With the emergence of the Delta variant, economists are keeping a close eye on inflation. They say the variant could threaten to ease pricing pressures in the short and worsen them in the long run. However, some argue that Delta fears are overheated, adding that it won’t derail any economic recovery. In other news, a recent analysis found that the Democrats spending plan would actually cost $5.5 trillion over the next decade.
CNN Business/Matt Egan
Inflation is here. The Delta variant could make it worse
The biggest question facing the US economy is when skyrocketing consumer prices will come back to earth. The emergence of the Delta variant only deepens that inflation mystery.
The hope is that inflation will cool off as the economy fully reopens, allowing supply to catch up with increasing demand.
But the summer surge in Covid-19 cases is complicating that thinking. That’s because the Delta variant threatens to both ease pricing pressures in the short term — and worsen them in the long run.
Covid alarm bells sounded on Wall Street on Monday, with the Dow sinking 726 points, or 2.1%. Markets rebounded swiftly on Tuesday and Wednesday, although the bond market is still signaling nervousness. Treasury yields dropped to the lowest level in nearly six months.
The good news is that, for now at least, investors and economists say the Delta fears are probably overheated. They point to how vaccines remain highly effective (almost all Covid-19 deaths and hospitalizations are among non-vaccinated people) and there is little appetite for the shutdowns that wrecked the economy last year.
“I don’t think this will derail the recovery,” David Kelly, chief global strategist at JPMorgan Funds, told CNN Business.
Similarly, Mark Zandi, chief economist at Moody’s Analytics, isn’t downgrading his forecast for a booming economy. He pointed to how real-time economic indicators, including everything from OpenTable restaurant bookings to the number of travelers going through airport security screenings, haven’t softened.
You can read more about them, here.
Fox Business/Megan Henney
True cost of Democrats’ spending plan could top $5T, analysis says
Democrats are crafting an enormous reconciliation bill that envisions spending $3.5 trillion over the next decade to dramatically expand the social safety net – but a new analysis published this week shows the measure may cost $2 trillion more than expected.
The spending agreement, announced last week, would invest billions in an array of planned health, education, environment and social programs as Democrats seek to use their power monopoly in Washington to squeeze through a slate of left-wing priorities.
But the Committee for a Responsible Federal Budget (CRFB) projected the bill could cost as much as $5.5 trillion over the next decade based on a fact sheet with top-line spending figures.
“In order to fit these proposals within a $3.5 trillion budget target, lawmakers apparently intend to have some policies expire before the end of the ten-year budget window, using this oft-criticized budget gimmick to hide their true cost,” CRFB said in the analysis, which assumed all of the policy provisions were permanent.
That’s in part because lawmakers may try to include proposals in the bill that would sunset after a few years, rather than making them permanent. But lawmakers often pass multiyear extensions down the road, even though the Congressional Budget Office – when it scores the legislation – assumes those measures will expire.
“Unfortunately, lawmakers often violate these principles by establishing or extending policies on a temporary basis when they intend such policies to be permanent,” CRFB said. “Doing so can help reduce a policy’s reported ten-year cost or help legislation circumvent rules that prohibit long-term increases in debt.”
Continue reading, here.
Kitco News/Rajan Dhall
Goldman Sachs is looking for $2K for Gold
In their latest research note on gold Goldman Sachs is now looking for $2000/oz for gold. The report notes “commodities to rebound sharply unless there are widespread lockdowns due to the spreading delta mutant coronavirus.” In terms of the timeframe, the updated “forecast gold at $2,000/oz in 3, 6 and 12-month horizons.”.
Justifying the decision the U.S. investment bank says it “does not expect widespread lockdowns.”. Many analysts have been looking into if the last set of restrictions would be the final set. In the U.K. the government has said it would be their preference not to make another set of restrictions. The bank added, “even if they were it delays the rapid bounce back by six to eight weeks, citing past experience.”
The bank added a caveat to their outlook by saying unless there are widespread lockdowns due to the spreading delta mutant coronavirus which seems sensible.
You can read the full article, here.