Morning Report: Larry Summers urges the Fed to go slow in hiking rates 12/7/15

Stocks are lower as oil continues to drop. Bonds and MBS are down small.

The week after the jobs report tends to be data-light and this week is no exception. The highlight will be retail sales on Friday. Other than that, expect markets to be dull as traders position for the FOMC meeting next week.

The Labor Market Conditions Index fell to 0.5 from 2.2 in November, according to the Fed. This index is a meta-index of 19 different variables.

The latest Black Knight Mortgage Monitor is out, and they take a look at the high LTV loan universe. FHA has become the go-to high LTV loan product, and they high LTV loans account for 77% of FHA / VA origination. Fannie and Freddie did about 1% in high LTV loans. Home Price appreciation continued in September, with their proprietary home price index up 5.5% on a year-over-year basis.

Larry Summers makes the case that the Fed should go slow with raising interest rates. His main point: that the “neutral interest rate” has been declining and will continue to decline due to the changing allocation of savings versus consumption tilts more towards savings. (More savings = more demand for bonds, which pushes bond yields lower). Of course this argument focuses primarily on the baby boomers, who are retiring and ignores the millennials, which are bigger and will enter the workforce (and spend) over the next decade or so. He makes another point: some of the economic indicators are pointing towards a slowdown, and we don’t want to have monetary policy acting as a drag on an economy that is already weakening. FWIW, I think the body language out of the Fed is that they will take it slow, and I cannot see how an extra 25 or 50 basis points on the Fed Funds rate is going to be that material of a drag on the US economy. In reality, a sub-1% Fed Fund rate is still incredibly accomodative.

31 Responses

  1. Monday. . . and frist!

    I may go postal, though, if people continue to insist on calling semi-automatic rifles “weapons of mass destruction.”

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  2. Everyone started doing that this morning… Did I miss a memo?

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  3. I love that they’ve completely dropped the act. For years it was “oh, we don’t want to ban guns.” fascists. every last one of them.

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  4. Did I miss a memo?

    I didn’t get it, either. Aletheia’s insistence on playing Humpty Dumpty is going to drive me batty.

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    • ‘Goose, I do not know how you can read the comments at PL. That is both a technical and a qualitative question. The site comment loading is buggy in the extreme. The site comments themselves are visceral, and largely content free. It is not as if you can have a discourse with NoVA, JNC, and Shrink any more – that is, a discussion with interesting links.

      It seems as if blog comments tend to sink to the lowest common denominator.

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  5. The Labor Market Conditions Index fell to 0.5 from 2.2 in November, according to the Fed.

    What does this mean?

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  6. Glad to see I’m not missing anything over there.

    Christmas is probably the most miserable time of the year for me. Work doesn’t slow down at all anymore since the advent of the Internet, and it’s simply a bunch of additional social obligations dumped on top of an already full schedule.

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  7. “For years it was “oh, we don’t want to ban guns.” fascists. every last one of them.”

    The latest work around being of course the secret due process free no fly list.

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  8. My understanding is that the Senate bill used the Terror Watch list, of which Nelson Mandela was a member until 2008 and does not have any due process. The President referred to the No Fly list which does have some due process attached to it though it did include Ted Kennedy (appropriately, I think) for a time.

    Either option is, of course, absurd and indefensible.

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  9. They should just go with the targeted killing list and have the gun shop owners authorized to shoot them on sight when they try to buy a gun.

    After confiscating their credit card.

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  10. “Michigoose, on December 7, 2015 at 9:56 am said:

    Did I miss a memo?

    I didn’t get it, either. Aletheia’s insistence on playing Humpty Dumpty is going to drive me batty.”

    To paraphrase Obi Wan Kenobi, who is the bigger fool Aletheia or those who would try and actually debate him? And yes, I’ve fallen into that category previously.

    And he’s not unique. Cons and all the rest do the same thing about redefining language, just not to his extreme.

    Trying to pin someone down on definitions just makes you the equivalent of Scott.

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    • … just makes you the equivalent of Scott.

      The ultimate insult! I’d love to become a verb…”You’ve been Scotted!”

