propaedeutic
pro-pi-du-tik
preceding and preparing for something
a course that provides an introduction to an art or
science (or to more advanced study generally)
You don't have to be a walking encyclopedia to use it,
but "propaedeutic" does tend to occur mostly in scholarly discussions
of learning and education.
"Propaedeutic" might be a "hard"
word, but one easy thing to remember about it is that it is closely related to
"encyclopedia."
"Encyclopedia" is from Greek paideia, meaning
"education," plus enkyklios, meaning "general."
"Propaedeutic" is from Greek paideuein, meaning "to teach,"
plus "pro-," which means "before."
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TIP OF THE WEEK
A propaedeutic promulgation.
Like the slope of the yield curve, SBA 7(a) loan approval
volume has been prospicient about the direction of the economy.
Just for fun I calculated the correlation coefficient
between SBA 7(a) loan volume and GDP for over nine years using the Microsoft
CORREL function. It came out to a
statistically significant 0.86.
SBA 7(a) loan approvals were profluent.
Through September 16th $24,101,763,300 in SBA 7(a) loans
had been approved. While below the
levels of the prior year that had a 90% guarantee and no guarantee fee, SBA
7(a) loan volume did exceed fiscal years 2017 through 2020.
The new fiscal year starting October 1st has an
authorization level of $30 billion which is more than sufficient lending
authority.
The SBA program for this new fiscal year sets the 7(a)
loan program at a ZERO subsidy rate.
That means the fees collected from borrowers and lenders
are sufficient to cover the projected costs of the loan guarantee. No tax payer subsidy is needed.
Effective October 1st, the guarantee fee for SBA 7(a)
loans are:
-loans of $500,000 or less: 0.00%:
-loans of $500,001 to $700,000: 0.55% of the guaranteed
portion.
-loans of $700,001 to $1,000,000: 1.05% of the guaranteed
portion.
-loans $1,000,001 to $5,000,000: 3.5% of the guaranteed
portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000.
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Indices:
PRIME RATE= 6.25%
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SBA 504 Loan Debenture Rate for September
For 20 year debentures, the debenture rate is only 4.10%
but note rate is 4.16% and the effective yield is 5.343%.
For 25 year debentures, the debenture rate is only 4.26%
but note rate is 4.30% and the effective yield is 5.44%.
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AHEAD OF THE YIELD CURVE
One profligate propaedeutic is that there is a trade-off
between jobs and inflation.
The Phillips Curve, named after New Zealand economist A.
W. Phillips, misconstrues a supposed correlation between unemployment and
inflation as a causal relation.
When he won the Nobel Prize in economics in 1976, Milton
Freidman in his acceptance speech titled Inflation and Unemployment made it
clear there is no tradeoff between inflation and unemployment.
Freidman had promulgated that “inflation is always and
everywhere a monetary phenomenon,” and said central bankers should prevent the
supply of money from growing faster than economic output.
The growth rate of all the dollars in circulation (“M2
Money Supply”) soared a historic record 27% in 2020.
To put that in perspective, this increase in M2 Money
Supply is the biggest jump in America’s history. That is bigger than the
Financial Crisis of 2007-2008 (10%), bigger than World War II (18%), and bigger
than FDR’s stimulus to fight the Great Depression (10%).
The recent increases by the Federal Reserve in the fed
funds rate has moderated the changes in the M2 money supply. M2 actually decreased by over $300 billion
in May with nominal increases in June and July and no increase in August. As a result month by month changes in the
consumer price index over the last quarter has also plateaued.
As for jobs, initial claims for unemployment fell again
last week, rapidly approaching the lowest levels seen early this year. Overall,
claims remain historically low, and are headed lower again after trending
higher from May through July. Claims suggest the labor market remains
tight. All signs point to continued
tightness in the labor market, despite weaker growth.
Keep your eyes and ears open for this week’s report on
employment for the month of September.
Here are the latest jobs numbers from the Bureau of Labor
Statistics.
August 315,000
July 526,000
June 293,000
May 386,000
April 368,000
March 398,000
February 714,000
January 504,000
2021
6,400,000
2020 -9,370,000
2019 2,108,000
2018 2,679,000
2017 2,110,000
2016 2,160,000
2015 2,740,000
2014 3,116,000
2013 2,074,000
2012 2,193,000
2011 2,103,000
2010 1,022,000
2009 -5,052,000
2008 -3,617,000
2007 1,115,000
2006 2,071,000
2005 2,484,000
2004 2,019,000
What does all this mean?
I don't know.
Next week on Thursday there will be an auction of 30 year
Treasury bonds. At last month’s auction
of 30 year Treasury bonds, the high yield was awarded at 3.511 percent, up from
3.106 percent at last month’s auction.
The 30 year Treasury yield is now at 3.77%.
For all the talk of an inverted yield curve, the 3 month
and 10 year yields have not inverted.
The last time they inverted was back in 2019.
On the same day, the consumer price index will also come
out. While year over year price
increases will be reflected, it is important to actually note the month to
month change.
Eurodollar futures settle at a three- month lending rate
that has averaged about 22 basis points more than the Fed's target over the
past 10 plus years.
The December 2022 implied rate is now at 4.73% up from
4.454% just last month and up from only 0.17% in October.
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OFF BASE
It is not propaganda when the Federal Reserve promulgates
official holidays. A three day weekend
approaches!
The Federal Reserve has proscribed banks from being
opened on the following days:
Columbus Day October 10
Veterans Day November 11
Thanksgiving Day November 24
Christmas Day December 25
