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close video Fed is going to keep raising rates, Jim Rickards warns

Strategic Intelligence editor Jim Rickards discusses the Fed’s decision to raise rates by 25 basis points, arguing that policymakers are “determined” to get inflation under control.

The worst banking crisis since the Great Recession could severely tighten credit for U.S. households and businesses, taking a toll on economic growth.

The turmoil that has engulfed the financial system following the stunning collapse of Silicon Valley Bank and Signature Bank has raised the prospect among economists that lending standards will become drastically more restrictive in coming months. 

"Tighter conditions can happen and occur outside the official tightening of the Fed funds rate. There are so many other variables," Jeffrey Roach, chief economist at LPL Financial, told FOX Business. "A banking crisis, in essence, can tighten conditions… I think it’s fair to say that the current banking crisis could also be an equivalent to say, a 50-basis-point rate hike."

During a credit crunch, banks significantly raise their lending standards, making it difficult to acquire a loan. Borrowers may have to agree to more stringent terms like high interest rates as banks try to reduce the financial risk on their end. Fewer loans, in turn, would lead to less big-ticket spending by consumers and businesses. 

FUND MANAGERS WORRY SYSTEMIC CREDIT CRUNCH COULD CRASH US MARKETS

Employees walk outside the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023, in Santa Clara, California. (Justin Sullivan/Getty Images / Getty Images)

Gregory Daco, chief economist at the consulting firm EY-Parthenon, said he thinks tighter credit will constrain "business investment, employment growth and consumer spending in the coming months." 

While that could help the Federal Reserve in its fight to tamp down stubbornly high inflation, it also raises the risk of a recession this year. 

"The odds of a recession have risen due to heightened financial market volatility, tightening credit conditions and economic uncertainty," Daco said. "While labor market conditions still look relatively resilient, an abrupt shift in sentiment along with a rapid tightening of financial conditions could push the economy into a recession with businesses and consumers retrenching."

JEROME POWELL'S FAVORITE BOND MARKET GAUGE FLASHES RECESSION WARNING SIGN

Chairman Jerome Powell acknowledged during the Fed's two-day meeting last week that upheaval within the financial sector could tighten credit for American households. He suggested that stricter lending standards could have a similar effect on inflation that a rate increase can.

"Such a tightening in financial conditions would work in the same direction as rate tightening," Powell said. "You can think of it as being the equivalent of a rate hike or perhaps more than that."

Jerome Powell, chairman of the U.S. Federal Reserve, speaks during at a news conference in Washington, D.C., Wednesday, March 22, 2023. (Al Drago/Bloomberg via Getty Images / Getty Images)

His comments came shortly after policymakers delivered another quarter-percentage point rate hike, lifting the benchmark funds rate to a range of 4.75% to 5%, the highest since 2007. It marked the ninth consecutive rate increase aimed at combating high inflation.

Fed officials are in the midst of the most aggressive tightening campaign since the 1980s as they try to crush inflation still running about three times higher than the pre-pandemic average. Before the spate of bank collapses earlier in March, the Fed had considered raising rates by a half-percentage point in the face of strong economic data, Powell said Wednesday.

But fears over a broader financial crisis complicated the Fed's efforts, because the rapid rise in interest rates played a direct role in the failure of Silicon Valley Bank. Increasing interest rates threatens to exacerbate instability within the financial system. Powell said it is too soon to say how banking sector stress will affect the broader economy.

YELLEN SAYS US WILL TAKE MORE ACTION TO PROTECT SMALLER BANKS IF NEEDED

"Financial conditions seem to have tightened and probably by more than the traditional indexes say," he said. "The question for us, though, is how significant will that be – what will be the extent of it, and what will be the duration of it?

 "We’ll be looking to see how serious is this and does it look like it’s going to be sustained. And, if it is, it could easily have a significant macroeconomic effect, and we would factor that into our policy decisions."

Pedestrians near the U.S. Treasury building in Washington, D.C., Dec. 30, 2022. (Ting Shen/Bloomberg via Getty Images / Getty Images)

SVB largely catered to tech companies, venture capital firms and high net worth individuals who were pulling cash at a rapid pace as the once red-hot tech sector cooled. When the bank announced it was trying to raise capital from investors and that it would take a $1.3 billion loss on long-term securities that had tumbled in value amid higher interest rates, depositors panicked and a bank run ensued.

Within days, U.S. regulators took extraordinary steps to contain the fallout from the bank's collapse and shore up wavering confidence in the financial system, including protecting all deposits at the two institutions – even those holding funds that exceeded the FDIC's $250,000 insurance limit. 

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The Fed also launched a new emergency backstop for lenders to help them meet deposit withdrawals under favorable terms. 

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UK content creators demand formal recognition from the government

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UK content creators demand formal recognition from the government

The UK’s YouTubers, TikTok creators and Instagram influencers have been surveyed en masse for the first time ever, and are demanding formal recognition from the government.

The creator economy in the UK is thought to employ around 45,000 people and contribute over £2bn to the country in one year alone, according to the new research by YouTube and Public First.

But, despite all that value, its workers say they feel underappreciated by the authorities.

Max Klyemenko, famous for his Career Ladder videos, wants the government to take creators like himself more seriously. Pic: Youtube
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Max Klyemenko, famous for his Career Ladder videos, wants the government to take creators like himself more seriously. Pic: Youtube

“If you look at the viewership, our channel is not too different from a big media company,” said Max Klymenko, a content creator with more than 10 million subscribers and half a billion monthly views on average.

