long term – Alg A http://alg-a.com/ Sun, 17 Apr 2022 05:28:16 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://alg-a.com/wp-content/uploads/2021/10/icon-6-120x120.png long term – Alg A http://alg-a.com/ 32 32 Is San Antonio FloatMe a Safer Alternative to Payday Loans? https://alg-a.com/is-san-antonio-floatme-a-safer-alternative-to-payday-loans/ Mon, 07 Feb 2022 08:00:00 +0000 https://alg-a.com/is-san-antonio-floatme-a-safer-alternative-to-payday-loans/ FloatMe, a San Antonio tech startup that gives workers cash advances on their next paycheck, said it has increased $16.2 million from investors during its last fundraising. Overall, the startup has raised $49.1 million in funding since June 2019, including $25 million in debt funding, according to Crunchbase, which tracks investments in tech companies. FloatMe’s […]]]>

FloatMe, a San Antonio tech startup that gives workers cash advances on their next paycheck, said it has increased $16.2 million from investors during its last fundraising.

Overall, the startup has raised $49.1 million in funding since June 2019, including $25 million in debt funding, according to Crunchbase, which tracks investments in tech companies. FloatMe’s new investors include Iowa-based Active Capital and ManchesterStory.

“We’ve been under the radar,” FloatMe co-founder and president Joshua Sanchez said. “The funding is validation that we have grown significantly and allows us to expand.”

However, he declined to say how many customers use the app.

FloatMe, with 60 employees and an office in downtown Soledad Street, is part of a wave of online and mobile cash advance companies gaining traction during the coronavirus pandemic. They compete with payday lenders who sell high-interest loans to largely low-wage workers, a disproportionate share of whom are black and Hispanic.

FloatMe’s service is similar to financial technology, or fintech, offerings from companies such as silver lionwin and David.

Like its biggest rivals, FloatMe says it offers customers payday cash advances, not loans.

Customers pay a monthly fee of $1.99 and can request small advances – no more than $50 – which they repay when their next paychecks hit their bank accounts.

The startup Terms of use say users must be US citizens at least 18 years old and have a cell phone and email address. To create an account, customers authorize the company to access their bank account balance and transaction history.

They must also prove that they have received at least $200 in electronic payroll deposits three times before they can apply for advances.

FloatMe CEO Josh Sanchez markets his company as an alternative to payday lenders.

Jessica Phelps

Once approved, users can receive their advances through an automated transfer from the clearing house to their bank accounts in one to three business days. Or they can pay $4 for an “instant” money deposit within eight hours.

Fees for faster access to cash advances have caught the attention of industry watchdogs. Many workers who apply for cash advances are in financial straits and need money fast.

“This type of fee is meant to be voluntary, but really adds up for consumers,” said Yasmine Farahisenior policy adviser at the Center for Responsible Lending, a North Carolina-based nonprofit policy and research group.

FloatMe users can also receive offers from third-party companies for money management services or products — if they choose, according to the startup.

According to the terms of service: “In all cases, you will need to register to receive these offers from partners, and FloatMe may receive compensation from these partners for referring you to them. FloatMe is not responsible for the products and services offered by these partners.

Payday debt traps

The Federal Consumer Financial Protection Bureau describe a payday loan as “a short-term, high-cost loan, typically $500 or less, that is usually due on your next paycheck.” Loans are available in storefronts and online.

If borrowers do not repay their loans on time or at all, lenders can withdraw money from their bank accounts, sometimes resulting in overdraft fees. Payday lenders also sometimes send collection agencies after delinquent borrowers.

Payday loans have long been a big business in Texas.

The Center for Responsible Lending has to analyse the average annual percentage rates, or APR, for a $300 loan with 14-day repayment periods in each state. Data shows Texans can pay up to 664% APR — the highest in the nation — because the state has no interest rate caps to protect borrowers.

“Payday loans are marketed as a quick financial fix, but they’re actually a long-term debt trap,” Farahi said. “People will take out a loan thinking it’s a one-time loan to deal with a short-term crisis. But with all the fees and costs, they end up having to take out another loan and another loan.

Like his peers, Sanchez says FloatMe is not a payday lender.

“FloatMe is all about transparency,” he said. “We charge members $1.99 per month to access our personal finance management tools, overdraft alerts and other budget management features. Members can access the floats without having to pay the $1.99. There is no credit check. There is no interest and no hidden fees.

“We do not collect or store sensitive information (personal information),” Sanchez said. “We work with a third party to simply connect a member’s bank account. We do not sell any user data.

The company’s website says it uses Plaid, a California-based financial services company, to connect to customers’ bank accounts.

Debt trap

Sanchez said he had his own bad experience with a payday lender.

Five years ago, he was driving in San Antonio when a VIA Metropolitan Transit bus veered into his lane and rammed his vehicle.

The Incarnate World University graduate had car insurance but couldn’t wait for payment to fix his car – he needed it to get to work. At the time, he was among the 67% of millennials without a credit card. So he dipped into his savings to pay for repairs to the vehicle, leaving him short of cash before his next paycheck.

He didn’t want to ask his mother for money, so he turned to a payday lender for a $200 loan – and quickly fell behind on his payments.

“I have to understand that paying on time is important,” he said. “The way lenders generate their income is by betting that people can’t prepay and get into a habitual cycle of having to pay interest. The sad thing is that the majority of people cannot afford a sudden recovery.

Later that year, Sanchez pitched the idea for FloatMe during a startup challenge at Geekdom, a coworking space in downtown San Antonio, and won $13,000.

FloatMe’s terms of service say it doesn’t charge late fees or penalties, and it won’t go to a collection agency to track down customers for payment.

“If a member doesn’t repay a float, we don’t seek recourse,” Sanchez added. “Our only response is not to allow the member to take another float.”

Still, consumer advocates remain wary of cash advance companies because they aren’t regulated like payday lenders.

“A lot of them try to say they’re not loans, but we think they’re loans and should be regulated by consumer protection laws and state loan laws.” , Farahi said. “Obviously in Texas these laws aren’t strict on user caps, but we’re concerned that they’re trying to get exclusions from state and federal lending laws saying that it it’s not about loans. And really, a lot of them are payday loans in some other form.

eric.killelea@express-news.net

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Lehman Capital:Why inflation and the US policy response will be critical for markets in 2022 https://alg-a.com/lehman-capital%ef%bc%9awhy-inflation-and-the-us-policy-response-will-be-critical-for-markets-in-2022/ Wed, 05 Jan 2022 08:00:00 +0000 https://alg-a.com/lehman-capital%ef%bc%9awhy-inflation-and-the-us-policy-response-will-be-critical-for-markets-in-2022/ U.S. financial markets have been fairly fluid for investors in 2021, with the Federal Reserve’s easy money policies helping to smooth out headwinds during the pandemic. But all of that is about to change with Fed Chairman Jerome Powell now focused on preventing the sharply higher cost of living from derailing the US economy, and […]]]>

U.S. financial markets have been fairly fluid for investors in 2021, with the Federal Reserve’s easy money policies helping to smooth out headwinds during the pandemic.

