Welcome! I am musician & producer: Simon Grant. The purpose of this site is to highlight my work in the music and film industry and share some of my experiences and lessons learned. If you have questions or comments about the information here, or the site itself, feel free to send me a quick note via the “Contact” page.
Thanks for stopping by!
Current Events
Because we have to write songs about something, right?
The latest SG News can be found on the “Log” page.
- America’s Minsky Moment Approachesby Tyler Durden on March 29, 2024 at 1:00 PM
America’s Minsky Moment Approaches Authored by Michael Wilkerson via The Epoch Times, Named after American economist Hyman Minsky, the idea behind a Minsky moment is that a financial markets crisis (especially in credit markets) is caused by a sudden and systemic collapse in asset prices, usually after a sustained period of speculative investment, excessive borrowing, and widespread financial risk taking. In other words, it’s the moment when the music stops playing, investors stop buying, and the Ponzi game ends abruptly. It’s a hard crash. America may be on the brink of its Minsky moment. This process, which moves from slowly, slowly, to suddenly and now, goes back decades. The confrontation with reality that was required to put America’s economic house back in order after the global financial crisis of 2008–09 was deferred to a later date by politicians, central bankers, and government officials alike, presumably when they would no longer be around. Instead of taking the painful but necessary steps of liquidation—i.e., allowing more over-levered and risk-heavy banks and financial firms to fail, and for the economy to take the short-term pain, then move on—the U.S. government and the Federal Reserve kicked the can down the road by massive money-supply expansion and unproductive government spending. The same playbook from the financial crisis (i.e., money printing and fiscal excess) was used again in 2020 in response to the pandemic. As the monetary authorities had but one instrument in their toolbox—the blunt-force cudgel of money-supply growth—it was the go-to solution. As the saying goes, when the only tool available is a hammer, every problem looks like a nail. In both instances—the financial crisis and COVID periods), the U.S. Congress went on a massive spending spree, not realizing (or, as political animals with short time horizons, not caring) that excess and repeated deficit spending, and the debt creation needed to fund it, would eventually spiral out of control and doom future generations. While a more serious collapse of the bubble—a monetary Great Reset—was avoided in 2008–09, the underlying conditions were not resolved. The monetary and fiscal actions taken at the time only postponed the crisis and, worse, further inflated a massive bubble that is destined to eventually burst. We are still living in this bubble, evidenced by all-time highs in equity and crypto markets, speculation in numerous asset classes from real estate to collectibles to memecoins, and “get what you can while you can” borrowing by governments, households, and corporates alike. Given the increasing magnitude (in both nominal and real terms) of the debt problem, a financial crisis in 2024 or 2025 will have much worse consequences than anything that would have happened at the time of the financial crisis 15 years ago. On the eve of the 2008 crisis, U.S. federal debt to GDP was around 64 percent, the same level as in 1995. This allowed some flexibility. As of the most recent quarter, the ratio of debt to GDP is now nearly double that, at 122 percent. On this measure, the United States is now among the top 10 most indebted countries in the world, a peer group that includes economically hobbled nations such as Venezuela, Greece, Italy, and sclerotic Japan. The level of U.S. national debt, quickly approaching $35 trillion in coming months, now requires more than $1.1 trillion in interest payments annually just to service it. And this number doesn’t include state and municipal debt or the unfunded liabilities and entitlements such as Medicare and Social Security that now comprise the substantial majority of the federal budget, limiting anyone’s ability to shrink the deficit through a reduction in discretionary spending. The deficit for 2024 is tracking at $1.7 trillion, adding to the existing cumulative U.S. deficit of $22 trillion since 2001. The deficit matters in part because high deficits relative to GDP are strongly correlated with persistent inflation. Since 2020, the United States has run the highest levels of deficits (as a percent of GDP) since World War II. Those deficits produced high inflation, but they also reversed and became budget surpluses shortly after the war ended. This was made possible because of the productivity miracle that was mid-twentieth century America. The United States of 2024 has no equivalent productivity boost waiting in the wings. Artificial intelligence is one bright spot, but other tech (crypto in