Morning Report: The Fed maintains current interest rate policy

Vital Statistics:


Last Change
S&P futures 3140 -3.25
Oil (WTI) 58.90 -0.14
10 year government bond yield 1.79%
30 year fixed rate mortgage 3.97%


Stocks are flattish after the Fed maintained interest rates yesterday. Bonds and MBS are up.


The Fed maintained the Fed Funds rate at current levels and gave a generally upbeat assessment on the economy. The FOMC took down their future unemployment estimates by .2% and left all other projections unchanged. The biggest revelation was the dot plot, which was a bit more dovish than the September plot, but is still forecasting the possibility of a hike in 2020, along with no forecasts for a rate cut.


Dec dot plot


The Fed Funds futures, which have been (a) more dovish than the Fed’s dot plots and (b) more correct, went from forecasting a 50% chance of a cut in 2020 to a 70% chance of a cut. The bond market adjusted as well, with the 10 year bond yield falling about 4 basis points in the afternoon.


The Producer Price Index (PPI) was unchanged in November, and up 1.1% on a year-over-year basis. The PPI measures inflation at the wholesale level, and is a companion inflation index to the Consumer price index. Ex-food and energy, the index fell in November and was up 1.3% YOY.


Initial Jobless Claims jumped to 252,000 last week. This is a huge jump, and I am not sure what drove it. We have been hanging around in the low $200,000s for quite some time. FWIW, this jump in new jobless doesn’t necessarily comport with the other labor market indicators out there, but it is less of a lagging indicator than the others.

48 Responses

  1. Despair is starting to set in for some on the progressive side, but I think it may be peaking too early:

    “After impeachment, Trump wins again — unless Democrats can tell a better story
    Democrats are finally asserting themselves. But without a compelling narrative, they’ll never take down Trump

    Chauncey DeVega
    December 12, 2019 12:00PM (UTC)

    Who wins in a contest between Trump’s Abrams main battle tank and Biden’s “No Malarkey” bus? The outcome is obvious. It is a pathetic, albeit entertaining, mismatch out of a monster truck rally.

    Unless the Democratic Party uses impeachment as a launching point for a compelling vision of how to best rebuild America for the average American, Trump will win re-election in 2020. Trump’s failed impeachment will likely be the wind at his back as he lies about how he and his supporters have become victims of a “coup” and “conspiracy” by the “treasonous” Democrats.

    To borrow from Paul Heyman, an executive director and professional wrestling manager for World Wrestling Entertainment, “This is not a prediction. It’s a spoiler.””


    “This Isn’t What Progressives Wanted From Impeachment

    They feel betrayed, and Democrats’ newly announced support for President Trump’s trade deal isn’t helping.

    Elaine Godfrey”


    • Trump’s followers idolize him. They are in love with him. Trump’s followers wish they could be him while simultaneously seeing him as their personal savior.

      I think negative partisanship is everything right now. People don’t vote for Trump because they idoloize him. They vote for him because they can’t stand the democrats.

      But Trump’s critics are not his intended audience

      Regarding the Rocky memes, etc. Trump’s critics ARE the intended audience because they will take the bait and get triggered by them.


      • My perception is that the Democrats felt the same way about Obama. I think the R base feels for Trump what they do/did for Reagan. A lot of pundits idolize Reagan now but before, say, Clinton a number of pundits we’re not Reaganites. It’s an interesting dynamic.

        Obama talked of being a “transformative President” as Reagan is perceived today. I don’t think he accomplished that and it certainly remains to be seen if Trump will. Neither Bush were, not Clinton.


        • I think a lot of Trump votes aren’t for Trump–they are against Democrats, period. And I don’t know if the feel quite about Obama the way voters might feel about Trump. Obama had all the polish and civility that made them proud he was their guy. Was also African-American. He ticked so many boxes for them, and for a lot of them policy is secondary. It’s whatever their guy is doing is right.

          I think the “hold the nose and vote for Trump” phenomenon is much larger than any “hold the nose and vote for Obama” was.


      • They vote for him because they can’t stand the democrats.

        This. There are people that love Trump, just love him and idolize him and consider him a savior. They are may 10% to 15% of the people who voted for him. They are nowhere near enough to get him to the presidency in the first place, or re-elected.

        The alternatives offered by the Democrats are so bad, though, that a lot of people who just think he’s all right or have to actively hole their nose still vote for him.

        Lots of folks I would vote for instead of Trump. I voted for Johnson. Might have voted for HRC if I hadn’t already known Trump would carry Tennessee.