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  11. “makes you the equivalent of Scott”

    Executive: You’ve desecrated a classic! This is even worse than Godfather III!
    Mel Gibson: Hey, hey, let’s not say things we can’t take back.
    Executive: You’re right, that was uncalled for, I apologize.

    S11E1

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  12. Good point, jnc

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  13. Just remember Michi, in Al’s eye’s you are just like me and JNC. so might as well join us.

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  14. Do I get to wear a top hat?

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  15. Why the butthurt when asking for a definition? How is that not understood to be a foundational need for debate?

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  16. Like

  17. Popehat on guns:
    https://popehat.com/2015/12/07/talking-productively-about-guns/

    “I hear “my right not to be shot outweighs your right to own a gun.” This strikes me as perfectly idiotic. “

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    • NR’s Charles Cooke notes the all-too-typical New York Times hypocrisy.

      http://www.nationalreview.com/corner/428129/new-york-times-and-president-obama-indulge-their-inner-jekyll-and-hyde-charles-c-w

      In 2009 the NYT complained that the no-fly list was “shadowy” and “operate(s) under a veil of secrecy so thick that it is virtually impossible to pierce it when mistakes are made”, noting that “more than half of the 71,000 names then on the no-fly list were wrongly included.” It even described one such instance as “laughable if it weren’t such a violation of basic rights” and proclaimed that “A democratic society premised on due process and open courts cannot tolerate such behavior.”

      In 2015 the NYT has apparently changed its mind, calling Paul Ryan’s “due process” argument against turning the no-fly list into a no-gun list – the same due process argument being made by the Times in 2009 – a “weak defense of arming potential terrorism suspects”.

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  18. “Let the mutherfuker burn!, on December 7, 2015 at 11:56 am said:

    Why the butthurt when asking for a definition? How is that not understood to be a foundational need for debate?”

    Because it could cause one to lose the argument.

    Michigoose’s irritation at improper use and expansion of WMD’s (for a specific purpose) mirrors almost identically mine and I suspect several other ATiM posters irritation at how the same process is used vis-a-vis Constitutional interpretation.

    If you hate Scalia, Thomas, “originalism”, et al, you really don’t have a leg to stand on when it comes to challenging a redefinition of WMD’s based on overall body count vs the original methodology.

    That’s exactly what Scott challenges every time he gets into a first principles discussion that’s often dismissed here as semantics.

    It’s also why I’ve mostly given up on even the idea that a reasonable discussion/debate can be had anymore.

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    • jnc:

      It’s also why I’ve mostly given up on even the idea that a reasonable discussion/debate can be had anymore.

      Well, you and I can always have a reasonable discussion/debate on just about anything, I suspect. No dismissive complaints about “rabbit holes” from me. Besides, we mostly agree on our first principles anyway, so it is onward and upward from there!

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  19. Because it could cause one to lose the argument.

    Do we all agree?

    I’d love to hear any dissents from this.

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  20. “Michigoose, on December 7, 2015 at 11:43 am said:

    Do I get to wear a top hat?”

    Sure. Probably goes well with the boots. Also the food is better.

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  21. Another reason to not even bother with PL is that the site is performing even worse than usual.

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  22. This is pretty good:

    “At the core of Barack Obama’s terrorism speech on Sunday night lay a contradiction. He gave the address to convince an increasingly fearful nation that he takes the terrorist threat seriously. But he doesn’t, at least not in the way his political opponents do.”

    http://www.theatlantic.com/international/archive/2015/12/obama-isis-speech-terrorism/419055/

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  23. The left really does believe that ISIS isn’t about religion, but is instead about wealth inequality and climate change.

    https://www.jacobinmag.com/2015/12/naomi-klein-cop-21-paris-climate-change-this-changes-everything/

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  24. “. He gave the address to convince an increasingly fearful nation”

    I don’t think it’s fear. more of a frustration with the BS proclamations.

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  25. Our prayers are answered.

    http://news.yahoo.com/homeland-security-chief-introduce-terrorism-alert-system-150405480.html

    That’ll do it.

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