particular), energy, and mining industries are each being chased off-shore through regulatory interference. Manufacturing is attempting a comeback, but only represents 11 percent of GDP. Bureaucratic, tax, monetary (the U.S. dollar remains too high to be competitive), and other barriers persist. The continued growth (as a percent of GDP) of financial advisors, personal injury attorneys, and tax accountants needed to navigate the impossible IRS tax code hardly comprise the revolutionary army needed to make the American economy great again. When the Minsky moment arrives, the U.S. government will have no ability to confront it save for a resumption of quantitative easing and other forms of money printing. With the bond markets in turmoil, investors will be increasingly reluctant to buy more U.S. debt. Foreign buyers have already begun reducing their exposure, and now account for only 30 percent by value of U.S. Treasurys held, compared with 45 percent in 2013. If this divestment trend suddenly accelerates, the United States will be forced to monetize its debt through Federal Reserve purchases of U.S. Treasurys. This will be highly inflationary, even as economic conditions are weakening and unemployment is rising. The U.S. Department of the Treasury and the Federal Reserve have already committed to a “whatever it takes” approach to crisis management. When the Minsky moment arrives, and the bond markets are in meltdown, the “whatever it takes” will primarily be a firehose of liquidity (more money created out of thin air) to the banking system with an alphabet soup of program names. As a result, the United States will be forced to accept significantly higher levels of inflation. The alternatives are just too severe. The U.S. government, as the issuer of the world’s reserve currency, cannot default. There is a practical limit on how high it can take the visible tax rate. Its only alternative is the hidden tax of ever-higher inflation. To avoid this outcome, U.S. productivity would have to dramatically increase such that the ratio of debt to GDP falls back in line. This seems an impossibility. The higher the ratio of debt to GDP, the greater the anchor-like drag on the national economic ship. Tyler Durden Fri, 03/29/2024 – 09:00
- Disinflationary Path Stalls As Non-Durable Goods Prices Spike But Supercore PCE Slidesby Tyler Durden on March 29, 2024 at 12:47 PM
Disinflationary Path Stalls As Non-Durable Goods Prices Spike But Supercore PCE Slides One of The Fed’s favorite inflation indicators – Core PCE Deflator – was flat at +2.8% YoY in February (as expected) – the lowest since March 2021. However, the headline PCE Deflator stalled its disinflationary path, rising to +2.5% YoY (from +2.4%)… Source: Bloomberg Durable Goods deflation slowed and non-durable goods inflation picked up in February… Source: Bloomberg The so-called SuperCore – Services inflation ex-Shelter – remains stalled around +3.33% YoY (up 0.18% MoM)… Source: Bloomberg But SuperCore MoM tumbled significantly (as Healthcare cost inflation fell and Other Services prices deflated)… Source: Bloomberg Income and Spending both rose in February with spending far outpacing income (+0.8% MoM vs +0.3% MoM respectively)… Source: Bloomberg On a YoY basis, spending is once again outpacing income growth… Source: Bloomberg Government workers’ record wage growth in January was revised lower (because we caught them)… Govt wages grew 8.1% in Feb, up from a downward revised 7.9% in Jan and below the record high of 8.9% in December Private wages grew 5.4% in Feb, up from 5.3% in Jan and back to their pre-covid growth rates As one would expect with that level of spending, the savings rate collapsed to its lowest since Dec 2022… Source: Bloomberg Here’s why – government handouts rose significantly once again (+$39BN MoM)… Source: Bloomberg Finally, while the markets are exuberant at the survey-based disinflation, we do note that it’s not all sunshine and unicorns. The vast majority of the reduction in inflation has been ‘cyclical’… Source: Bloomberg Acyclical Core PCE inflation remains extremely high, although it has fallen from its highs. Is The (apolitical) Fed really going to cut rates 4 times this year with a background of strong growth (GDP) and still high Acyclical inflation? Tyler Durden Fri, 03/29/2024 – 08:47
- Asian Stocks Gain With US and Europe Closed Ahead Of Core PCE Print, Powell Speechby Tyler Durden on March 29, 2024 at 12:16 PM
