The Fed Hits Dead Center, But for How Long?
The Bureau of Economic Analysis of the US Department of Commerce published the Personal Consumption Expenditures index this morning, and it met expectations. The index rose 2% year over year, hitting the official Fed target of 2% year over year inflation. Core PCE, which excludes food and energy, rose 1.9% year over year. This is the very first time since 2012 that the core PCE measure hit the 2% mark. Accompanying this, the US savings rate dropped from 3.3% to 3.1%. This indicates many things, but in terms of importance opinions vary. For those inclined to believe that savings behavior has strong implications for future business cycle downturns, lowered savings rates simply mean that there are fewer cash reserves in the private sector to deal with recessionary pressures in the future.
China Trade War Ebbing?
Thursday and Friday could be big days for the overall trade picture between the US and China. US trade talks with China are scheduled for those two days. The nitty gritty of what happens depends on the goals of each administration and in turn from what each administration expects from its voters regarding a certain outcome. Are the two sides intent on changing the overall balance of trade, meaning less Chinese imports by the US and more US imports by the Chinese, or is this merely a play for US and Chinese traders already anticipating a certain outcome?
This is what will be discovered in the coming days. Essentially, the current trade surplus in China and deficit in the US is determined by the interplay of labor and monetary policies in both countries. Assuming these won’t change too drastically, a fairly conservative assumption, then traders can assume that nothing substantive will change between the US and China, and that the Trump Administration is simply looking for a nominal win that will placate its voter base.
South Korean Propaganda Coming to an End?
So it wasn’t just North Korea that was a fan of constant propaganda from loudspeakers. Apparently, as part of the newly signed peace treaty between the two long-warring Koreas, South Korea (NYSEARACA:EWY), the democratic and more globally accepted of the two Koreas, will be reducing propaganda at the border. In a move that quiets loudspeakers at borders, South Korea agreed to lessen the volume of Southern propaganda at the border. Will North Korea follow with quieting loudspeakers attesting to the divinity of Kim Jon Un? Only time will tell.
A Mess of Italian Pasta
Looks like another round of Italian elections for the rest of the world. Italy (NYSEARCA:EWI) is the most indebted, in both an absolute sense and relative to GDP except for Greece, of all Eurozone States, and in what looks to be another waste of money, it is calling on renewed elections, a very expensive procedure, for something that just happened on March 4th and shouldn’t, ideally, happen again for another 4 years at least. But now, they will happen, because nobody is satisfied with the results. And since nobody is satisfied with the results, everyone will vote again, expecting a different result, in accordance with Albert Einstein’s definition of insanity, which is expecting the same result over and over again from the same initial conditions. This will put the Italian State even deeper into debt, which probably won’t help its prospects of paying down its massive 132%+ of GDP that it owes bond investors.