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Today's June jobs report is being touted as strong enough to put any chance of a Fed ease on hold. That's silly, in my view. Putting things in the proper perspective, today's job report was one more in a year's worth of mediocre numbers. Private sector jobs (the ones that really count) have been growing at a 1% rate for over a year, which is consistent with real GDP growth of about 2%, a bit less than we've seen since 2010. Nothing in this report should give the Fed a reason to keep monetary policy tight.
10 comments:
It seems like the bill will cause more real world inflation than tariffs.
Thank you Scott. Do you think they are going or hoping for negative real rates to deal with the debt?
I agree.
In addition, much US inflation stems from tight housing markets, a legacy of criminalizing housing production for decades nearly everywhere, but especially California.
As for US debt, like everyone else I would prefer balanced budgets.
Since that ain't going to happen, the Fed should grow its balance sheet, and maybe a 2% to 35 inflation target would be better---this would stop the US from becoming over-indebted.
The Bank of Japan owns 50% of Japan's government bonds, and their problem until recently was deflation.
Interest paid on JGB's goes back into the national budget.
You have a better solution...for the real world?
What influence will a weakened dollar have on all of this? Higher commodity prices? Wasn't a spike in commodity prices a big part of the 2008 financial crisis? https://www.thestockdork.com/effects-of-a-weakening-us-dollar/
California Goods Producing Economy
Having worked in this sector and state for many years, I have several contacts still involved there. Recently I have seen the following closures scheduled between now and 2026- 1. last sugar mill 2. last large chemical plant 3. two oil refineries.
The state and local government makes it hard to do business in this sector, and continues to be supported by the voters.
Basically, the state has the following "industries" (aside from the usual local items like health care, financial/accounting services, vehicle repair, etc.): 1. agriculture (high value items), 2. tech (electronic and pharma) 3. movies/entertainment.
As such, the trajectory continues as a "productive" state (top 10 in most categories), coupled with the highest poverty.
Benjamin - Bank of Japan: it may be something particular to Japanese society; but still, fundumentally, a central bank buying its own government debt will either: eventually cause inflation, or, eventually ruin its currency (relative to real assets, not other gov't currencies doing the same thing).
I do have a related question to the US situation: can anyone tell me how M2 has gone up approx 6% a year for decades, but with the GDP only growing 2-3%? Can it be anything other than the Fed? priming the pump?
Ellen Brown finally brings out some good points
https://ellenbrown.com/2025/07/09/why-public-funds-should-be-deposited-in-publicly-owned-banks/
You want good growth, then you use the U.S. Golden Age in Capitalism as an example, where the transaction's velocity of funds financed 2/3 of GDP.
During the decade ending in 1964 aggregate monetary demand increased at an annual compounded rate of about 6 percent. In the subsequent 9 years, the increase was more than 13 percent, and in 1972-73 nearly 30 percent.
During the U.S. Golden Era in Capitalism (not optimized with 3 recessions), the annual compounded rate of increase in our means-of-payment money supply was about 2 percent. The nonbanks grew faster than the commercial banks (which made Citicorp’s Walter Wriston jealous), and therein a higher percentage of savings was utilized (through direct and indirect investment) and was also FSLIC and NCUA insured.
And during this same period, 1955-1964, the rate of inflation, based on the Consumer Price Index, increased at an annual rate of 1.4 percent. Unemployment averaged 5.4 percent.
Things ended in 1965. That’s when the commercial banksters began to outbid the non-banks for loan-funds (resulting in disintermediation of the thrifts).
The growth of time deposits shrank AD and therefore forced the FED to follow its easier monetary policy, which caused the Great Inflation.
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