“If you look at the relevancy, especially among young audiences, I will say that we are more relevant. That said, we don’t really get the same treatment,” he told Sky News.

Fifty-six per cent of the more than 10,000 creators surveyed said they do not think UK creators have a “voice in shaping government policies” that affect them.

Only 7% think they get enough support to access finance, while just 17% think there is enough training and skills development here in the UK.

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Nearly half think their value is not recognised by the broader creative industry.

The creative industries minister, Sir Chris Bryant, said the government “firmly recognises the integral role that creators play” in the UK’s creative industries and the fact that they help “to drive billions into the economy” and support more than 45,000 jobs.

“We understand more can be done to help creators reach their full potential, which is why we are backing them through our new Creative Industries Sector Plan,” he said.

Ben Woods said the government needs to "broaden its lens" to include creators
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Ben Woods said the government needs to “broaden its lens” to include creators

“The UK has got a fantastic history of supporting the creative industries,” said Ben Woods, a creator economy analyst, Midia Research who was not involved in the report.

“Whether you look at the film side, lots of blockbuster films are being shot here, or television, which is making waves on the global stage.

“But perhaps the government needs to broaden that lens a little bit to look at just what’s going on within the creator economy as well, because it is highly valuable, it’s where younger audiences are spending a lot of their time and [the UK is] really good at it.”

Read more from Sky News:
Trump says ‘very wealthy group’ has agreed to buy TikTok in US
Major porn sites to introduce ‘robust’ age verification in UK

According to YouTube, formal recognition would mean creators are factored into official economic impact data reporting, are represented on government creative bodies, and receive creator-specific guidance from HMRC on taxes and finances.

For some, financial guidance and clarity would be invaluable; the ‘creator’ job title seems to cause problems when applying for mortgages or bank loans.

Podcaster David Brown owns a recording studio for creators
Image:
Podcaster David Brown owns a recording studio for creators

“It’s really difficult as a freelancer to get things like mortgages and bank accounts and credit and those types of things,” said podcaster David Brown, who owns a recording studio for creators.

“A lot of people make very good money doing it,” he told Sky News.

“They’re very well supported. They have a lot of cash flow, and they are successful at doing that job. It’s just the way society and banking and everything is set up. It makes it really difficult.”

The creative industries minister said he is committed to appointing a creative freelance champion and increasing support from the British Business Bank in order to “help creators thrive and drive even more growth in the sector”.

The government has already pledged to boost the UK’s creative industries, launching a plan to make the UK the number one destination for creative investment and promising an extra £14bn to the sector by 2035.

These influencers want to make sure they are recognised as part of that.

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Astros’ Alvarez to see hand specialist after setback

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Astros' Alvarez to see hand specialist after setback

DENVER — Houston Astros slugger Yordan Alvarez has experienced a setback in his recovery from a broken right hand and will see a specialist.

Astros general manager Dana Brown said Alvarez felt pain when he arrived Tuesday at the team’s spring training complex in West Palm Beach, Florida, where he had a workout a day earlier. Alvarez also took batting practice Saturday at Daikin Park.

He will be shut down until he’s evaluated by the specialist.

“It’s a tough time going through this with Yordan, but I know that he’s still feeling pain and the soreness in his hand,” Brown said before Tuesday night’s series opener at Colorado, which the Astros won 6-5. “We’re not going to try to push it or force him through anything. We’re just going to allow him to heal and get a little bit more answers as to what steps we take next.”

Alvarez has been sidelined for nearly two months. The injury was initially diagnosed as a muscle strain, but when Alvarez felt pain again while hitting in late May, imaging revealed a small fracture.

The 28-year-old outfielder, who has hit 31 homers or more in each of the past four seasons, had been eyeing a return as soon as this weekend at the Los Angeles Dodgers. Now it’s uncertain when he’ll play.

“We felt like he was close because he had felt so good of late,” Brown said, “but this is certainly news that we didn’t want.”

Also Tuesday, the Astros officially placed shortstop Jeremy Peña on the 10-day injured list with a fractured rib and recalled infielder Shay Whitcomb from Triple-A Sugar Land.

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Springer’s 7 RBIs help Jays pile on Yankees late

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Springer's 7 RBIs help Jays pile on Yankees late

George Springer had a career-high seven RBIs, including his ninth grand slam, and the Toronto Blue Jays celebrated Canada Day by beating the Yankees 12-5 on Tuesday and closing within one game of American League East-leading New York.

The seven RBIs are tied for the second most by any Blue Jays player in a home game, behind Edwin Encarnación (nine RBIs in 2015), according to ESPN Research.

Andrés Giménez had a go-ahead, three-run homer for the Blue Jays, who overcame a 2-0 deficit against Max Fried. After the Yankees tied the score 4-4 in the seventh, Toronto broke open the game in the bottom half against a reeling Yankees bullpen.

Springer went 3-for-4, starting the comeback with a solo homer in the fourth against Fried and boosting the lead to 9-5 with the slam off Luke Weaver after Ernie Clement‘s go-ahead single off shortstop Anthony Volpe‘s glove. Springer has 13 homers this season.

Toronto won the first two games of the four-game series and closed within one game of the Yankees for the first time since before play on April 20.

New York went 2-for-17 with runners in scoring position, dropping to 3-for-24 in the series, while the Blue Jays were 5-for-7. After going 13-14 in June, the Yankees fell to 10-14 against AL East rivals.

The Associate Press contributed to this report.

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