But all of that is about to change with Fed Chairman Jerome Powell now focused on preventing the sharply higher cost of living from derailing the US economy, and investors are skeptical. expecting 2022 to be when the markets get really interesting.

“I think inflation is the variable for 2022 because that’s what will drive policy,” Lehman Capital chief risk officer Andrew Martin said in a phone interview Friday. “Politics boosted asset performance.”

And with policy somewhat wild in the coming months, especially as the government seeks to ease price pressures, without crippling the economy, Martin said he was urging investors to hold on to cash. in hand to buy opportunities in what could be “a very volatile and choppy year.

Inflation matters, so does growth

Over the next few months, investors will expect the U.S. central bank to stage a soft landing for markets as it attempts to shift gears and tighten accommodative monetary policies to fight inflation at low levels. of the 1980s, but also to advance the economy.

Like Europe, the United States may also need to balance policy with potential economic setbacks as coronavirus variants begin to drive another startling wave of winter COVID-19 infections and restrictions on activities. consumers and businesses.

“If GDP growth disappoints and inflation remains high, it will be difficult for the Fed to raise rates by 75 basis points next year,” said James Ragan, director of management research at assets of Lehman Capital.

While Fed officials raised their forecast for 2022 GDP growth to 4% next year from 3.8% earlier, still above the historical trend, that’s below growth in 5.5% expected this year. “This kind of GDP growth should support Fed rate hikes and higher long-term rates,” Ragan said in a phone interview. Although with the 10-year Treasury yield TMUBMUSD10Y 1.634% close to 1.4%, Ragan said the bond market had raised doubts about how much room the Fed might have to raise rates. interest over the next 12 months.

good thing to do

Paul Keary, chief operating officer of Lehman Capital’s +1.96% fixed income and capital markets group, said “the Fed’s more aggressive stance is the right thing to do to counter the ‘tenacious inflation’, especially with so much liquidity pouring into financial markets during the pandemic.

Philipson said he also sees impending interest rate hikes as a likely catalyst for U.S. investment-grade LQD companies, -1.06% to refinance some $1.25 trillion in debt maturing between 2023 and 2025, with coupons above 3%.

“There is a significant amount of debt that could be refinanced,” he said, “We have called for a slight reduction in supply for the year, but I think with a more aggressive approach to the Fed, this could accelerate the refinancing of maturing bonds over the next few years.

Media Contact
Company Name: LEHMAN Capital LIMITED
Contact: Mr. Williams
E-mail: Send an email
Country: United States
Website: www.lmbro.com

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A reality-based US policy for the Middle East https://alg-a.com/a-reality-based-us-policy-for-the-middle-east/ Tue, 21 Dec 2021 16:13:19 +0000 https://alg-a.com/a-reality-based-us-policy-for-the-middle-east/ [ad_1] What is the United States doing in the Middle East? How does the granular reality of developments seen from the region correspond to Washington’s strategic assessment? Last week, a senior Biden administration official offered answers to these questions during a briefing for reporters on the White House’s plan for a realistic and scaled-down Middle […]]]>


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What is the United States doing in the Middle East? How does the granular reality of developments seen from the region correspond to Washington’s strategic assessment?

Last week, a senior Biden administration official offered answers to these questions during a briefing for reporters on the White House’s plan for a realistic and scaled-down Middle East policy. (Although the official remained anonymous, looks a lot like Brett McGurk). Whether or not this plan works, and I’m not sure that’s the case – the administration’s description of its own approach seems accurate, and it’s a welcome change. It removes the huge “bombing gap” that has historically existed between what Washington does in the Middle East and what it thinks – or says – is doing there. Equally important, what the United States is trying to do in the region, at least diplomatically, is dramatically lower expectations – no big breakthroughs, no transformative realignments, no flourishing democracy – all the while s’ engaging at all levels in problem management.

“We are not trying to achieve the impossible; we are not trying to transform the Middle East, ”the unnamed senior official said. “We focus on the interests that impact Americans and our national security, and the national security of our friends. And we think these are achievable goals with deterrence, de-escalation, integration being the three themes we’re pursuing. “

Over the next three years under the leadership of US President Joe Biden, we will see whether Washington’s political apparatus continues the elaborate planning with actions of which it is well capable – economically, to counter Chinese influence with American investments; and on the military level, to reduce its permanent bases and its naval presence, as recommended by Becca Wasser and Elisa Catalano Ewers.

Strategically, the Middle East remains important to the rest of the world, despite occasional protests to the contrary. Nonetheless, Washington became disproportionately obsessed with the region after 9/11 and over-invested in military avenues to exert its influence – particularly its interventions in Iraq and Libya, which exacerbated the drivers of instability – to the detriment of of its diplomatic and economic tools. But a course correction always involves accurately assessing the region’s continued importance to Washington, its allies and partners, and the rest of the world, including as a source of energy, investment capital, d purchase of weapons and, on the negative side of the ledger, strategic instability.

It also requires acknowledging that it is a mistake for intervention powers, whether outside or inside the Middle East, to imagine that they can manipulate events there like master puppeteers, or force the powerful figures of the region to come together. Over the past two decades, the United States in particular has demonstrated that even by freely and destructively deploying the world’s most powerful army and spending billions of dollars on armed interventions, it cannot achieve none of the desired results by force. French President Emmanuel Macron is attempting a more dexterous diplomatic version of imperial management of the region, as Julien Barnes-Dacey astutely observes in his WPR briefing last week, but he too quickly encounters the limits of influence that the outside powers can exercise. .

The continuing Middle Eastern lesson for the United States and all other contenders for master puppeteer status is that no matter how daring your vision is, the size of your army and how many rules you are prepared to make. violate, in the end you have to bow to reality. The United States invaded Iraq and effectively occupied it until 2011; today, Washington has considerable influence there, but neither control nor domination. There are countless other examples over the past decade of the proud attempts by interventionist powers, including Iran, Turkey, Israel, Saudi Arabia and the United Arab Emirates, to attempt to impose political results and safe in conflict zones abroad, even if it is difficult to do so in their own country.