Asian Stocks Gain With US and Europe Closed Ahead Of Core PCE Print, Powell Speech With US futures and European markets closed for Good Friday, the only markets trading overnight were in Asia where stocks gained following another record close on Wall Street, with focus turning to key PCE data due later Friday as well as a speech by Fed chair Powell. Benchmarks in Japan, South Korea and mainland China showed modest increases, after US stocks wrapped up the first quarter on a positive note, including the 5th monthly gain in a row and closing up 18 of the past 22 weeks – something markets haven’t done since 1989. And while they won’t be able to trade it – except perhaps through crypto which never closes – investors are bracing for a print of the Federal Reserve’s preferred consumer price reading for fresh clues about its policy outlook. Several Asian markets, including Australia, Hong Kong and Singapore, are also closed Friday for a public holiday. The gains in the region came after traders sent the S&P 500 to its 22nd record this year on the back of data showing the US economy remained healthy. A $4 trillion surge in US equity values in just three months has startled doomsayers, while leaving a host of strategists scrambling to update their 2024 targets. “Domestic events are driving the gains in China, Japan and South Korea with investor sentiment underpinned by the overnight gains in the US market,” said Seo Sang-Young, a market strategist at Mirae Asset Securities. End-of-quarter portfolio rebalancing also seems to be at play, Seo added. Eslewhere, traders remain on alert for intervention in Japan’s currency after officials stepped up warnings this week to stem its slide. The yen’s weakness is not in line with economic fundamentals, Masato Kanda, vice finance minister for international affairs, said in an interview Friday. He also reaffirmed the commitment to act if needed to prevent excessive swings in the exchange rate. There is a growing sense of wariness of intervention, said Taishi Fujita, associate in the global markets division for the Americas at MUFG Bank. “Even if you build a position selling the yen during a strong phase, you are likely to drop the position as it approaches 152.” He pointed out that the market may continue to hover in the low 151-yen per dollar range. Latest data showed that consumer price growth in Tokyo moderated while staying well above the central bank’s inflation target. It may keep authorities on track to consider more rate increases after they hiked earlier this month for the first time since 2007. On China’s corporate front, one of the nation’s biggest property firms delayed its earnings report while another posted a historic profit decline. Country Garden Holdings Co. announced late Thursday it will miss a deadline for reporting annual results, saying it needs more information. Developer China Vanke Co. said net profit tumbled 46% last year. According to Bloomberg, swaps traders on Thursday slightly trimmed wagers that the Fed would cut rates as soon as June following Fed Governor Christopher Waller’s comments on Wednesday that there was no rush to lower interest rates. Two-year Treasury yields climbed five basis points to 4.62% in a shortened session ahead of the holiday, while the dollar extended its quarterly advance. Trading of cash Treasuries in Asia is closed due to the holiday. With both GDP and consumer spending posting strong advances at the end of last year, consumer sentiment rose markedly toward the end of March, supported partly by the strong stock-market gains. In addition to the release of the PCE price index, the Fed’s preferred inflation gauge, traders will also closely monitor a speech by Fed Chairman Jerome Powell later Friday. Elsewhere, gold hit a fresh all-time high, extending a weeks-long rally fueled by bets on Fed rate cuts and deepening geopolitical tensions. Oil scored a 16% quarterly gain in the latest sign that export curbs by OPEC and its allies are reining in global supplies. Bitcoin eased Friday after climbing to $71,555 in the previous session, despite another session of strong inflows into ETFs, as bitcoin futures get slammed constantly, affording new spot buyers cheaper prices. Fed Chair Jerome Powell is speaking at the San Francisco Federal Reserve Bank’s Macroeconomics and Monetary Policy Conference today. The conversation, moderated by Marketplace’s Kai Ryssdal, will start at 11:30 a.m. ET. It should cover several topics including inflation and interest rates. Tyler Durden Fri, 03/29/2024 – 08:16
- What Will The Fed Do Next?by Tyler Durden on March 29, 2024 at 11:30 AM
What Will The Fed Do Next? Authored by Louis-Vincent Gave via Evergreen Gavekal blog, So far this year, we have seen US inflation repeatedly beat expectations, US gasoline prices creep higher, gold break out to new all-time highs, feverish speculation in crypto and parts of the equity market, bonds sell off, and the US dollar roll over. Now copper has suddenly broken out of its recent trading range. And against this benign backdrop, US corporate bond spreads remain tight, despite fears of a US commercial real estate bust and its impact on US regional banks. Outside the US, Japanese trade unions have secured their biggest pay rise in 33 years. Coming on top of a higher-than-expected PPI reading for February, this points to a more hawkish Bank of Japan and a stronger yen, which implies less deflation and less capital exports from Japan. Meanwhile India, Southeast Asia, Latin America and the Middle East are booming. And in spite of weak domestic economic data, European stock markets are chugging along