Lower velocity, Mish

The turn of the calendar didn’t leave the bad news in 2019, as the Cass Freight Index showed continued weakness in the U.S. freight market. Both the shipments and expenditures components of the Cass Freight Index worsened sequentially and showed decelerating y/y growth. According to the broader stock market levels, there is still optimism out there, but the freight trends have yet to turn. And the Covid-19 coronavirus case count continues to grow, creating uncertainty around containment and eventual impact on global supply chains. Some Chinese factories resumed operation this past week, but they are still not close to 100% production levels. Others have pushed re-opening back to March 1.

Velocity is shipments per time period, and it has been dropping and still likely dropping.   This also means, by the way, any Euler assumptions are out the window, we are ill sampled. It also means retail transactions are dropping, folks save up and buy in one large transaction rather than using shared inventory over multiple transactions.

We have become  simple mining economy.  We have a mismatch, Mr. Solow is not equilibriating within the smaller error bounds of the past. We have been doing this since the Clinton administration and always end up paying yesterdays higher interest rates for today's lower transaction rate. We are pretending to be  manufacturing economy.

We are ending up with gaps in monetary coverage, like no one noticed the Obama cycle ended in 2016, rates have finished their prior Fed cycle and we are up and running  a new cycle.. And we are in the new cycle with a contracted economy as indicated by the Treasury curve.

We are, or rather, we have, frigged ourselves, we are at default time and AOC better bring her Milton Kenes to meetup.