Fed Faces Backlash As Retail Fizzles, Factories Fade

Investors Business Daily ^ | 01/15/2016 | JED GRAHAM

[expat_panama]

Criticism Mounts Vs. Fed As Stocks, Economy Buckle

Output, Retail Sales Slide Central bank hiked rates as economy barely grew;  fallout is felt worldwide

It's becoming clear that the Federal Reserve ran out of patience and pulled the trigger on the first rate hike...

New data out Friday showed that retail sales fizzled...   ... factories slowed further, leading economists to mark down Q4 growth estimates. The Q1 outlook isn't a whole lot better.

With oil prices and global stock markets plunging, criticism of the December rate hike is mounting.

"Consumers are still keeping their purse strings tight, producers are reducing activity further and inflation --what inflation? Remind me again of the Fed's argument for liftoff last month"...

...Retail sales sank 0.1%...

Sales at general merchandise stores sank 1%, with that news coming as Wal-Mart (NYSE:WMT) said Friday that it would close 154 U.S. locations...

...December industrial production slid 0.4% after November's 0.9% fall, Fed data showed. Output fell 0.1% for manufacturers, 0.8% for miners and 2% for utilities. Total output fell 1.8% vs. a year earlier, the worst in six years.

January hasn't gotten off to a good start for factories...

The S&P 500 fell 2.2% Friday...   ...Crude oil settled below $30 a barrel...

"The market is saying, 'You guys made the wrong policy move,' " Piegza said, noting a flattening of the yield curve as the 10-year Treasury rate has fallen back to about 2%.

That's not yet an inverted yield curve, a recession warning when short-term Treasuries have higher rates, but a hint that the Fed is risking "severe negative consequences" if it keeps tightening.

[expat_panama]

My favorite part: "reducing activity further and inflation --what inflation? Remind me again of the Fed's argument for liftoff last month".."

[Boonie]

How can this be true??? Obama’s economy is flourishing....he said so....

[Paladin2]

Too much debt out there. Pzst time to clean it up.

[headstamp 2]

I think this is all from the energy sector taking a dump.

We’re finding out just how much it was holding up the economy.

[jneesy]

the market wants their heroin back they are going to scream until the fed takes back that quarter point

[RayChuang88]

I think if you want a REAL economic recovery, you need to do two things:

1. The tax code needs MASSIVE reforms. Who wants to follow 75,000-plus pages of tax code that makes James Joyce's famously unreadable Finnegans Wake seem almost readable in comparison? Small wonder why the Tax Foundation estimates American residents and businesses spend around US$1 TRILLION in yearly compliance and economic opportunity costs for the tax code.

2. We need to pare back a lot of Federal regulations, given many Federal laws are either obsolete or unneeded (yes, we can lower pollution and offer decent civil rights with a lot less Federal laws).

[abb]

The elephant in the room is the MASSIVE increase in healthcare premiums brought about by Obamacare. That’s where everybody’s money is going.

[VerySadAmerican]

I read somewhere the other day where some “expert” said when they cut rates it’s time to start buying gold.

I’d appreciate the opinion of some “experts” on free republic.

[patq]

Yep, the bankers want their free money. All the regular folks got was no interest savings accounts and no loans. Plus the market knew the rate hike was coming for months and was already baked in the market. The market was overvalued and the underlying economy has been crap for a while. I quarter point increase did not cause this.

[MeneMeneTekelUpharsin]

The elephant in the room is the MASSIVE increase in healthcare premiums brought about by Obamacare. That’s where everybody’s money is going.

I have been screaming that.

[kearnyirish2]

I think a much worse issue is the fact that many Americans today, like Europeans 50 years ago, are foregoing children; this immediately trickles down into the housing market, the government education industry (which here in NJ consumes 75% of our high property taxes), and retail (all sectors) as a new generation of consumers doesn’t appear/isn’t bred. As a result, Third World populations have to be trafficked here (to fill housing, classrooms, Wal-Mart aisles), and they have no money. The dwindling pool of American taxpayers has to pay for every single thing for these newcomers (including their ObamaCare coverage), as well as provide for themselves.

