as they are completely original with me and I believe totally new to the world.
Lastly, I've seen Keen, Mitchell, and Varoufakis evolve just as Mitchell mentions Joseph Stiglitz has evolved. I don't know whether Michael Hudson has evolved because Michael knows so much, I just don't think I've heard half of what he knows and ultimately wants for the world.
I sure would like to see these guys get together to change the world together. If I were the President of the United States and wanted a brain trust to debate economic ideas with me and to come up with solutions ....
⇧ Flood insurance premiums may sink South Florida before the rising sea
Pathman urges us to think back to 1992's Hurricane Andrew. That disaster could have been catastrophic for insurance rates. But it wasn't. Why? Because Florida passed the nation's most stringent building codes. Today's buildings have a greatly reduced risk of falling apart in a hurricane. The insurance industry has taken note. Premiums haven't soared.
By the same token, if we can demonstrate that we are reducing the risk of property loss from increased flooding, insurers will restrain insurance rates and investors will keep believing in South Florida. In other words, we apply the lessons learned from Hurricane Andrew to sea-level rise.
⇧ Considering SRO [Single-Room Occupancy] Housing in New York City and Beyond
Seattle offers a real-world lesson on the interaction between market demand for SROs and development regulations. From 2009 to 2014, Seattle experienced a boom in market-rate SRO construction when developers realized that existing regulations allowed for the construction of these units in a way that would not trigger a lengthy design review process and that could, in some cases, avoid requirements to build off-street parking. These units had an average rent of $660, far less than the average rent of $1,367 for traditional studios. In 2013 alone, more than 1,800 SROs and microapartments were built, accounting for nearly 25 percent of all dwellings built in Seattle that year. Despite a finding from the city's Department of Planning and Development that "micro-housing and congregate housing residences production is consistent with adopted Comprehensive Plan Goals and Policies," the city, through a series of judicial decisions and legislation from the city council, pursued regulatory changes that have had the effect of making affordable SRO and microunit construction economically infeasible. These include subjecting proposed developments to longer review processes; expanding parking requirements; tightening zoning regulations; and increasing minimum size requirements. One study estimates that as a result, 829 fewer affordable housing units are being built in the city per year. The city's Housing Affordability and Livability Agenda task force recommends rescinding these changes to promote private-market development of more affordable housing.
⇧ Technically Speaking: 2nd Half Starts With A Fumble Recovery
Lance Roberts continues to impress. He appears to be considered "alternative" news. I suppose it's because neoclassical economics doesn't appear to be his inspiration. I like his realist/practical approach.
This is not an endorsement or recommendation to use his firm. It's not the opposite either. That's not my job or place. What I am saying is that I find his analysis rather comprehensive for that sector and a good source if I don't want to immerse myself like some day trader, which I certainly am not and never have been.
As for his position in the article, I'm leaning more toward recession sooner. That said, Lances job is to ride the wave as long as possible being sure to get off in time. Mine is too risk adverse to try to get the very last week out of some play. You can see why I'm not interested in being a day trader.
⇧ Residents Begin Cleanup After Iowa Flooding
... more than 230 homes were damaged near Fourmile Creek, along with about 10 commercial structures, a couple of hotels and six apartment buildings.
⇧ Wildfire Destroys 100-Plus Colorado Homes, Other Blazes Burning in West [also destroying properties]
⇧ We know ocean plastic is a problem. We can't fix it until we answer these 5 questions.
⇧ Quitting All Time-Wasting Addictions: "The Case for Not Owning a TV," etc.
I have not seen TV since 2004. I have also stopped social media. I did that this year and haven't missed it any more than I've missed TV all this time, which is not at all. These blog posts get posted to social media and any important notifications get taken care of when those posts occur. That's it. My total productivity has way more than doubled. There are a number of other not exactly time wasters I've given up but overly time-consuming things that I won't go into. You get the point.
Do I consider BiggerPockets as social media? I don't. How about LinkedIn? It doesn't have to be, but I think most people use it that way even though "networking" is what brought them to the site. Therefore, LinkedIn takes a degree of self-discipline to use without falling back into the mere "social" aspect of it.
What about when you've worked hard and are simply tired (too tired to read) and need to unwind? Form healthy habits to replace the unhealthy habits/addictions. You can always make sure you're getting enough sleep. Depriving yourself of needed sleep is not a smart thing to do or brag about.
⇧ 6 Different Ways to Hack Your Housing (Find One That Works for You!)
