US jobs data average; factories facing huge cost pressure; US grain stocks halve; China bond worries; China PMIs unimpressive; ditto Japan and South Korea; UST 10yr at 1.45%; gold and oil firm; NZ$1 = 70 USc; TWI-5 = 72.6

Thanks for doing the groundwork on the bible belt origins for the Lifesite website. Explains the bias.

I'm looking at the same data you are Keith. 53,000 unvaccinated positive Delta cases: 38 deaths. 7000 vaccinated Delta cases with 2 doses: 50 deaths.

So, it is ok to let people die, because they only had a couple of years left anyway?

Sort of worrying that first bit isn't Scarfie? Humans are essentially a social animal, and that very fact makes us highly vulnerable to all kinds of nasties that are going to kill some of us.

Putting the brakes on our social interactions has meant that a few people will live longer than normal.

Do they really want to avoid another crisis though? The Federal Reserve is buying $40 billion worth Mortgage-Backed Securities (MBS) each month.

Is the US Treasury going to bail out the Fed when the next crash happens?

Yes, I think Nymad mentioned it a while back. An awful lot of banking software is based on old obsolete coding languages. Mind boggling really.

I am in no way as qualified as those you have referenced but it seems as though old measures are not revealing the true state of the economy. We have high employment but there is no real wage increases as there is no unified bargaining and technology now makes knowledge work high transportable. There are record high valuations on all asset classes, this is not the concern as any inflation regularly puts us at record high valuations but it is the recent pace of valuation increase that concerns me. Debt has become disconnected from wages due to incredibly low interest rates. Therefore interest rate rises will lead slowly but surely to default and default cascades exponentially.

From http://moneymovesmarkets.com/ (June 16th)

'The current stock of G7 broad money is 20% higher than at end-2019. G7 gross wealth – i.e. the aggregate value of equities, bonds and stocks – is also up by about 20% since then, while real bond yields, on the measure calculated here, are little changed. According to the model, the rise in wealth will have boosted broad money demand by 10%. So markets may have “absorbed” about half of the additional liquidity created since end-2019, implying a smaller excess to be reflected in goods and services prices.

The implication of the model that buoyant asset prices are disinflationary is controversial '

At least half the increased nominal money supply has gone into the speculative economy. Instead of the price of a broad range of goods and services rising due to wage pressures it is house prices, lumber prices and building material prices along with bitcoin and share prices that have risen. Bank lending to businesses has actually decreased in New Zealand. Inflation is being caused by blockages in materials supplies and lack of skilled labour. So inflation continuing depends on transport difficulties continuing and immigration not restarting.

From the same website

'G7 broad money growth remains elevated relative to the 2010s but E7 growth is at the bottom of its range, with Chinese weakness a key driver.

Secondly, G7 bank loans to the private sector have contracted following a brief spurt last spring, contrary to forecasts that government guarantee programmes and central bank incentives would spark a lending boom

Medium-term inflation expectations in markets are correlated with swings in global industrial momentum – chart 3. The forecast here that the global manufacturing PMI new orders index will decline through late 2021 suggests that expectations will stabilise or moderate near term.'

It seems that the Chinese are still restricting credit and that this is translating into a lagged weakening of their economic growth. Biden won't get his large infrastructure bill through but maybe a small bill followed by another bill by reconciliation. So the outlook is short term growth in Europe and the US weakening, weakening growth in China, growth impacted in Covid hit developing countries.

Biden needs to be able to continue with the fiscal/infrastructure spending for there to be any chance of long term general inflation.

Banks are buying higher grade bonds for safety because they fear that the economic revival is not being sustained, not because of inflation fears.

Debt becomes deflationary when interest rates rise but incomes don't rise.

From the Money Moves Markets website 'Sustained high inflation in the 1970s reflected strong broad money growth driven by bank lending. Last year’s money surge, by contrast, was due to monetary financing of ballooning fiscal deficits and additional QE.'
Left unsaid here is the fact that bank lending in the 1970's was in turn driven by a broad based economic expansion driven by post war spending on infrastructure followed by spending unleashed by the post war baby boom. New houses, new services new schools, new roads, new everything.

If the Reserve Banks push rates higher without there being a sustained economic rally then general spending falls. If govts like China or the EU move to restrict credit before economic growth is self-sustaining then there will be no more inflation from those countries, those areas will be exporting deflation.

World population demographics are not as favorable for general spending as they were in the 1970's. For govts to act like it's 1974 is to misread the situation.
'

They are finding it difficult to lend cash at any rate to counterparties who can collateralise the loan with the most liquid and safe securities (government debt) in the event of a future liquidity/solvency crisis. MMFs in particular do not want the Net Asset Value of the fund to 'break the buck'. Thus US Treasury Bills (discount instrument) are the most pristine because they cannot be auctioned below 0.0%

Local NZ dealers are tapping the RBNZ for scarce bond issues at the bond lending facility window.