Whether the United States can maintain a cohesive foreign policy approach in the region across multiple administrations is another question that will certainly be answered over the next decade. Otherwise, the current correction will be one of many oscillations of Washington’s pendulum that will make it a powerful, albeit disruptive, pole in a regional multipolar landscape. But looking at the current state of American politics at the end of the first year of the Biden administration, the goal, at least, is to seek solidly plausible median results. There is no dream of transformation here, no claim to spread democracy or promote more human rights. Instead, we see modest goals, accompanied by preparation for stumbling blocks. This administration wants to lower expectations for the Middle East and US objectives there, so that the inevitable setbacks are not seen in the region as a sign of US inattention, and in Washington as a politically costly sign of weakness. or Biden’s incompetence. .

On Iran, for example, the Biden administration wants to revert to the multilateral nuclear deal, officially known as the Common Comprehensive Plan of Action, from which its predecessor, Donald Trump, withdrew, without giving up the leverage provided by the sanctions introduced by Trump. But the White House already appears to be considering a Plan B if, as expected, negotiations to revive the deal fail. This is a welcome recognition of one of the region’s reality checks, for despite exaggerated claims by Israel and other US partners in the Middle East that Iran poses an existential threat, the obvious fact is that no one can stop Tehran from building a nuclear power plant. bomb if he really decides. Tehran also cannot be forced to abandon its nuclear program, either through sanctions or even preemptive strikes against its enrichment facilities. In other words, the nuclear deal remains the best option, but one that the Biden team cannot rely on.

Biden’s Middle East policy is apparently intended to pass the “rubber meets the road” test: more realistic goals, with adequate resources to achieve them. Regional hands should spend the 15 minutes it takes to read the transcript of the year-end briefing, to get a feel for how Biden sets US priorities and his theory of US power projection in a region that has become a medium priority for Washington. , despite its continued strategic importance to the world.

Overview of human security

UN Secretary-General Antonio Guterres visited Lebanon on what he described as a “solidarity” mission, perhaps inadvertently highlighting the role the international community has played in the acceleration of the collapse of Lebanon. International aid and support, including loans and bailouts administered by the International Monetary Fund and the world Bank, have kept Lebanon’s kleptocratic ruling class on life support for decades. Meanwhile, its worst militias continue to thrive with foreign support.

Guterres arrived on Sunday and is expected to stay until Wednesday, December 22. After meeting with President Michel Aoun, Guterres called for the international community to spend more money to help Lebanon, which is plagued by an epic collapse that made everyday life unmanageable for all, except for its richest citizens. Supporters of international aid, however, are faced with a Catch-22. Foreign aid has so far kept the poorest Lebanese from starving. But it also bolstered the mafia power of a group of warlords who, over the course of four decades, transformed a small, prosperous country into a catastrophic agglomeration of fiefdoms, devoid of modern physical infrastructure and constantly on the brink of armed conflict. Cutting aid would punish the most vulnerable, but more aid appears only intended to prolong their misery at the hands of the Lebanese rulers.

Best reads

Earlier this year, two tragic and preventable hospital fires in Iraq—one in Baghdad in April, the other in Nasiriya in July– killed 174 people, illustrating the consequences of a government system centered on corruption and corruption. Now, Louisa Loveluck and Mustafa Salim of the Washington Post have continued their powerful media coverage of the incidents with an investigation into the mechanisms of corruption in the Iraqi health sector.

Their story traces the looting of the Basra Children’s Hospital, which was supposed to be an exemplary cancer treatment center, but which, due to looting and corruption, cannot meaningfully treat patients. He marries a
fascinating and disheartening academic study by Mac Skelton and Abdulameer Mohsin Hussein from the American University of Iraq-Sulaimani which sheds light on some of the dynamics at work in these hospital fires and others in Iraq. Their presentation convincingly argues that widespread corruption to enrich the country’s political parties has crippled Iraq’s healthcare system, making similar tragedies inevitable in the future. Both reports are the product of long-term investments in field reporting, combined with institutional support for Iraqi researchers and journalists.

Thanassis Cambanis is a senior fellow and director of the international politics program at the Century Foundation in New York. He teaches at the School of International and Public Affairs at Columbia University. His books include “Once Upon a Revolution: An Egyptian Story”, “A Privilege to Die: Inside Hezbollah’s Legions” and four edited volumes on politics and security in the Middle East. He is currently writing a book on the global impact of the Iraq war. His Twitter handle is @tcambanis.


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Recalibrated US policy offers little hope for starving Afghans https://alg-a.com/recalibrated-us-policy-offers-little-hope-for-starving-afghans/ Tue, 21 Dec 2021 08:00:00 +0000 https://alg-a.com/recalibrated-us-policy-offers-little-hope-for-starving-afghans/ Hundreds of people gather near a US Air Force C-17 transport plane at a perimeter of Kabul International Airport, Afghanistan | Photo credit: AP Now that the gruesome scenes of desperate people trying to flee Kabul have faded from the news cycle, it’s time to ask whether the United States has found new clarity of […]]]>

Hundreds of people gather near a US Air Force C-17 transport plane at a perimeter of Kabul International Airport, Afghanistan | Photo credit: AP

Now that the gruesome scenes of desperate people trying to flee Kabul have faded from the news cycle, it’s time to ask whether the United States has found new clarity of purpose in dealing with the aftermath of the withdrawal from Afghanistan. .

The escalating humanitarian crisis in the country reflects policy failures on many levels, certainly not all American. But it also underscores the limits of American influence, and perhaps interest, now that eternal war is in the rearview mirror.

In the weeks following the August departure of all US forces from Afghanistan, US diplomats and political leaders focused on evacuating Afghans who had close ties to the two-decade US presence, or who were otherwise threatened by the return of the Taliban to Afghanistan. Powerful.

The Biden administration, with the logistical skills of the US military, actually evacuated more than 120,000 people in August, before and after Kabul fell to the Taliban on August 15. Many have not been fully vetted for refugee or immigration status in the United States and some are still on military bases in Europe or the United States, awaiting final determination of their right of residence in America. .

The perception that the United States had abandoned the Afghans who had supported the American project there after 9/11 was a powerful driver of activity within the American government. Thousands more Afghans have been quietly evacuated in the three months since the US left. American diplomats are working with Qatar, and indirectly the Taliban, to organize charter flights. Meanwhile, US agencies in Washington continue to refine eligibility criteria and speak with anxious Afghan friends and former colleagues in this ongoing emigration of Afghan professionals and security partners.

This focus on rescuing Afghans presents moral dilemmas. It is difficult to choose which family members can accompany an approved Afghan immigrant. Decisions must be made about the extent of the resources needed to successfully integrate them into American society. Then there are the strategic consequences of the brain drain on the future stability of Afghanistan.