nicely. In short, over the past two months the case for Federal Reserve rate cuts has taken on some serious water. This leaves investors with an important question. What will the Fed do next? Will it try to get ahead of the curve and beat back the expectations of imminent rate cuts that it raised in December? Or will the Fed deliver on the promise of rate cuts, even though the macro backdrop is no longer so supportive of easier policy? One added complication is the calendar. The Fed will be loath to start a new rate cut cycle in July, smack in between the Republican and Democratic conventions. It will also be loath to start a new cutting cycle in late October, days before the US presidential election. This means that the obvious times for the Fed to start a new rate cut cycle are either in June or in December (unless a Lehman-style or Covid-type crisis forces its hand). Now, having said all that, one of the first things I was taught as a young cadet at officer school was that “doing nothing” is still “doing something.” In the heat of battle, the temptation is always to freeze and attempt to gather more information before making any decision that could potentially have dire consequences. But the decision to freeze and wait is still a decision—and one that itself can have dramatic implications. If the Fed freezes and does nothing—does not cut rates and lets the reverse repo reservoir drain without adding fresh liquidity—we can probably expect a sell-off in long-dated bonds, especially considering the volume of rollovers and new issuance coming down the pipeline. Few equities, least of all the more richly valued, would respond well to higher bond yields. The US dollar would likely rally, and commodities would struggle. If the Fed, despite the changed environment, goes ahead with rate cuts, precious metals will continue to rally; in the past few sessions, silver has started to show signs of life and seems to be joining gold in a new bull market. Emerging market debt and equities will rally hard. The US dollar will continue to weaken. And commodities will continue to rally. So let’s weigh the odds, starting with the reasons for the Fed to go ahead and deliver on rate cuts, despite all the recent strong data. 1) Institutional bias. In meeting after meeting, the Fed has made clear its belief that fighting inflation is much easier than fighting deflation. This belief will tend to push the Fed to err on the side of reflation. 2) Credibility fears. After being caught out and changing course in 2019 and again in 2022, Jay Powell probably wants to avoid another flip-flop. 3) Politics. If Powell fails to deliver rate cuts, triggering a bond and equity market crash just before the presidential election, he will never be invited to a dinner party in Washington D.C. again. 4) Treasury capture. In the last couple of months, both Treasury Secretary Janet Yellen and President Joe Biden have gone on record to say that the Fed needs to cut rates. In fairness, it probably does need to cut rates if the US treasury is to roll over US$8trn in debt and add another US$2trn on top without difficulty. 5) China fears. The constant Western media drumbeat on China is that the Chinese economy is imploding, that the renminbi is about to devalue, and that China is set to release a deflationary wave around the world that will make the Asian crisis look like a mere ripple. With a backdrop of such fears, you can see why the Fed might want to get few “insurance” cuts under its belt. Against all these possible reasons to cut, the main reason Fed policymakers might want to sit on their hands is that Powell has made it clear he does not want to be remembered as another Arthur Burns. That’s basically it: the fear of being remembered as Arthur Burns versus the fear of no longer getting invited to D.C. dinner parties. Looking at copper, gold, bitcoin, the US dollar and others, it increasingly looks as if the market has already decided. The fear of losing the dinner party invites is stronger than the fear of getting a bad rap in the history books. In any case, over the last few years the new motto of public life in Western democracies seems to have become “Après moi, le déluge.” Why expect a change now? The market is likely right to expect an easy Fed—and to position itself for reflation. Tyler Durden Fri, 03/29/2024 – 07:30
- Philadelphia Fed Admits US Payrolls Overstated By At Least 800,000by Tyler Durden on March 29, 2024 at 11:11 AM