Here in NJ it is easy to walk through neighborhoods, past schoolyards, and in malls/Wal-Marts and realize THAT is where everybody’s money is going...

[palmer]

I quarter point increase did not cause this.

Absolutely true. The bankers are anticipating the next couple quarter points which they can lever into 10 point returns because they are too big to fail (don't try this at home). A good chunk of the market is propped up by that kind of speculation and the rises and falls of that bubble hurts the rest of the economy.

Zero rates always creates bubbles that eventually pop. The bubbles may be here or more likely abroad in various sectors. But they are always there. The rest of the market has some fundamental strength but that is being undermined by misallocation and gets trashed with the collapse of the bubbles.

[palmer]

I read somewhere the other day where some "expert" said when they cut rates it's time to start buying gold.

When they get serious and raise rates then the gold bubble starts. The reason is that they will only do that when staring at inflation in the pipeline. Eventually the rates get high enough to stop the inflation and the gold bubble bursts. But getting them high requires someone with the fortitude of Volker and that someone doesn't exist right now.

[DrPretorius]

Your point that “...as a new generation of consumers doesn’t appear/isn’t bred. As a result, Third World populations have to be trafficked here...” is popular received wisdom and underlies all excuses about bringing in Mexicans and Moslems in large numbers, but must be rejected as nonsense if we are to ever get our country back again. It is orders-of-magnitude better to learn to live with a population decline, like the Japanese, than to continue to import unassimillable aliens who destroy our communities and nation, like the Germans and other Europeans.

[ridesthemiles]

“Keeping the purse strings tight’

WTF?

Over 40 million Social Security recipients got their SS frozen AGAIN by Obama. 3 times in 7 years. Also the same for Federal employee retirees.

My vehicle insurance has gone up 23%.
My house insurance has gone up 8%.
Food prices are NOT down.
Vehicle registration is up 2%.
Don’t even talk to me about labor for repairs to my vehicles.
Don’t even mention the cost of ANYTHING medical.

[ridesthemiles]

I forgot:

My ‘guaranteed free’ Silver Senior bank account isn’t free any more.

One charges 2.50 a month because I want a printed statement. I WILL NOT do any on-line banking.

The other is used only lightly, but charges $10.00 a month. Need to hold it to facilitate any needed transfers from a family member who helps when I need it. (I always pay him back).

Both of these accounts were GUARANTEED to be free for the rest of my life when I opened them.

[Boonie]

Uhhhhhh...My comment was meant to be sarcastic, rides....

[kearnyirish2]

I don’t know why FReepers take my explanation as a defense of the policy; I certainly don’t want these people coming in masses. In my area many Americans can’t get unskilled or low-skilled jobs because they can’t speak Spanish; I’m the last person to concede that there is ANY benefit to Americans with these open borders.

I am hoping to explain, however, why the Democrats in particular (as the political arm of the teachers’ unions), will always keep the borders open despite the obvious damage done to one of their prime constituencies (blacks).

[Thorliveshere]

I truly believe this, and I think it was the only reason Minnesota has been doing so well is because we have everything the Bakken needed to continue running, and now that their production is going down, it won’t be long before we start to feel the hurt.

[mythenjoseph]

I disagree with the importation of bodies for consumption only. If the factories and manufacturers stayed the economy would be the strongest and most stable in the world for generations to enjoy....liberal and RINO purchased rep’s and senators see nothing wrong with throwing away Americans to the poor house while all the while allowing the illegals and all of the “private” groups that take federal money to assist the illegals...all for votes to a class of politico’s who will over see the anticipated chaos and then rule with a hard line communist/islamic manner....they have allowed the suversion and monetary blood letting occur so long that there is only one alternative to this situation perpetuated by the globalists that control our government .....Trump and throw all out who are not here properly...islamists run out of all federal agencies and the constant purging of the jihad via residency and birth of the little islami wannabees....during this the prosecution of 100’s within our own government needs to be front and center...Treason is running rampant ...along with the pilfering of our money ...all calculated by the way...time to get real business like and expose the true subversives....