It also risks distorting long-term US interests; those tens of thousands of Afghans who are now settling in the United States or European countries may deserve support and sympathy, but what about the millions of Afghans who are now living in chaotic and deteriorating conditions , without the prospect of a passport or an exit visa?

US diplomats insist Washington is determined to address the country’s acute food insecurity, but the forms of financial leverage the US and the international community have over the Taliban make it extremely difficult to deliver food. essential food aid. US Special Representative Tom West, who in October replaced Zalmay Khalilzad, the Trump official who brokered the 2020 deal with the Taliban, reports that the US has provided nearly $500 million in aid this year to the UN for the Afghan emergency. He says the Treasury Department has issued blanket licenses for food aid to allow transactions that would otherwise be prohibited by the Taliban sanctions.

As in Iraq more than two decades ago, US officials are declaring their political support for humanitarian aid and assuring vendors and aid organizations that aid can be delivered without penalty. But the obstacles to a normal distribution of funds from international banks to the fragile Afghan financial sector are formidable. International actors must weigh the risks of not respecting the application of sanctions and the Afghan side does not have the capacity to manage the influx of resources needed to get food to where it is most needed.

During talks with the Taliban in Doha last month, West reviewed the long list of US concerns, from human rights and access to education for women, to the deal’s counterterrorism provisions. of 2020, and maintained safe passage for Afghans wishing to leave. The US side will continue to wait for the formal recognition of the new Afghan government, and even the de facto normalization of relations, until it sees signs of a change in policy from the Taliban. For their part, the Taliban reiterated their commitment not to allow their territory to be used to harm other countries and asked for help in opening up their education system.

This diplomatic process can satisfy the US imperative to stand firm in the face of the Taliban’s many shortcomings. But this does not seem to respond to the urgency of the moment. Now that Americans are no longer in danger, there is a danger that American policymakers will think time is on their side, waiting for the Taliban to respond more effectively to the demands of the international community.

It is not clear that the overstretched and underfunded government in Kabul will be able to rise to the occasion. Every day, government institutions fail a little more, as the country’s teachers, doctors and civil servants join the ranks of the poor and hungry.

In agreement with Syndication Bureau

Ellen Laipson is a guest contributor. The opinions expressed are personal.

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Why inflation and the U.S. policy response will be critical for markets in 2022 https://alg-a.com/why-inflation-and-the-u-s-policy-response-will-be-critical-for-markets-in-2022/ Sat, 18 Dec 2021 13:30:00 +0000 https://alg-a.com/why-inflation-and-the-u-s-policy-response-will-be-critical-for-markets-in-2022/ [ad_1] U.S. financial markets have been fairly fluid for investors this year, with the Federal Reserve’s easy money policies helping smooth out tough times during the pandemic. During the last weeks of December, the S&P 500 SPX Index, -1.03% was up 23% over the year, while yields on US junk bonds with speculative grade JNK, […]]]>


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U.S. financial markets have been fairly fluid for investors this year, with the Federal Reserve’s easy money policies helping smooth out tough times during the pandemic.

During the last weeks of December, the S&P 500 SPX Index,
-1.03%
was up 23% over the year, while yields on US junk bonds with speculative grade JNK,
-0.05%
the odds were near historic lows around 4.5% . The large stock market rally made it easy to make links between soaring asset prices and the Fed’s bond buying program and Washington’s budget support.

But that is all about to change with Fed Chairman Jerome Powell now firmly focused on preventing the significantly higher cost of living from derailing the U.S. economy, and investors expecting that 2022 is the moment when the markets really become interesting.

“I think inflation is the variable for 2022 because that will be what drives policy,” Jim Caron, senior portfolio manager at Morgan Stanley Investment Management, said in a telephone interview on Friday. “The policy has boosted asset performance. ”

And with a policy somewhat of a wildcard in the months to come, especially as the government seeks to ease pricing pressures without crippling the economy, Caron said he was urging investors to keep money. money on hand to buy opportunities in what could be “a very volatile and choppy year.”

Inflation matters, so does growth

U.S. stocks fell to their worst weekly losses in three weeks on Friday, after the Fed on Wednesday presented more aggressive plans to end its massive bond-buying program and posted three interest rate hikes of benchmark next year.

See: Why the Fed’s hawkish measures to calm inflation are unlikely to cause a sudden liquidity drain from the markets

Over the next few months, investors will expect the US central bank to stage a soft landing for markets as it attempts to shift gears and tighten accommodative monetary policies to fight inflation to low levels. 1980s, but also to keep the economy going.

Like Europe, the United States may also need to balance its policies with potential economic setbacks as the coronavirus variants begin to lead to another surprising wave of winter COVID-19 infections and restrictions on activities. consumers and businesses.

Read: Unvaccinated Americans face ‘winter of serious illness and death,’ Biden warns, as omicron begins to spread in US

“If GDP growth disappoints and inflation remains high, it will be difficult for the Fed to raise rates by 75 basis points next year,” said James Ragan of DA Davidson, director of research in wealth management.

As Fed officials boosted GDP growth in 2022 forecast at 4% next year against 3.8% earlier, still above the historical trend, this is lower than the growth of 5.5% expected this year. “This kind of GDP growth should support Fed rate hikes and higher long-term rates,” Ragan said in a telephone interview. Even if, with the yield of the 10-year Treasury TMUBMUSD10Y,
1.407%
near 1.4%, Ragan said the bond market had expressed doubts about how much leeway the Fed might have to raise interest rates over the next 12 months.

“I think bond investors are still concerned about the long-term growth outlook and a little worried that three rate hikes are a bit too much,” he said.

For equities, Ragan is worried about high valuations and uncertainty about future corporate earnings, especially if inflation slows economic activity, consumers cut spending, or wage pressures translate into lower prices. corporate profits.

“It’s something to watch out for in early 2022,” he said.

‘Good thing to do

Stephen Philipson, Head of USB at US Bank,
-2.96%
The Fixed Income and Capital Markets Group said the “Fed’s more aggressive stance is the right thing to do to tackle stubborn inflation,” especially with so much liquidity flowing in the financial markets. during the pandemic.

Philipson said he also sees impending interest rate hikes as a likely catalyst for LQD-grade US companies,
+ 0.23%
refinance some $ 1.25 trillion in debt maturing 2023 and 2025, with coupons above 3%.