On "3. Renting by the Room," be aware that local laws often set the total number of non-family members who can live in the same house. Check the zoning laws to start with. I personally do not agree with such laws, but they exist and could upset your whole plan for a given large house.
⇧ 12 Creative Ways to Add Major Value to Apartment Buildings
Just to clarify on this one, 1-4 unit properties can definitely be valued via cap rates. Not doing so is arbitrary. It's a choice. Furthermore, 5+ unit properties can certainly be comped. Usually, the cap rate in the area for a comparably classed property is used. I'm not suggesting the article is bad or wrong.
⇧ The Velocity of Money... and Revolution
I'm including this one because, firstly, it's fun.
We have known — ever since Adam Smith gazed across the last 4000 years — that a feudal oligarchy does not invest in productive capacity. Nor does it spend much on goods or services that have large multiplier effects (that give middle class wage earners a chance to keep money moving). Instead, aristocrats have always tended to put their extra wealth into rentier (or passive rent-seeking) property, or else parasitic-crony-vampiric cheating through abuse of state power.
I largely agree with the whole article. I'm not as enamored with the "Greatest Generation" meme, however. After all, there was a whole lot wrong with the entire Cold War era. Plus, pollution went through the roof and hasn't been truly contained yet.
Secondly, I'm not as enamored with quite the degree of mixed economy David Brin seems to tout. I'm more democratically oriented.
That said, he does nail John Mauldin's reticence to finger the neoclassical culprit square on. Think about it. John was elated when Mauricio Macri became the President of Argentina because Macri would fix everything via the same method Sam Brownback used to trash the economy of Kansas.
I really do wish John would make up his mind as to which side of the political-economy debate he's on. He seems to be well aware of many of the same economists I consider the best.
⇧ City properties should be homes for people first — not investments
This article is why wise landlords work to get government to subsidize renting.
If made to choose between everyone having a decent place to live versus landlords making a killing, I'll choose making sure homeless children get housed. However, why should I be forced into that choice? It's not necessary. We can have a mixed economy if we want while housing everyone decently and while landlords make a decent living providing a valuable social service housing the People.
⇧ Europe Turns Down Chinese Offer For Grand Alliance Against The US
No surprise here:
... why does Europe - which has so staunchly publicized its disagreement with Trump's policies - refuse to align with China? Simple: behind closed doors it admits that Trump's complaints about Beijing are, drumroll, spot on.
Despite Trump's tariffs on European metals exports and threats to hit the EU's automobile industry, Brussels shares Washington's concern about China's closed markets and what Western governments say is Beijing's manipulation of trade to dominate global markets.
"We agree with almost all the complaints the U.S. has against China, it's just we don't agree with how the United States is handling it," another diplomat told Reuters.
And while Europe's position is understandable, if hypocritical - after all if it believes that Trump's approach to dealing with an ascendant China is the right one, why not just say it - the attention will shift to China, and the admission that Beijing is terrified about the consequences of a full blown trade war.
⇧ A Public Bank for Los Angeles? City Council Puts It to the Voters
That is a pretty revolutionary idea — a closed-loop California banking system that is independent of the Federal Reserve and the federal system. SB 930 would bypass the Feds only for cannabis cash, and the bill strictly limits what the checks issued by these "pot banks" can be used for. But the prospects it opens up are interesting. California is now the fifth largest economy in the world, with 39 million people. It has the resources for its own cashless "CalPay" or CalCoin" system that could bypass the federal system altogether.
I'm not a big fan of Marijuana, though I realize there are some bonafide uses and that more research should be done along those lines. However, that's beside the point of public banking.
I'm also not a fan of state public banks, though they are better than nothing. Frankly, I'm completely for nationalizing and totally democratizing the money system and for doing away with lending and interest all together.
Okay, so I'm a visionary. I'm sure it will happen. The question is when and just how many deviations from the straight path we'll go down before getting there.
⇧ Strong job growth combined with flat wage growth provides little evidence for skills shortages
Meanwhile, year-over-year nominal wages grew 2.7 percent, consistent with growth for much of this year. This continued slow wage growth is an obvious sign that the economy is not at full employment. Furthermore, despite a rash of employer anecdotes about being unable to find qualified workers, if there were widespread skill shortages we would expect to see stronger wage growth as employers bid up wages and benefits to attract and retain qualified workers. Instead, wage growth has been flat over much of the last year.