Philadelphia Fed Admits US Payrolls Overstated By At Least 800,000 The first red flags emerged in the summer of 2022: that’s when the Biden Labor Department started well and truly rigging the labor market data. Regular readers may recall that it was back in July of 2022, when we first warned that something had “snapped” in the labor market: that’s when a striking discrepancy emerged between the number of US Payrolls (as measured by the BLS’ Establishment Survey, a far more crude and imprecise, yet much more market-moving data series), and the number of actual Employed Workers (as measured by the BLS’ far more accurate Household Survey) . As we showed then, after the two series had tracked each other tick for tick for years, a wide gap opened in March 2022 which quickly grew to 1.5 million jobs in just 3 months… … one which has since exploded to a whopping 5 million “employed workers” that apparently do not exist. And while some of this discrepancy could be explained with the record surge in multiple jobholders, which increased by 1 million since March 2022 to an all time high of 8.6 million at the end of 2023 (as a reminder, the Establishment Survey counts 1 worker have 2 or 3 (or more) multiple jobs as, well, 2 or 3 (or more) separate jobs, even if it is just one worker trying to make ends meet under the roaring inflation of Bidenomics), most of the gap remained unexplained. There was more: it was around the summer of 2022 that the Biden labor department – in its zeal to show job growth no matter the cost, or quality of jobs – also started fooling around with the composition of the labor market, with most of the monthly gains going to part-time workers, even as full-time workers stagnated or declined. The culmination, as we reported earlier this month, is that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Which is great… until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million). In other words, starting in 2022 and accelerating to present days, less and less full-time jobs were added, until we got to the absurd situation that all the new jobs in the past year have been part-time jobs! And then there was, of course, the great jobs replacement theory, only as we first showed well over a year ago, it wasn’t a theory but practice, and following countless months in which native-born workers lost their jobs, including a near-record 3-month plunge to start 2024… … offset by a record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February… Or, as we first pointed out several months ago, not only has all job creation in the past 6 years – since May 2018 – has been exclusively for foreign-born workers… … but there has been zero job-creation for native born workers since June 2018! Ok fine, but all of the above are really just example of the Biden admin Labor Department playing around with statistics and trying (and succeeding) to fool the greatest number of people. There is really nothing about outright data rigging and fabrication… and also while we realize that the Household survey shows a far uglier labor market – one where part-time jobs, illegal immigrants, and multiple jobholders dominate – what about the Establishment survey, which is behind the actual payrolls number, the only number that matters as far as the market is concerned? All good points, and to address them, we first have to go back to December 2022, when we reported something shocking: as part of its data analysis of the “more comprehensive, accurate job estimates released by the BLS as part of its Quarterly Census of Employment and Wages (QCEW) program”, the Philadelphia Fed found that the BLS had overstated jobs to the tune of 1.1 million! This is what the Philadelphia Fed wrote in its quarterly Early Benchmark Revision of State Payroll Employment report at the time: Our estimates incorporate more comprehensive, accurate job estimates released by the BLS as part of its Quarterly Census of Employment and Wages (QCEW) program to augment the sample data from the BLS’s CES that are issued monthly on a timely basis. All percentage change calculations are expressed as annualized rates. Read more about our methodology. Learn more about interpreting our early benchmark estimates. So what did this “more accurate”, “more comprehensive” report find? It found that… In the aggregate, 10,500 net new jobs were added during the period rather than the 1,121,500 jobs estimated by the sum of the states; the U.S. CES estimated net growth of 1,047,000 jobs for the period. This is shown graphically in the chart below: specifically, the analysis looks at the quarter in the red box, where the green line, or the more accurate “early benchmark” revision of official data, dipped decidedly below the CES trendline (i.e., the nonfarm payrolls). Alas, since the far more accurate Quarterly Census of Employment and Wages (QCEW) numbers would not be actually incorporated into BLS benchmarks for well over a year after we wrote our analysis in Dec 2022, neither we nor the market would know just how manipulated the data was until early 2024. Which, of course, is now, and as we already know, the BLS had been consistently downward revising virtually all initial job prints in 2023 (ten of the eleven jobs reports heading into Dec 2023 were revised lower) to make the economy more realistic but only in retrospect… … however, even though we do know now that the jobs data in 2022 was far weaker than anyone thought at the time, nobody really cares: after all there are part-time jobs and illegal immigrants to plug any and all historical holes, plus we are talking about ancient