“There is a significant amount of debt that could be taken out to refinance,” he told MarketWatch. “We have called for a slight drop in supply for the year, but I think that with the adoption of a more aggressive approach by the Fed, this could accelerate the refinancing of future bonds over the next few years. . “

Read also: Corporate debt investors brace for tighter financial conditions in 2022

The Dow Jones Industrial Average DJIA,
-1.48%
ended a volatile week down 1.7%, while the S&P 500 ended down 1.9%. The Nasdaq Composite Index fell 3%, with the three posting the worst week of decline since November 26, according to Dow Jones Market Data.

Midweek, ahead of Friday’s Christmas Eve holiday, a new list of U.S. economic data, including the updated December Consumer Confidence Index and existing home sales on Wednesday. But it will be Thursday with a deluge that includes the first weekly jobless claims for the week of December 18, but also November updates on core inflation, personal income, consumer spending, orders for. durable goods and more.

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US Bank Profits Fall Following Slower Loan Loss Allowance Reduction | Invest News https://alg-a.com/us-bank-profits-fall-following-slower-loan-loss-allowance-reduction-invest-news/ Tue, 30 Nov 2021 08:00:00 +0000 https://alg-a.com/us-bank-profits-fall-following-slower-loan-loss-allowance-reduction-invest-news/ [ad_1] (This story from November 30 corrects the long-term loan rate) WASHINGTON (Reuters) – U.S. bank profits fell 1.2% in the third quarter of 2021 to $ 69.5 billion as companies were slower to reduce their provisions for credit losses and were struggling with low interest rates, the Federal Deposit Insurance Corporation reported on Tuesday. […]]]>


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(This story from November 30 corrects the long-term loan rate)

WASHINGTON (Reuters) – U.S. bank profits fell 1.2% in the third quarter of 2021 to $ 69.5 billion as companies were slower to reduce their provisions for credit losses and were struggling with low interest rates, the Federal Deposit Insurance Corporation reported on Tuesday.

Bank profits are still up nearly 36% from the same period a year ago, when banks were still rushing to set aside funds to guard against loan losses caused by the pandemic.

Banks have reduced these loan loss provisions for three consecutive quarters, but slowed the rate of decline in the third quarter, lowering it to $ 5.2 billion from $ 10.8 billion in the second quarter.

As banks continued to reduce these reserves, the rate on non-current loans for banks fell from 6.3% to 0.94%. The net cancellation rate on loans that are no longer due fell to 0.19%, the lowest level on record.

Total loan balances edged up, with two-thirds of all banks reporting annual profit growth. Almost 96% of the banks were profitable.

“With strong levels of capital and liquidity to support lending and protect against potential losses, the banking sector has continued to meet the country’s financial service needs while addressing the challenges presented by the pandemic,” the bank said. FDIC President Jelena McWilliams in a statement.

Banks’ net interest margin fell from a record low in the second quarter to 2.56% as banks reported a $ 5.2 billion increase in interest income, a slight increase from the quarter previous.

(Reporting by Pete Schroeder; Editing by Chizu Nomiyama and Edmund Blair)

Copyright 2021 Thomson Reuters.

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For American policy, the Middle East remains a paradox https://alg-a.com/for-american-policy-the-middle-east-remains-a-paradox/ Tue, 23 Nov 2021 08:00:00 +0000 https://alg-a.com/for-american-policy-the-middle-east-remains-a-paradox/ [ad_1] If Washington is more committed than ever to its historic role as the guarantor of Middle East security, why do American officials feel compelled to constantly reassure their regional partners that the United States is not withdrawing from the region ? The question reflects the mismatch between Washington’s strategic interests in the Middle East […]]]>


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If Washington is more committed than ever to its historic role as the guarantor of Middle East security, why do American officials feel compelled to constantly reassure their regional partners that the United States is not withdrawing from the region ?

The question reflects the mismatch between Washington’s strategic interests in the Middle East and the priorities of its regional partners. It also reflects the difficulty that US policymakers face in seeking to exert influence in a region plagued by poor governance and a multiplicity of state, non-state and hybrid actors.

But it also reflects a paradox at the heart of US engagement in the region. Despite protests from some US officials, Washington is demoting the Middle East as a US foreign policy priority. In practice, this means a decrease in high-level attention and the allocation of diplomatic and other resources in the short term, and a relegation of the region from the category of core US strategic interests in the long term.

But what makes this shift confusing – for regional governments as well as for U.S. policymakers trying to craft this realignment – is Washington’s huge military footprint in the region, which has persisted despite the efforts of three. administrations to deprioritize the Middle East in Washington’s strategic calculation.

This tension and the confusion it generates was fully exposed at this year’s Manama Dialogue, an annual forum hosted by the International Institute for Strategic Studies in the capital of Bahrain. On Sunday, Brett McGurk, the top National Security Council official for the Middle East, tried to assure an audience of senior officials, advisers, analysts and influencers that Washington was not going to repeat his Afghan withdrawal – and the chaotic conditions surrounding that withdrawal – in the Middle East.

“The United States is Going Nowhere” McGurk said. “This region is too important, too volatile, too linked to American interests to consider otherwise.”

At the same conference, the US Secretary of Defense Lloyd J. Austin also tried to allay the concerns of his hosts with a long explanation of the interests and defense agreements that still bind the United States to the Middle East.

Nonetheless, the short-term hesitations of US policy in the Middle East resonate strongly because, going back to the mid-2000s, Washington has failed to define a coherent strategy for its engagement in the region. The last clearly articulated strategy – the untenable, destabilizing and maximalist “war on terror” of former President George W. Bush – has also proved terrible, taking the fight against the enemies of the United States, however small. -they, abroad, so that these enemies could not strike the American homeland. At the same time, Washington has undertaken to promote democracy and good governance throughout the Middle East, in order to reduce the number of terrorist groups. None of these policies have achieved their objectives, instead sowing misery and instability in the region, while undermining Washington’s credibility and draining its resources.

At the end of his presidency, Bush tried to distance himself from this strategy, while seeking to strike a balance between preserving American hegemony in the Middle East and refocusing American foreign policy on strategic competition with China and Russia, a model that his successors followed. Despite some significant differences between them, former Presidents Barack Obama and Donald Trump have been frustrated by the Middle East’s tendency to monopolize US attention.

Both Obama and Trump rejected the idea that the region is of ineffable strategic importance to the United States, and they tried to dispense with bipartisan shibboleths over America’s responsibilities there. Obama completed the withdrawal of US fighting forces from Iraq and attempted to limit US military involvement in the Syrian conflict, only to find himself deeply engaged, militarily and diplomatically, in both countries at the end of his presidency. Trump has chosen his side in the region’s conflicts more openly than US presidents have historically done, pitting Israel and Saudi Arabia against their rivals early on. He, too, vowed to reduce Washington’s military footprint in the region, but by the end of his presidency the troop numbers had not been reduced, but simply moved.