Part of the issue I've not seen discussed anywhere is that plenty of people took jobs for which they were considered overqualified. When the economy improves at all and positions open up that match their degrees, they leave their current jobs for those better matches.
So, plenty of employers are saddled with not having the trained and mature talent they say they need. Is there a huge lag, as in sticky wages (slow to raise wages to attract workers)? I'm positive that's the case.
It will have to change. However, we are still facing a downturn that will be made worse by the Fed's premature tightening.
⇧ Economists worry we aren't prepared for the fallout from automation
... do Schlogl and Sumner propose any of their own solutions? They write: "In the long term, utopian as it may seem now, [there is a] moral case for a global UBI-style redistribution framework financed by profits from ... high-income countries." Now that would certainly get the anti-globalist crowd incensed, and the pair admit that it's "difficult to see how such a framework would be politically enacted." Back to the drawing board then.
Nope. The plan is already out there and is quite simple and inevitable. There won't be any redistribution, as the money will be newly created to pay for the universal/gauranteed living-income (not at the poverty line but at a decent overall-quality-of-life level).
⇧ LA rents continue to flatline
⇧ California High Court Says Yelp Can't Be Ordered to Remove Posts
So, you're a landlord and a former or current tenant goes on Yelp and defames you and can't, or won't, substantiate the claims, which claims you believe are completely false or grossly overstated or what have you. Based upon this ruling, one is left to believe that people making false claims are protected and the one being falsely defamed has no recourse simply because Yelp's business model would be harmed? What side to you come down on?
⇧ As the Yield Curve Flattens, Threatens to Invert, the Fed Discards it as Recession Indicator
... just in the nick of time, with the spread between the two-year and the 10-year yields approaching zero, the Fed begins the process of throwing out that indicator and replacing it with a new indicator it came up with that doesn't suffer from these distortions.
And I have to agree that the Fed's gyrations over the past 10 years have distorted the markets, have muddled the calculations, have surgically removed "fundamentals" as a consideration for the markets, and have brainwashed the markets into believing that the Fed will always bail them out at the smallest dip. And the yield curve, reflecting all those distortions to some extent, might have become worthless as an indicator of anything other than those distortions.
It's not worthless any more than the Phillips Curve is worthless. It's simply not as clear because of the mentioned distortions. However, none of that means all fundamentals have been so distorted that there won't be a recession given the corporate tax cuts and the withdrawal of cuts for the working class and poor, etc.
Do I need to remind everyone that this is the most economically volatile time in my life so far? We don't know when, how often, and for long China will blink over the trade war and there's plenty more we don't know, all of which will impact our economy for the better or worse or both, just for various sectors.
⇧ "US Debt Explosion & Weimar II," by Egon von Greyerz
... they will be on their own when debt implodes and they lose their jobs. Because the state will at that point have run out of money and there will be no social security or unemployment benefits. Nor will there be any pension for retirees as pension funds will go from extremely underfunded to totally unfunded.
Handwringing extraordinaire ....
Look, when we have our next large recession, the people who knew that the fiscal stimulus in the face of the Great Recession was way, way, way too small will still be alive and talking and writing. The young people who've been studying the disaster that is laissez-faire capitalism will be ready, able, and willing to turn the system upside down and flatten it, as needs to happen and should have happened long, long ago. Deficits will be wiped from the books. Governmental borrowing will be eliminated as the means of creating the liquidity we'll need to not engage again in the mindlessness called austerity. Things will get much, much better after the next stupid, neoliberal-caused crash.
Homelessness will be ended. Healthcare will be free. College will be free. Poverty will be completely eliminated. Pollution will be stopped and cleaned up. Only the People's imaginations will limit them in terms of what humanity will be able to do. Automation will be turned to servicing everyone and ultimately completely for free.
⇧ Trump's tariffs: What they are and how they will work
Now why do you think that this article leaves out just how well the US economy did when tariffs were really high? Also, why didn't the article mention that domestic prices come down for products that were being sold at a higher rate outside the US? Suppliers have to move their inventory. They have to lower prices to make that happen, to make the products worth it for Americans to buy right here at home. Finally, how many companies have ramped up production and hiring because now they don't have to compete with lower-paid subsidized labor in China and elsewhere (countries that supply China with materials and parts to assemble)?
Tariffs are not the complete answer, but they are not as advertised by the neoclassical "free traders" either.