history. Plus, we have all those great recent jobs reports to fall back on: the ones that confirm that Bidenomics is doing such a great job. Only… that’s not true either. Presenting Exhibit A: the latest Philadelphia Fed quarterly report on Early Benchmark Revisions of State Payroll Employment. It shows that once again, the BLS has been fabricating jobs, and not just any jobs but those that make up the all-important (if highly inaccurate) payrolls reported by the Biden Bureau of Goalseeked Statistics. The primary purpose of this analysis, in the Philly Fed’s own words, is “to produce timely estimates of state payroll jobs that closely predict the annual benchmark revisions released by the BLS each March. To do so, we incorporate more comprehensive job estimates released by the BLS as part of its Quarterly Census of Employment and Wages (QCEW) program.” This is more or less a replica of the analysis which the Philly Fed performed back in December, when it found that 1.1 million jobs were unexpectedly “missing.” So what happened this time? Well, the analysis, which looked at state-level data, “found that “the employment changes from June through September 2023 were significantly different in 27 states compared with prebenchmark state estimates from the Bureau of Labor Statistics’ (BLS) Current Employment Statistics (CES).” Specifically, “early benchmark (EB) estimates indicated lower changes in 24 states, higher changes in three states, and lesser changes in the remaining 23 states and the District of Columbia.” Some more details from the report: Over the full year ending with this 2023 Q3 vintage — which includes additional QCEW data changes affecting the prior three quarters — payroll jobs in the 50 states and the District of Columbia grew 1.5 percent. Based on the pre-benchmark CES sum of states and the U.S. CES, payroll jobs grew 1.9 percent and 2.0 percent, respectively. The revised CES sum-of-states growth rate is 1.5 percent. For 2023 Q3, payroll jobs in the 50 states and the District of Columbia rose 0.5 percent, after adjusting for QCEW data. Based on both the prebenchmark CES sum of states and the U.S. CES, payroll jobs grew 1.7 percent. The revised CES sum-of-states growth rate is 0.5 percent We’ll go back to the chart above in a second, but first we wanted to show this scatter of state-level employment comparing the St Louis Fed’s more accurate early benchmarking process vs the BLS’ Prebenchmarking CES process: it found that most states’ labor data would be revised lower, in many substantially so. Ok… but what does all of that mean in English? Well, to make some more sense of the data, we went through the Early Benchmark state-level data excel spreadsheet provided by the Philly Fed (link), and simply added across the various states to obtain aggregate, country-level data so that we could compare the far more accurate QCEW data with what the BLS had been peddling for the past year. The result was – again – shocking, and as shown in the chart below, a little over a year after we, or rather the Philly Fed, found that the BLS had overstated payrolls in 2022 by 1.1 million, here we go again, only this time the BLS had overstated payrolls by 800,000 through Dec 2023 (and more if one were to extend the data series into 2024). It’s truly statistically remarkable how every time the data error is in favor of a stronger, if fake, economy. it also means that far from the stellar 230K average monthly increase in payrolls in 2023, which the White House would spin time and again as direct evidence of the benefits of Bidenomics, the true average monthly payroll increase in 2023 was only 130K! The full monthly change in payrolls as originally reported by the BLS (in green) and the actual monthly number, as per the QCEW (in red) is shown below. Putting it all together, we now know – as the Philly Fed reported first – that the labor market is far weaker than conventionally believed. In fact, no less than 800,000 payrolls are “missing” when one uses the far more accurate Quarterly Census of Employment and Wages data rather than the BLS’ woefully inaccurate and politically mandated payrolls “data”, and if one looks back the the monthly gains across most of 2023, one gets not 230K jobs added on average every month but rather 130K. Of course, none of that paints Bidenomics in a flattering picture, because while one can at least pretend that issuing $1 trillion in debt every 100 days to add 3 million jos per year is somewhat acceptable, learning that that ridiculous amount buys 800,000 jobs less is hardly the endorsement that the White House needs. Which is also why nobody in the mainstream media – which is now nothing more than the PR smokescreen for the Biden puppetmasters, the government and the deep state – will ever mention this report. As such, we urge all readers to read Philly Fed analysis (link here) and to analyze the excel data (link here) at their own leisure, because in a fascist state, the media no longer works for the people. Tyler Durden Fri, 03/29/2024 – 07:11