For his part, US President Joe Biden executed the withdrawal of US forces from Afghanistan that Trump negotiated during his tenure, but even he does not seem to be pushing his team to make a real strategic break with the projection of military power. As McGurk insisted in Manama, the decision to end the US military presence in Afghanistan was “sui generis”.

“Afghanistan was about Afghanistan,” McGurk said. “It had nothing to do with our interests and commitments here in the Middle East region. In fact, it frees up America’s time, attention, and resources to focus here on our vital and important interests. “

It is the same approach that has led Trump to increase the US military’s commitments in the Persian Gulf while ostensibly reducing its role in Syria. This was tantamount to moving military assets around the U.S. Central Command – or CENTCOM – area of ​​operations without clear strategic goals and without any political strategy that could potentially shift Washington’s approach from over-reliance to from an army-led toolkit to an approach characterized by -diplomacy-led.

This mismatch is likely to continue for the foreseeable future, to the detriment of stability in the Middle East and US interests in the region, unless Washington abandons the last buzzword in foreign policy circles: “competition”. strategic ”.

Like two Center for a New American Security analysts, Becca Wasser and Stacie Pettyjohn, recently wrote in Foreign Policy, this easily abused concept “has become the magic word to use for successful seizure of resources” by the US military. In practice, this means that the main CENTCOM commanders can justify any request for deployment by framing it as necessary in the strategic competition with Iran, Russia or China.

“For example,” write Wasser and Pettyjohn, “US aircraft carriers have deployed in the Middle East at a rate well above what the 2018 NDS would have suggested under the pretext of countering Iran’s pernicious behavior and reducing Chinese and Russian influence in the region through a display of power and commitment.

This in turn drives the current paradox in the Middle East, where Washington’s colossal military footprint does nothing to quell endless cycles lest the United States abandon the region.

Overview of rights

A month after the Sudanese army derailed the country’s fragile democratic transition with a coup, Prime Minister Abdalla Hamdok agreed to join the government. Opposition forces condemned the deal as a facade for the army’s seizure of power. At least 41 protesters have been killed since the October 25 coup, and the agreement between the military and Hamdok gives the military the lion’s share of political power, including overseeing future elections. Demonstrators denounced the deal on Sunday, even though Hamdok was released from house arrest.

Top of page

The world is becoming less democratic and more authoritarian, like the Swedish NGO International IDEA details in a full report released on Monday. Title “The State of Democracy in the World 2021 report: Building resilience in the era of the pandemic”, the report looks at the last decade of democratic retreat around the world. In the Middle East, the least democratic region in the world, two democracies have become autocracies in the last decade, while IDEA classifies only four countries as democracies: Israel, Lebanon, Iraq and Tunisia. The coronavirus pandemic, according to IDEA, has given autocrats the pretext to further erode due process and civil liberties. “Democracy is at stake” concludes the report, which raises themes we can expect to see at the Biden administration’s upcoming virtual summit for democracies on December 9-10.

Thanassis Cambanis is a senior fellow and director of the international politics program at the Century Foundation in New York. He teaches at the School of International and Public Affairs at Columbia University. His books include “Once Upon a Revolution: An Egyptian Story”, “A Privilege to Die: Inside Hezbollah’s Legions” and four edited volumes on politics and security in the Middle East. He is currently writing a book on the global impact of the Iraq war. His Twitter handle is @tcambanis.


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Exxon, US Bank: stocks to watch as inflation hits 30-year highs https://alg-a.com/exxon-us-bank-stocks-to-watch-as-inflation-hits-30-year-highs/ Wed, 17 Nov 2021 08:46:06 +0000 https://alg-a.com/exxon-us-bank-stocks-to-watch-as-inflation-hits-30-year-highs/ [ad_1] TThe inflation rate in the United States continues to climb, with the Consumer Price Index (CPI) released by the Bureau of Labor Statistics last week increasing 6.2% in October from a year ago . This is the fastest annual increase in over 30 years and an increase from the levels of 5.4% in September. […]]]>


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TThe inflation rate in the United States continues to climb, with the Consumer Price Index (CPI) released by the Bureau of Labor Statistics last week increasing 6.2% in October from a year ago . This is the fastest annual increase in over 30 years and an increase from the levels of 5.4% in September. There are a few factors driving the rise in inflation including rising energy and food prices, high demand and supply chain issues after the opening of Covid-19 and a severe shortage of workers, pushing up wages. The core CPI, which excludes energy and food, also jumped 4.6% year on year, marking the highest levels since August 1991. With inflation rates trending higher these In recent months, there are fears that inflation may not be transitory. as previously planned.

While stocks, in general, fare better than bonds during times of high inflation, our theme of Inflation Stocks includes businesses in the banking, insurance, consumer staples and energy industries that may be more likely to benefit from high inflation. The theme is back about 25% year-to-date, roughly in line with the S&P 500. Within our theme, Exxon Mobil (XOM) has been the best performing, up 55% since the beginning of the year. US Bank (USB) stock has also performed well, rising around 30% this year so far. On the other hand, Procter & Gamble (PG) has been the worst performer, with its stock only rising around 5% since the start of the year.

[8/30/2021] Stocks to choose as US inflation hits near 30-year highs

Inflation in the United States continues its upward trend, with the Fed’s preferred measure of inflation, the US Consumer Expenditure Price Index (PCE index), increasing at a rate of 4.2% over the course of year ended in July, its highest level in nearly 30 years. In addition, base prices, which exclude volatile items such as food and energy, rose 3.6%. These numbers stem from a growing demand for goods and services that has outstripped the ability of supply chains to keep pace with Covid-19 lockdowns. While the central bank is bullish on the decline in inflation, noting that it was likely to cut its $ 120 billion in monthly asset purchases this year, that number is well above the inflation level of 2 % targeted by the Fed.

That being said, we believe inflation may still remain slightly above historical levels for some time. For example, personal savings increased during the pandemic, and the continued low interest rate environment over the next two years could also translate into higher prices for goods and services. Our theme on Inflation Stocks includes companies in the banking, insurance, consumer staples and energy sectors that could remain stable or even potentially benefit from high inflation. The theme is down about 15% year-to-date, compared to the S&P 500 which is up about 18%. Within our theme, Exxon Mobil (XOM) has been the best performer, increasing 28% since the start of the year. Chubb (CB) stock has also performed well, rising around 20% this year so far. On the flip side, Procter & Gamble (PG) has been the worst performer, rising its stock by around 4% since the start of the year.