        But I don’t see there being anybody amongst the Democrats I would vote for, and if the AOC-wing of the party is taking over, I’d show up to vote against them if the Republicans were running a tree stump.


      • “People don’t vote for Trump because they idolize him. They vote for him because they can’t stand the democrats.”

        I wouldn’t generalize too much from our own social circle. The people who go to Trump rallies seem to genuinely like him. Especially the ones I know who didn’t vote prior to Trump running and only came out because of him.


    • Democrats are finally asserting themselves.

      Are they? Is this “asserting themselves”? It doesn’t feel like it. Just feels like kabuki theater and whining.

      They feel betrayed, and Democrats’ newly announced support for President Trump’s trade deal isn’t helping.

      Because stuff you’d think was awesome if it happened under Obama you have to fight because Orange Man Bad. So you’re saying you don’t vote on policy or principal, just how much you hate the other guys.

      They had been advocating for Democrats to levy a much broader set of charges to paint a thorough portrait of the president’s wrongdoing, not the discreet list the House Judiciary Committee revealed on Tuesday.

      That they think that sort of piling on would be effective and not just seem like mounting bs to everyone whose not already a true believer . . . at the very least, it wouldn’t help. And no doubt a number of the things the rank-and-file OrangeManBad person wants added is evidence-free or insanely conspiratorial. No doubt they want the fact he asked Russia to hack Hillary’s emails stuck in there, too. Basically, if they got what they wanted, they’d give Trump so much ammunition to attack them as lying and unserious the whole effort would be dead in the water.

      Representative Rashida Tlaib of Michigan, a member of the high-profile group of progressive freshmen known as the Squad, expressed a similar frustration. She told me that while she is still reviewing the content of the two Ukraine-centered articles, she’s concerned that the charges don’t include “some of [Trump’s] abuse of power, especially the racist abuse of power, and some of the direct violations [of] the Constitution, especially the emoluments clause.

      There are cases for the emoluments clause, but not with in-kind campaign contributions, which might be where they really want to go. If she wants to throw in racist abuse of power, that’s just another 1% of white voters going “Oh, I really want to vote against this guy, but now . . . ”

      If they want impeachment to not hurt them, they need to stay as far away from Tlaib and whatever she wants as they can.

      and even the alleged human-rights abuses by the Trump administration at the U.S.-Mexico border.

      They really want to go there? When there are many legal immigrants who feel those folks got themselves into that situation by taking an illegal or illegitimate path? And the program basically started under Obama?

      Moderates and other rank-and-file members of the caucus, meanwhile, were concerned that straying from Trump’s Ukraine-related offenses could create the appearance of a partisan fishing expedition—as if Democrats were simply intent on removing a president they strongly oppose.

      They are 100% correct, but for a whole lot of people it already looks exactly like that anyway, as it did with Bill Clinton in 98/99.

      Pelosi held a second press conference to reveal that Democrats had finally reached a deal with the White House on a trade deal, the North American Free Trade Agreement replacement called the United States–Mexico–Canada Agreement.

      There are a large number of Democrats and independents who aren’t always spewing bile on Twitter and comments sections that think the Democrats should be getting actually legislation done while they are in power. Who’da thunk it?

      or if, as progressives argue, the party should leave those voters behind.

      I expect that will be a solid strategy for winning the presidency–and maybe congress–in the 2040s.


  2. The point Scott made that the FBI investigation was counter-intel and not criminal was of course correct, when I had written how FBI agents sometimes wear blinders when going after a criminal suspect they are convinced is guilty.

    Apparently Horowitz thought it was even worse in the counter-intel context. He certainly did not whitewash it.


    • Sarah Isgur makes the point that, based on her experience, she thinks it’s clear the FBI agents involved were sure Trump was guilty–it wasn’t a hoax, it’s just they were sure he was guilty, so were ignoring exculpatory evidence and not disclosing information to the FISA court that they should have because why stick to the rules? They were going to catch him and nobody was going to be looking at *how* they got him . . .

      And lots of other good things. I found this podcast very interesting:

      While it says Jonah Goldberg, it’s actually David French and Sarah Isgur (who was Jeff Sessions spokesperson at the DOJ).


  3. @scottc1:

    Looks like #brexit is happening!

    The pound surged against the dollar after the exit poll figures were announced, with sterling gaining 3% to $1.35 – its highest level since May last year. The pound also jumped to a three-and-a-half-year high against the euro.

    Good news, I’m guessing!

    It would be the biggest Conservative victory since 1987 and Labour’s worst result since 1935, the poll suggests, with the party forecast to lose 71 seats.

    That makes me suspect that the LibDems and Labor haven’t made themselves super popular with their general attitude towards Brexit, and Brexit voters.