⇧ SNAP work requirements could increase deep poverty for some
It should be pointed out that government policy and practices shouldn't be set as if the US economy is only going to improve. I see a recession as highly likely. Also, the unemployment rate just went up, not down. Let's also remember all the complaints from employers about not being able to find qualified workers. Is the system really going to train everyone who is on SNAP? Perhaps the guaranteed public job is a better idea.
⇧ Does the U.S. Have a Lot of Leverage with China? Mr. Arithmetic is Skeptical
In answer to the article, China could not afford to ditch patent rights. The EU would not go along. Who'd buy from China? Also, China's GDP is lower now than in 2009. Lastly, the nations supplying China might look directly to supplying the US. That would ruin China's supply chain. "Mr. Arithmetic" needs to look at all the numbers, not just cherry picked ones.
⇧ June 2018 BLS Jobs Situation Remains Strong
The survey jibes only to a degree with the actual stats. Much of what will happen will depend upon just how much employers are reading the right tea leaves. My feeling is that most are simply going along rather than really trying to plan too far out. Things would have to settle down and become more predictable before many would take on longterm commitments (plans that once executed would prove very costly to shutdown).
National Federation of Independent Business (NFIB)'s monthly Jobs Report Statement:
Small business owners are continuing to hire and create new jobs at historically high levels, according to NFIB's monthly Jobs Report, released today. Sixty-three percent of owners reported hiring or trying to hire, up five points from last month and the highest level since September 1999. A seasonally-adjusted net 20 percent plan to create new jobs, up two points from May.
"Small business owners, once again, are continuing to be the driving force of our economy by hiring at record levels and adding new jobs," said NFIB President and CEO Juanita Duggan. "The number of owners hiring or looking for workers strengthened."
The search for qualified workers remains owners' biggest problem, but many continue plans to increase compensation to attract workers. Twenty-one percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem, only three points below the survey record. Thirty-six percent of all owners reported job openings they could not fill in the current period, up 3 points matching the survey record high set in November 2000. To compete in the tight labor market, a net 31 percent of owners reported raising compensation, marking the sixth straight month it has been 30 percent (net) or higher.
"Right now, more firms are looking for workers than workers looking for a job," said NFIB Chief Economist Bill Dunkelberg. "The competition for existing workers has tightened the labor market for both skilled and unskilled workers."
Hiring is the strongest in construction, manufacturing, and financial services. Owners are also adding resources to invest in training for both new and existing workers.
⇧ Major Problems & Common Issues on Home Inspections
The article is a good primer.
Okay, this is the home inspection to buy or sell, but it is not the inspection to get your home/property insured. It's not radically different for what it covers. It's different concerning what it doesn't go into that the insurance company may want to know. Of course, that's assuming the author, Jeff Knox, really did a pretty exhaustive job covering the subjects in the purchase/sales inspection. It seems it.
⇧ 76 Environmental Rules on the Way Out Under Trump
Cutting back on environmental protection is a real risk increaser that will end up reflected in higher insurance premiums or the withdrawal of coverage altogether.
⇧ Greening Boston: The Climate Change Preparedness and Resiliency Checklist
The City of Boston is, in fact, undertaking a variety of initiatives to become more resilient—including developing green infrastructure installations, advancing an urban forestry program, updating wetland and flood ordinances, and educating businesses on their vulnerabilities. Most recently, the city has chosen to improve the resiliency of new development and existing structures.
⇧ LA City Council advances plan to change development rules near transit stations
This seems to fly in the face of libertarian claims that mass transit is a wasted effort.
⇧ You're eating microplastics in ways you don't even realise
⇧ Macron strikes humble tone as he launches 'Year Two' of reform drive
"It's impossible to pretend you can redistribute wealth if you don't create it in the first place."
That's France's President, Emmanuel Macron. His statement is doubly wrong. He's combined two false notions to make a failed point. Yes, first you create the wealth (money). However, then you don't redistribute it. You simply distribute it. What he's suggesting, which is flat wrong, is that cuts for the rich results in businesses creating wealth. However, he's wrong on both fronts on that also. Cuts don't do that in general, and businesses are not the source of wealth. Money created by the government is (provided it's done correctly, which means in an economically balanced manner).
So, what a mess he has in his head concerning the fundamentals of economics. He's far from alone. It wasn't long ago when the vast majority of supposedly top economists suffered from the exact same ignorance and illogical thinking. So many of them thought the way Macron still does that I did not learn economics from academic economists but from self-study and applying logic to the questions. I had formal training in political economy, but that did not supply the answers. After my self-study and findings, I discovered that a number of others had already come to the exact same logical conclusions I had (even non-economists, such as Edison and Ford), though I've gone further than anyone else I've seen so far.