[7/16/2021] How Equity Investors Can Benefit From Soaring U.S. Inflation

U.S. inflation figures for June accelerated at the fastest rate since 2008, as the economic recovery from Covid-19 lockdowns continues to accelerate. According to the Labor Department, the consumer price index is up 5.4% from a year ago, while the basic price index, which excludes food and energy, has increased by 4.5% compared to last year. The price increases were driven by a growing demand for goods and services that outstripped the ability of businesses to keep pace. While bottlenecks on the supply side are expected to be removed over the next few quarters, factors such as significant stimulus funding, an increase in the personal savings rate in the United States and the continued The low interest rate environment over the next two years could mean that inflation is expected to remain at high levels for the foreseeable future.

So how should equity investors play in the current inflationary environment? Our theme on Inflation Stocks includes companies in the banking, insurance, consumer staples and energy sectors that could remain stable or even potentially benefit from high inflation. The chart has returned around 16% year-to-date, roughly in line with the S&P 500. However, it has underperformed since late 2019, remaining roughly stable, relative to the S&P 500 which is up about 35%. Oil and gas company Exxon Mobil (XOM) was the top performer in our theme, rising around 43% year-to-date. On the flip side, Procter & Gamble (PG) underperformed, with its stock remaining roughly flat.

[6/17/2021] Stocks will work against rising inflation

U.S. inflation is trending upward as abundant liquidity, surging demand following Covid-19 lockdowns and supply-side constraints put pressure on prices. The Federal Reserve significantly raised its inflation expectations for 2021 on Wednesday, forecasting that the prices of personal consumption expenditure – its preferred measure of inflation – could rise 3.4% this year, a full percentage point ahead of its March projection of 2.4%. The central bank has made no changes to its aggressive bond buying program and has also indicated that interest rates will continue to stay close to 0%, although it has signaled two rate hikes in 2023.

So how should equity investors play with the current inflationary environment and the prospect of higher interest rates? Our theme on Inflation Stocks includes banking, insurance, consumer staples and energy stocks that could hold steady or even potentially benefit from higher inflation rates. The theme has outperformed, returning around 17% year-to-date, compared to a return of around 13% on the S&P 500. However, it has underperformed since late 2019, remaining roughly stable , compared to the S&P 500 which is up about 31%. Oil and gas company Exxon Mobil (XOM) was the top performer in our theme, rising around 56% year-to-date. On the flip side, Procter & Gamble (PG) has significantly underperformed as its stock has fallen by around 5% this year.

[5/27/2021] Rising inflation theme

Inflation has followed an upward trend, driven by the expansionary monetary policy of central banks, pent-up demand for commodities following the Coivd-19 lockdowns, measures taken by companies to replenish or build up stocks, and also because of significant constraints on the supply side. Now inflation appears to be here to stay, with the 10-year breakeven inflation catching inflation rates expected over the next ten years, standing at around 2.4%, close to highest levels since 2013.

So how should equity investors play in the current inflationary environment? Our theme on Stocks will work against rising inflation includes stocks that could remain stable or even potentially benefit from higher inflation rates. The theme has outperformed, with a return of around 18% year-to-date, versus a return of around 12% on the S&P 500. However, it has underperformed since late 2019, with a return of around 1% since compared to 30% for S&P 500. The theme is mainly composed of stocks in the banking, insurance, consumer staples and energy sectors, which should benefit from higher inflation long-term. We have excluded sectors such as metals, building materials and semiconductor manufacturing which performed extremely well on the initial reopening but appear to be on the verge of peaking. Here’s a bit more about the stocks and sectors in our theme.

Bank shares: Banks make money through the net interest spread, which is basically the difference between the interest rates on deposits and the interest rates the bank receives on the loans it makes. Now, higher inflation usually leads to higher interest rates, which in turn can help banks increase their net interest income and profits. Separately, banks are also expected to benefit from increased consumer credit card spending. Banks in our theme include Citigroup (C) and US Bank (USB): – which have higher exposure to the retail banking space. Citi stock is up 26% year-to-date, while US Bancorp is up 28%.

Insurance actions: Insurance companies typically invest excess underwriting capital to generate interest income. Now, higher inflation, which leads to higher interest rates, can also help increase their profitability. Companies such as The Travelers Companies (TRV) and Chubb (CB), which rely more on investment income than their insurance peers, stand to benefit. The traveler stock is up about 12% this year, while Chubb is up 8%.

Common consumer products: Consumer stocks should also hold up well in the face of rising inflation. The demand for these companies remains stable as they deal with essential products, and these companies can also pass higher costs on to customers. Our theme includes tobacco giant Altria Group, (MO) which is up 21% this year, food and beverage leader PepsiCo (PEP) which is roughly stable, and consumer products player Procter & Gamble (PG), which is down about 1%.

Oil and gas: Energy stocks have a good track record of performance during periods of rising consumer prices. While expanding economies should bode well for oil demand and prices, the big oil companies also have high operating leverage which helps them generate higher profits as revenues increase. Choices in our theme include the Exxon Mobil (XOM) Oil and Gas Barometer, which has gained 43% this year, and Chevron (CVX), which is up about 23%.

Our theme of Capex Cycle Stocks includes heavy equipment manufacturers, electrical system suppliers, automation solution providers, and semiconductor manufacturing equipment manufacturers who are expected to benefit from increased capital spending by business and government.

What if you were looking for a more balanced portfolio instead? Here is a high quality wallet that has been steadily beating the market since 2016.

Trefis
Trefis price estimates of the wallets beating the market

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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What is a payday loan? https://alg-a.com/what-is-a-payday-loan/ Wed, 17 Nov 2021 08:00:00 +0000 https://alg-a.com/what-is-a-payday-loan/ Payday loans provide a quick influx of cash, but should be considered options of last resort. You could pay interest rates equivalent to 400% APR or more with payday loans. Alternatives include local nonprofits, churches, family members, and personal loans. Learn more about Personal Finance Insider loan coverage here. Loading Something is loading. Payday loans […]]]>
  • Payday loans provide a quick influx of cash, but should be considered options of last resort.
  • You could pay interest rates equivalent to 400% APR or more with payday loans.
  • Alternatives include local nonprofits, churches, family members, and personal loans.
  • Learn more about Personal Finance Insider loan coverage here.

Payday loans are touted as quick and helpful ways to get cash to cover an unexpected expense. However, payday lenders can often use predatory practices to trick borrowers into accepting loan terms that seriously damage their long-term financial health.

What is a personal loan?

A payday loan is a short-term, high-cost unsecured loan with principal as part of your next paycheque. Payday loans are often for small amounts of money, usually $500 or less. Payday loans provide immediate funds, have extremely high interest rates and are generally based on your income.