    • KW:

      That makes me suspect that the LibDems and Labor haven’t made themselves super popular with their general attitude towards Brexit,

      The general consensus here seems to be that Lib Dems hurt themselves by promising a full-on revocation of Article 50 (ie simply cancelling Brexit altogether), rather than a new referendum. That idea apparently turned off a lot of squishy Remainers who thought that simple revocation of a passed referendum was a step too far for democracy.

      The reasons for Labour’s poor showing are probably several, but in my view 1) they never took a firm stand on Brexit, merely trying to frustrate Boris without committing to a meaningful alternative one way or the other, 2) they never figured out how to bridge the gap between their traditional blue collar constituency that was full on Brexit, and the Islington bien pensant crowd (think upper east side Manhattan) that loves Europe, and 3) one word…Corbyn. There were a lot of what we would call “undecideds” that Labour could have captured but were totally put off by both Corbyn’s hard-core leftism and his seemingly unrepentent anti-semitism.

      Liked by 1 person

      • I am curious at what the EU reaction will be. Seems the smart play on Boris’s part is to throw away the agreement he made and give the EU one more favorable to the U.K.. it’s this or crash out.


        • I don’t think the EU cares about being more favorable to the UK. Johnson also needs to worry about keeping Scotland in the UK.

          The good news for the EU is they are now dealing with someone with the power to actually make decisions and who has a clear plan.


        • I wonder how non-Scottish Leavers feel about keeping Scotland in the U.K.


        • jnc:

          Johnson also needs to worry about keeping Scotland in the UK.

          I’m not sure about that. Scotland wants out because it wants to remain in the EU, but I don’t think there is any way it can remain in the EU without having to re-apply as a new country. And I don’t think Scotland on its own could qualify under the economic constraints placed on new applicants. As a practical matter, I think it would be very difficult for Scotland to be in the EU without the rest of the UK, regardless of how much it wants to.


        • You don’t think the EU would come up with some sort of “grandfather” special provision for Scotland if it left the UK before the UK finalized leaving the EU?


        • jnc:

          You don’t think the EU would come up with some sort of “grandfather” special provision for Scotland if it left the UK before the UK finalized leaving the EU?

          Seems unlikely to me. Especially as it would require unanimous consent from all member states. See this:

          And it would have to do some serious bending of the rules to let Scotland in.

          In order to join the EU you’ve got to have a budget deficit of 3% of GDP or less or be obviously (which allows for some fudging) moving in that direction. And Scotland, now that oil has plummeted, simply is not there. It’s difficult, given the intertwining of British and Scottish accounts to get it exactly right but reasonable estimates have the Scottish alone budget deficit at 8 to 10% of GDP.

          At which point the EU won’t let Scotland in. Not unless they do some fiscal contraction amounting to a good 5% or so of GDP. That is, fiscal contraction very much worse that that imposed by “The Tories” which the SNP are complaining so bitterly about. And that’s why the SNP don’t actually want what they’re claiming to want, independence and then EU entry. Because imposing that sort of austerity on their own nation, when they are obviously in charge and responsible, would kill them as a political party.

          It is also not clear to me why the EU would even want an independent Scotland in it.


        • Duties on scotch whiskey?


        • I think Spain and France would veto that kind of thing. They’re barely hanging on to some of their own provinces.


  4. And Glenn Greenwald joins Taibbi:

    “The Inspector General’s Report on 2016 FBI Spying Reveals a Scandal of Historic Magnitude: Not Only for the FBI but Also the U.S. Media

    Glenn Greenwald
    December 12 2019, 11:44 a.m.”

    Liked by 1 person

  5. It’s always interesting to note what’s omitted from suspect descriptions:


  6. Good read:


  7. Remember when Sam Ervin went on the Tonight Show and yukked it up with Carson in order to sell Nixon’s impeachment to the nation? Thanks goodness we have more serious politicians nowadays.


  8. This struck me, Trump’s national security briefers were spying on him.

    “The intelligence briefing the FBI gave to Donald Trump’s team during the 2016 campaign was a “pretext” to gather evidence on the candidate and his foreign policy adviser to help in their counterintelligence investigation, according to the Justice Department watchdog. ”


    • I recommend the new movie Richard Jewell. Timely for the discussion of FBI agents who sniff-a-bone, doggedly dig for it, ignore the squirrels, then leave a lot of previously smooth turf full of holes.

      I must add here that I am glad they “found” Flynn and Manafort, especially Manafort. Doesn’t mean the end justifies the means in this case or any other.


