Former Fed Chairman Greenspan Warns of Bond Bubble, Poor Data and Rising Debt in UK and America, more…


As more bad data is reported in the UK and the U.S., former Fed chairman Alan Greenspan has joined the likes of the German Bundesbank in raising concern about a bond bubble in the market. Greenspan also sees low interest rates as unsustainable, and believes the economy is entering a ‘different phase‘ that he thinks will be marked by stagflation. A further indication that the Federal Reserve’s program of raising interest rates will continue.

Meanwhile, vice chairman of the Fed, Stanley Fischer, has been warning about political uncertainty in Washington D.C. as having a negative influence on the economy. Most tellingly, he said this week that sustainable growth in productivity is more likely to come from ‘effective fiscal and regulatory measures than in central bank actions‘. Language which once again mirrors that of the Bank for International Settlements Chairman of the Board of Directors Jens Weidmann, who over the past year has been speaking extensively about the need for monetary policy to be tightened and government fiscal policies to become self sustainable.

Central banks are preparing to withdraw stimulus and raise interest rates. The political narrative that plays out in tandem with this will almost certainly utilise the Presidency of Donald Trump and the ongoing Brexit negotiations.

Bloomberg: Greenspan Sees No Stock Excess, Warns of Bond Market Bubble

  • Equity bears hunting for excess in the stock market might be better off worrying about bond prices, Alan Greenspan says. That’s where the actual bubble is, and when it pops, it’ll be bad for everyone.
  • “By any measure, real long-term interest rates are much too low and therefore unsustainable,” the former Federal Reserve chairman, 91, said in an interview. “When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.”
  • “The real problem is that when the bond-market bubble collapses, long-term interest rates will rise,” Greenspan said. “We are moving into a different phase of the economy — to a stagflation not seen since the 1970s. That is not good for asset prices.”

Reuters: U.S. construction spending falls as government outlays tumble

  • U.S. construction spending unexpectedly fell in June as investment in public projects recorded its biggest drop since March 2002, suggesting a downward revision to the second-quarter economic growth estimate.
  • The Commerce Department said on Tuesday that construction spending tumbled 1.3 percent to $1.21 trillion, the lowest level since September 2016. Spending in May was revised to show it rising 0.3 percent.

CNBC: US carmakers sales to daily rental fleets in July

  • U.S. carmakers said on Tuesday they continued to slash low-margin sales to daily rental fleets in July as General Motors, Ford and Fiat Chrysler struggled to curb a slide in retail sales during the month.
  • July is on track to be the fifth straight month in which the annual pace of car and light truck sales declined from the same month a year ago
  • GM sales dropped 15 percent from a year ago to 226,107 vehicles, as the company cut rental fleet sales more than 80 percent.
  • Ford said its July sales dipped 7.5 percent to 200,212 vehicles, as it cut fleet sales more than 26 percent.
  • Fiat Chrysler said sales dropped 10 percent to 161,477, as it also cut back sales to daily rental fleets.

Independent: Eurozone GDP grew at twice the rate of UK in second quarter of 2017

  • The eurozone’s GDP grew at twice the rate of the UK’s in the second quarter of 2017, official statistics showed on Tuesday.
  • Eurostat’s “flash” estimate for growth in the 19-member single currency bloc was 0.6 per cent, double the 0.3 per cent estimate for the UK from the Office for National Statistics last week.
  • This is the second solid quarter of eurozone growth, following the 0.5 per cent expansion in the three months to March.

Zero Hedge: Americans’ Income Growth Slumps To Weakest Since November

  • It is perhaps no surprise that personal income growth ended in June (0.0% MoM) missing expectations and falling to its lowest level since November. Spending growth also slumped (has not been weaker since August).
  • Income was disappointingly unchanged in June, weaker than expected, while nominal spending was up 0.1%, as expected. Adjusted for inflation, spending was unchanged in June. Consumer spending was up 2.8% in Q2.

CNBC: Blockchain technology being considered by more than half of big corporations, according to study

  • More than half of the world’s large corporations are looking into blockchain (distributed ledger technology), according to a study by U.K. research firm Juniper Research.
  • The research, released on Monday, found that 57 percent of large corporations – defined as any company with more than 20,000 employees – were either actively considering or in the process of deploying blockchain.
  • And two-thirds of companies surveyed by Juniper said that they expected the technology to be integrated into their systems by the end of 2018.

Bloomberg: Fed’s Fischer Warns Political Uncertainty Hurts Economic Growth

  • Federal Reserve Vice Chairman Stanley Fischer said political and economic uncertainty has contributed to slow economic growth in the U.S. and around the world.
  • “Uncertainty about the outlook for government policy in health care, regulation, taxes, and trade can cause firms to delay projects until the policy environment clarifies,” Fischer said in the text of a speech he’s scheduled to deliver Monday in Brazil.
  • “Policies to boost productivity growth and the longer-run potential of the economy are more likely to be found in effective fiscal and regulatory measures than in central bank actions,” he said.

CITY A.M: UK house purchases slow to nine-month low as consumer credit growth moderates

  • The number of house purchases fell to a nine-month low in June as the pace of consumer lending moderated, new lending data today revealed.
  • The number of mortgage approvals fell to its lowest since September last year, according to the Bank of England, in the latest sign the housing market may be entering a period of moderation.
  • There were 64,684 mortgage approvals for house purchases in June, with £11.8bn in loans extended.
  • The number of house purchases has fallen in every month since peaking in January, a trend which could start to drag down house prices after a period of sustained growth which has reduced affordability.

Guardian: Unsecured consumer credit tops £200bn for first time since 2008

The financial watchdog has announced fresh measures to protect consumers from spiralling debt as official data showed that borrowing through credit cards, overdrafts and car loans has topped £200bn for the first time since the global financial crisis.

In a paper published on Monday, the FCA said that one in six people with debt on credit cards, personal lending and car loans – 2.2 million – were in financial distress.

Zero Hedge: Treasury To Issue Half A Trillion Dollars In Debt In Q4

  • In its latest forecast of end-of-September cash balance it anticipated only $60 billion of cash on hand, nearly half the $115 billion it forecast in its previous report in May, according to the Department’s marketable borrowing estimates. The treasury also expects to borrow $96 billion in net marketable debt in the current quarter, down from $98 billion forecast previously.
  • The Treasury now expects a near record $501 billion in net marketable debt to be issued from October through December. This amount will be nearly equal to the actual marketable debt borrowed in the last 4 quarters, which amounts to $527 billion.

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