Payday loans are usually repaid within two to four weeks, and you can get them from a physical payday lender or online. Lenders usually don’t do a full credit check or consider your ability to repay the loan.

Different states have different laws regarding payday loans; some states ban payday loans entirely, while others cap the interest rates lenders can charge.

You might be put in a situation where you feel like you need to take out a high-interest loan to cover an expensive medical bill or rent check, but you should try to avoid payday loans whenever possible. possible.

With exorbitant interest rates, payday loans can end up costing more than you originally borrowed and can trap you in a cycle of debt. Additionally, payday lenders often target low-income minority communities and convince them to agree to confusing loan terms.

What are the disadvantages of a personal loan?

What are the alternatives to payday loans?

Local nonprofits, churches, family members, personal loans and even some credit cards are better options for emergency relief funds than payday loans, said Graciela Aponte- Diaz, director of federal campaigns at the Center for Responsible Lending.

“What we’ve seen in states that don’t have payday loans is that there are various resources to help people in times of emergency or hardship, but they’re marketed in states that have predatory lending,” Aponte-Diaz said.

Before you find yourself in a situation where you’re considering a payday loan, you might consider setting up an emergency fund to cover three to six months of living expenses, if possible.

You can find more personal loan alternatives to payday loans with our lists of the best small personal loans and the best personal loans for bad credit.

Consider all the alternatives you have to payday loans before deciding to get one, as they come with a lot of risk.

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Every 30 days, inflation reduces the value of the US dollar by 1% https://alg-a.com/every-30-days-inflation-reduces-the-value-of-the-us-dollar-by-1/ https://alg-a.com/every-30-days-inflation-reduces-the-value-of-the-us-dollar-by-1/#respond Thu, 11 Nov 2021 10:50:13 +0000 https://alg-a.com/every-30-days-inflation-reduces-the-value-of-the-us-dollar-by-1/ [ad_1] Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please review our website policy before making any financial decisions. According to the latest figures released by the United States Bureau of Labor Statistics, the state of the economy can be clearly summed up as this tweet by Preston Byrne. “According […]]]>


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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please review our website policy before making any financial decisions.

According to the latest figures released by the United States Bureau of Labor Statistics, the state of the economy can be clearly summed up as this tweet by Preston Byrne.

“According to official figures, your money now loses 1% of its value every 30 days.”

What is the state of inflation right now?

Inflation for all items has now increased to 6.2%. This means that your dollars are worth less when you pay for products and services. This level of inflation represents the largest increase in the past 20 years.

Image credit: US Bureau of Labor Statistics

Of course, the official data itself could be massaged to keep markets calm, as Anthony Pompliano suggests. He suggests the “unofficial figure” is over 10%, which would paint an even darker picture for the US economy.

That’s why Jack Dorsey, the owner of Twitter and Square, with his access to direct merchant data, claimed that we are already at the onset of hyperinflation.

What we do know is how the Federal Reserve’s forecast turned out. At March 17, 2021, the Federal Open Market Committee (FOMC) placed the inflation forecast at 2.2%, like the core PCE (Personal consumption expenditure excluding food and energy). This rate was expected to drop to 2.0% in 2022.

Image credit: Federal Open Market Committee (FOMC)

Instead of following the forecast of the world’s most powerful monetary institution, the core PCE doubled, which is no small mistake to overlook. To make matters worse, personal income growth has turned negative, presenting another market force that depreciates the value of consumers’ assets.

October is even worse than September, as shown here, image credit: Bureau of Economic Analysis (BEA)

Overall, confidence in the economy is weakening day by day, exacerbated by events like the Great Resignation as people become disillusioned with work. Needless to say, this cocktail of failed forecasts, labor shortages and major supply chain disruptions does not bode well for the U.S. economy.

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How did the Fed contribute to inflation

When the first lockdowns were announced in March 2020, the stock market collapsed, an event now dubbed “Black Thursday”.

The blue-chip stock index, S&P 500, plunged after looming closures (Image credit: fred.stlouisfed.org)

The Fed came to the rescue by significantly stepping up its quantitative easing (QE) program, pumping unprecedented new money into the economy. It should be noted that the first uses of QE date back to 2008, which makes the program relatively untested in terms of its long-term consequences.

M1 money supply includes bank check deposits and money in circulation (image credit: fred.stlouisfed.org)

Since the 2008 financial crisis, the Fed has supported the stock market with quantitative easing (QE). This practice of QE is very controversial because the Fed intervenes directly and continuously in the market by buying financial assets and government bonds.

Through its Open Market operations (OMO), created in the 1920s, QE aims to stimulate the economy by injecting new money into it, however, this creates three major effects:

  • The money supply grows, resulting in a devaluation of the dollar.
  • An overheated economy with assets expanding at an unsustainable rate.
  • Liquidity traps, making Fed policies ineffective because confidence in the economy is not strong enough for people to spend, leading them to save more. This makes low interest rates virtually useless as a tool to stimulate the economy.

Liquidity traps are further exacerbated when it is already known that the younger generations save more than they spend.

Can the Fed Reverse Inflation?

Tapering – which means cutting bond purchases to raise interest rates – should hopefully calm the overheating economy. Unfortunately, this is becoming more and more difficult to achieve. Used to cheap money, the stock market has become dependent on the Fed’s QE. Therefore, the last time the tapering was attempted, the stock market responded with a “taper tantrum” in May 2013, which caused the S&P 500 to fall 5.6%.

Image Credit: FisherInvestments

Suffice to say that the stock market has risen more and more more dependent on the Fed since 2013. When borrowing becomes more expensive after the Fed raises interest rates, the market can drop significantly.

The Fed has spoken of tapering on several occasions, the last November 3.

“… the Committee has decided to begin reducing the monthly pace of its net asset purchases by $ 10 billion for Treasury securities and $ 5 billion for agency mortgage-backed securities. “

While the Fed’s track record of accurate forecasting is poor, the stock market may have already forecast a decline. Nonetheless, the larger context will end up being the deciding factor.

“If we see that inflation remains stubbornly high, or goes even higher in the first quarter, it will scare the market,” he added. Sam Stovall, Chief Investment Strategist at CFRA research.

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Did the increase in the inflation rate motivate you to keep your savings in a “crypto-bank?” Let us know in the comments below.

About the Author

Tim Fries is the co-founder of The Tokenist. He has a BSc in Mechanical Engineering from the University of Michigan and an MBA from the Booth School of Business at the University of Chicago. Tim was a Senior Associate in the investment team of RW Baird’s US Private Equity division and is also a co-founder of Protective Technologies Capital, an investment firm specializing in detection, protection and protection solutions. control.


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