      • I understand the Manafort reference, though I think it was more about being a Trump campaign manager than anything else. I don’t get the Flynn reference, especially considering that the agents (granted, both Struk and Priestka have little credibility) did not think he was lying. It seemed it was a two-fold prosecution, one for pissing off Obama and the other for working with Trump.

        And don’t get the started on the Roger Stone prosecution, utterly unforgivable.


        • Further, the FBI handling of Ruby Ridge (after the ATF fuck-up), Waco, 9-11 and the Anthrax attack are shameful. This organization is in desperate need of disbanding. I cannot think of a good reason to keep it intact.


        • Kevin Williamson captures my thoughts on this perfectly:

          The Democrats began publicly laying the foundation for impeaching Donald Trump before he was sworn in as president, the FBI under the Obama administration used counterintelligence powers to investigate the rival party’s presidential campaign and falsified evidence to get permission to continue the investigation, etc., but when Trump et al. point out that the inspector general has found serious misconduct on the part of the FBI, it’s “The president and his allies have turned investigations into a political tool to use against their enemies.” It’s the new “Republicans Pounce!” headline.

          I do not think that you would need to be an admirer of President Trump or a partisan Republican (I am neither) to understand, as all mentally normal people do, that the impeachment itself is the trophy example of a weaponized investigation being used for political purposes. You can even believe that the president should be impeached and removed from office and understand that. Because that is the obvious truth. There isn’t anybody who does not know that, even though there are many people who cannot, for professional or psychological reasons, admit it.


  9. And censorship is here. It’s pathetic to watch Vox pretend to care about something that they’ve been pushing for.


  10. The Cost of America”s Cultural Revolution

    The only precedent for our current resentment-driven war on the West’s magnificent achievements is the Chinese Cultural Revolution, and that didn’t turn out well. The Cultural Revolution, however, was waged mostly by the less educated against the more educated. The oddest feature of today’s social-justice crusade is that it is being prosecuted by the elites against themselves. Every college president, law firm managing partner, and Fortune 500 CEO would rather theatrically blame himself and his colleagues for phantom bigotry than speak honestly about the real causes of ongoing racial inequality: family breakdown and an underclass culture that mocks learning and the conformity to bourgeois values as acting “white.” Anti-racism has become the national religion, with the search for instances of racism to back up that religion becoming ever more desperate. Over the last year alone, ladies’ flats, sweaters, keychains, and Adidas and Nike sneakers have been purged from the marketplace for their imaginary connection to racist symbols. Innocent schoolboys have been tarred as bigots by the national media, and a robust traffic in hate-crime hoaxes has thrived.


    • Scott, what was th office vibe on Friday?


      • McWing:

        what was th office vibe on Friday?

        Our long national nightmare is over.

        Most of the people in the office were Remainers, but most of them figured Brexit was inevitable and just wanted to stop talking about it. We had a couple of Remainers who were bitter-enders (going to protests, constantly trying to figure out how it could be stopped), but even they had a really hard time bringing themselves to vote for Corbyn.

        I think for most people it is just a sense of relief that they can move on now to other things. There is some serious Brexit-fatigue here.


        • What do you think of Andrew Sullivan’s take on the Liberal Democrats?

          “The Liberal Democrats collapsed for two core reasons. They epitomized the London liberal elites. A key promise was simply: We will revoke Brexit altogether, you dumbass voters. No second referendum, just a parliamentary program to nullify the referendum of 2016. Hard to think of a more elitist project than that. Then they embraced wokeness. In the last week of the campaign, their leader, Jo Swinson, got caught in long discussions about what she believes a woman is. She didn’t just lose the election, she lost her own seat. It is clearer and clearer to me that the wholesale adoption of critical race, gender, and queer theory on the left makes normal people wonder what on earth they’re talking about and which dictionary they are using. The white working classes are privileged? A woman can have a penis? In the end, the dogma is so crazy, and the language so bizarre, these natural left voters decided to listen to someone who does actually speak their language, even if in an absurdly plummy accent.”


        • jnc:

          I think Sullivan is correct about the Lib Dems. It definitely seems that their revoke promise backfired on them, and lost them a lot of votes. I’m not sure whether the wokeness hurt them as much, but I would like to think it did. It would be reassuring to think that ordinary voters even on the left are sick of this kind of nonsense.

          And Sullivan is right to point out that Swinson lost her seat. That is quite a remarkable fact, the leader of the party (and a rather new one, too) actually getting voted out. Usually leaders of the parties are put up in safe seats, to guarantee that they don’t lose. (In the UK, there are no rules about having to actually live in the district that one is running for.) . So for Swinson to lose in what presumably was thought to be a safe seat for her is pretty shocking.