Why is all of this important (this wealth-source issue)? Macron is the leader of France. France, along with Germany, heads up the EU, a huge economy. If Macron is not corrected and if the correction doesn't become common knowledge, the entire planet's economic development will be retarded. It's already been retarded for not just hundreds of years but thousands. We need to stop flitting around with protecting plutocracy. We need to abolish it everywhere and permanently. We need economic democracy, which requires the utmost in transactional transparency.
⇧ ECB head Draghi: Trade protectionism is main risk to economy [wrong]
Draghi has some correct-leaning ideas. He's right to want to protect "citizens against unchecked globalization." You see, most of the trade deals that were being put forth and/or supported by the Obama administration were not checked enough, were too structured to give corporations free rein. Trump has backed off on all of those, but he hasn't done it for the welfare of the general citizenry but for more power for US plutocrats over the plutocrats of other nations.
Draghi is also correctly leaning when he says that greater integration of the banking system in Europe would help in the same way the FDIC has helped in the US. The problem is that Draghi's vision falls short, as does the FDIC system. In the US, we had "too big to fail." We bailed out the entire banking system, including banks that claim they didn't need bailing. What should have happened was the complete nationalization of the banking sector and a clean sweep and break so we could usher in a public, democratic banking system to be positive never to experience another economic crash.
Where Draghi is completely off course concerns the blanket denunciation of trade protectionism. If there is going to be any trade for profit at all, fair trade is always better. If it takes tariffs to get there, then such tariffs are generally a good thing.
⇧ Battery-backed solar power to undercut coal in China by 2028: report
Supplies of raw materials are critical, he added, and the sector needs to plan for end-of-life recycling. A typical on-grid battery lasts around ten years, charging and discharging three times a day.
At the cost of global warming (weather/climate-change-related disasters), we should subsidize battery development to match (or better) to speed up bringing the new systems online much sooner. The costs of global warming, the disasters, will curve up. The subsidies should take that into account and be front loaded while still ramping up.
⇧ Econometrics cannot establish the truth value of a fact. Never has. Never will.
Nowadays it has almost become a self-evident truism among economists that you cannot expect people to take your arguments seriously unless they are based on or backed up by advanced econometric modelling?.
I think that's dying. It's been dead with me for a long time. It's dying because of articles such as this one.
Advanced econometric models serve three purposes. First, they show probabilities. That one's okay. Second, they serve to make economics inaccessible, sort of like the wording of the article and those quoted, which is evil. Third, they serve to obfuscate, which is tied to the second reason just stated. What they want to obfuscate is that the economic system is deliberately designed to chop off the left end of the political spectrum. That was done by the right end, the owners of the system being protected from the truth that democratic economics is the best path for all concerned, even its ignorant, foolish opponents.
⇧ Zoning 101: New guide demystifies NYC's byzantine zoning code
⇧ What Newbies Should Know About Financing Investment Properties (Versus Homes)
⇧ Washington's Skagit County Gets New Tsunami Planning Maps
The Cascadia Subduction Zone beneath the Pacific Ocean off the West Coast has caused large earthquakes ....
⇧ 3 Homes in Georgia Burned Down by Fireworks
⇧ Newspaper Probe Says Texas Isn't Enforcing Flood Insurance Rules
In Houston alone, seven properties have had more than 100 damage claims totaling $9 million — even though the combined value of the buildings is just $426,000, according to the newspaper.
There is obviously a loss-history gap that shouldn't exist. That drives up premiums and other costs for everyone. It also puts lives at risk: owners and first-responders, etc.
⇧ Don't Fear the Inversion - It's the Short Rate That Kills You
Watch the short end? Yep. Stephen Williamson:
What's going on here? The flattening yield curve is being used as an argument for a pause in interest rate hikes, so the people in favor of more interest rate hikes are looking for reasons why things are different now, and the drop in the margin between the 10-year yield and the 2-year yield doesn't mean what it used to. People may be able to come up with explanations about what's going on with respect to the 10-year vs. the 2-year Treasury bonds, but as I discussed above, that's not really important - it's what's going on at the short end of the yield curve that matters. The key question is: What are the benefits and costs of further rate hikes, given the current state of the economy? In evaluating the costs, we need to be concerned about the effects of these hikes on real economic activity. What's it take for the Fed to kick off a recession, and does the Fed really want to do the experiment to find out ....