The Mess That Greenspan Made - Part 20

The Fed’s Not-So-Hot Growth Forecasts

Via Deutsche Bank and this item from Pawel Morski’s Twitter feed comes a rather embarrassing summary in chart form of the Federal Reserve’s dismal record at predicting growth for the U.S. economy in recent years. About the only nice thing one could say about this is that they’re at least moving in the right direction.

Let’s just hope that central bank economists don’t underestimate future inflation as badly as they overestimated growth, something we may get a first hint at with tomorrow’s inflation report following today’s big upside surprise for wholesale prices as detailed here earlier.

Today’s report on producer prices from the Labor Department has certainly heightened the anticipation for tomorrow’s reading on consumer prices, but, in some ways, that’s a lot like saying “one is greater than zero” as few seem worried about inflation these days.

After rising 0.5 percent in March, wholesale prices were expected to increase just 0.2 percent in April but, instead, they jumped 0.6 percent, the most since September 2012. Gains were paced by a surge of 2.7 percent in food prices and the second straight increase of 1.4 percent for trade services. The so-called “core rate”, excluding food and energy prices, rose 0.5 percent  following an increase of 0.6 percent in March.

Recent history is replete with examples of producer prices surging, but having little effect on consumer prices as retailers have found ways to deal with the increases without having to pass them along to their customers. But, with the general view that the U.S. economy is improving, that could be changing and, if so, the first signs of that could be seen tomorrow.

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Here’s the data on student loans and home ownership that’s been getting a lot of attention in the last day or so in chart form from its original source at the New York Federal Reserve.

Just in case it isn’t already obvious, many of those youngsters aged 27  to 30 who should be most able to buy property because they went to college and are making more money than they would otherwise are not doing so, in part at least, due to their student loan debt.

What’s really surprising about this is that, over the last few years, the implied home ownership rate of those with student loans has actually fallen below those who have no student loans, a group that, presumably, includes lots of college graduates who got through college with little or no debt along with those who never felt the need for higher education.

Of course, the bigger picture here is that overall home ownership amongst the younger set has fallen precipitously since the financial crisis, dropping by nearly a third, from over 30 percent to just over 20 percent.

Wednesday Morning Links

MUST READS
Reaction to new highs: cheers and fears – USA Today
Factories burnt in Vietnam anti-China protest – BBC
Anger Grows in Vietnam Over Dispute With China – NY Times
Ukraine Strives to Fix Crisis as Ambush Shows War Closer – Bloomberg
Focus on BoE, highlights contrast with dovish ECB – Reuters
Fannie, Freddie won’t reduce loan limits, regulator says – LA Times
Recession-Baby Millennials Scarred by Downturn Spurn Stocks – Bloomberg
U.S. household debt jumps for third straight quarter: survey – Reuters
Student Debt Holders Retreating From Housing Market, NY Fed Says – Bloomberg
Investors May Have Gained Early Word on Fed Policy, Study Finds – Bloomberg
Wall St. has always been corrupt or about to be corrupted – The Burning Platform
Piketty and the Zeitgeist – Project Syndicate

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MARKETS/INVESTING
Asia shares rise on new S&P high, Europe meanders – AP
Traders eye data this week for whiffs of inflation – CNBC
The Case for an Extended Bull Market in Stocks – Barron’s
European stocks step back from multiyear highs – MarketWatch
Investor Survey Explains Why Investors Remain “Side Lined” – Zero Hedge
Like So 2000: Wall Street Pumps Crashed Internet Stocks – Testosterone Pit
Treasuries Rise Before Producer Prices Amid ECB Stimulus Bets – Bloomberg
Gold up on lower dollar, stocks; platinum, palladium add to gains – Reuters
Nobody Is Bothering to Buy Gold and UBS Says That Is Its Biggest Positive – The Street
Gold Smuggling in India Spikes 446% in Last 12 Months – Scrap Monster
London silver ‘fix’ to be scrapped from August – Mineweb

ECONOMY/WORLD/HOUSING/BANKING
Why Austerity Does Not Work – xe.com
What Is Social Insurance? Take Two – Baseline Scenario
The Death of QE’s Promise and Premise – Alhambra Partners
Food Stamps and Failed Economic Policies – House of Debt
UK jobs growth rises at fastest rate in 43 years – Telegraph
Banks told to act more quickly on home loans – China Daily
‘Debt denial’ over mortgage repayment problems – BBC
Southern California housing market slowly heating up – LA Daily News
Where can the middle class actually afford to buy a home? – Fortune
Ben Bernanke lunch auctions for $70,500 – CNN/Money
The Dwindling Fed – NY Sun

 
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