          I do think that Sullivan is wrong about the Brexit party’s poor showing being a big deal. First of all, the Brexit party exists for a single reason, which is now going to happen, so its extinction it more akin to a victory than a defeat. And remember that Farage agreed not to put up candidates in most Tory constituencies, and didn’t even run for a seat himself, so its not as though the Brexit party was actually looking or expecting anything other than what happened. Farage and the Brexit party can take a great deal of the credit for getting Brexit over the line, and it being quite literally a single issue party, its members surely care more about Brexit being a reality than with holding seats in Parlaiment.


        • I saw this today, I wonder what the average Brit thinks about this.

          I imagined a lot of them feel about the press the way we do.

          The row is seen as an ominous sign of Boris Johnson’s willingness to bypass independent scrutiny and follows criticism of the BBC’s election coverage from both left and right.

          How is not going on quick-cut, 30-second-response TV “news” programs bypassing “independent scrutiny”? And the BBC is the only way to scrutinize?

          Why is it a license fee? It’s basically public television, why don’t they just pay it out of taxes? Having a license fee constrains it to “I’m being forced to pay this for this thing I don’t like because I have a TV”, or so it seems to me.

          “Decriminalisation could also mean we have at least £200m less to spend on programmes and services our audiences love.”

          So Netflix should be able to argue that because it isn’t illegal to not subscribe to Netflix, that they are losing out on potentially of billions of dollars they could spend on programs and services that audiences love? At least in Britain?


        • McWing:

          I saw this today, I wonder what the average Brit thinks about this.

          Well I, of course, love it.

          I think that a substantial majority of average Brits have an instinctual pride for the BBC as an especially British institution, in much the same way they love the NHS. However, I suspect that for most people the main thing they like about the BBC is very practical…the absence of advertisements. And I do think there is an increasing recognition of the political slant that exists in the BBC, so Boris’s proposals might actually find some widespread support.

          Liked by 1 person

        • I feel like Sullivan over-stresses the threat of white supremacy, in part for a point he makes–that black supremacists and Muslims and every other color of racist bigot that isn’t white gets a pass, while as white people complaining about minorities culturally are vilified. White supremacism was a threat when the power structure protect white supremacists and the media ignored or tacitly approved.

          White supremacism simply isn’t at the same level as a problem when it’s universally understood in entertainment, media and politics that white supremacism is a self-evident evil. I also think there is a tendency to conflate garden variety prejudice with white supremacism these days.

          I would also argue anti-semitism isn’t resurgent because people just believed it was all over with and so weren’t paying attention, it’s because there are too many classes of anti-semite that are protected by the media, and entertainment, and politicians. Every time an anti-semitic attack turned out to be due to a non-white actor, it disappears from the news. There aren’t any movies about black Israelites or Muslims discriminating and attacking Jews and how that’s wrong.


        • Interesting take from Jacobin:

          “But despite the short but sophisticated conversations about political economy on the doors, attempts at reframing in Leave areas were for the most part unsuccessful because many people felt they had been given a chance to finally have their say, to voice their displeasure at their situation, and now they saw themselves being told that they had made the wrong choice.”


  11. Did you guys see Comey’s interview on Fox? Talk about someone who hears only what he wants to hear. The guy is delusional.


  12. This is an inter sting piece from an insider on Nixon’s legal team re Impeachment.


    • Thanks for this. This is insanely good. The primary takeaway, after how history repeats itself and impeachments have always been about politics rather than justice (which is fine–we need impeachment, even though we have term limits now and its highly likely the entire point of impeaching a president was always to prevent a king from becoming president for life beyond their sell-by date). And that John Dean was the biggest criminal in the entire affair, surpassing Nixon and Haldeman and Liddy.

      This is a great, great point (especially given my assertion that Democrats and Republicans are more the same than they are different, especially when it comes to logistics):

      An interesting pattern began with Richard Nixon: Each and every time in modern history that a lame-duck president has been faced by a totally hostile Congress (that is, both houses in opposition to the party controlling the White House), a seemingly mundane problem morphs into a national scandal.

      This seems very true to me, and did it even really begin with Nixon? I think at least in similar circumstances in the past, and effort has been made to create a national scandal. I mean, Zachary Taylor was a Whig, the Democrats controlled congress, and . . . scandals!

      I feel like if house and Senate had been Democratic for the majority of time under Bush, there would have been far more scandals, plus an effort to impeach him for war crimes, lying us into the Iraq war, etc. They did get that Valerie Plame thing going but I’m not sure if that’s Iran-Contra levels.

      Definitely a great read!


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