Category Archive: 5) Global Macro

PBOC RMB Restraint Derives From Experience Plus ‘Dollar’ Constraint

Given that today started with a review of the “dollar” globally as represented by TIC figures and how that is playing into China’s circumstances, it would only be fitting to end it with a more complete examination of those. We know that the eurodollar system is constraining Chinese monetary conditions, but all through this year the PBOC has approached that constraint very differently than last year.

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Bi-Weekly Economic Review: As Good As It Gets

The incoming economic data hasn’t changed its tone all that much in the last several years. The US economy is growing but more slowly than it once did and we hope it does again. It is frustrating for economic bulls and bears, never fully satisfying either. Probably more important is the frustration of the average American, a dissatisfaction with the status quo that permeates the national debate. The housing bubble papered over the annoying lack of...

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Swimming The ‘Dollar’ Current (And Getting Nowhere)

The People’s Bank of China reported this week that its holdings of foreign assets fell slightly again in August 2017. Down about RMB 21 billion, almost identical to the RMB 22 billion decline in July, the pace of forex withdrawals is clearly much preferable to what China’s central bank experienced (intentionally or not) late last year at ten and even twenty times the rate of July and August.

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Emerging Markets: Week Ahead Preview

EM FX was mostly firmer on Friday, but capped off a week of broad-based losses. US rates gave back some of post-FOMC rise, and that weighed on the dollar. Not much in the way of US data until Friday’s core PCE reading and Chicago PMI.

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Global Asset Allocation Update: Step Away From The Portfolio

There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are no changes to the portfolios this month. The post Fed meeting market reaction was a bit surprising in its intensity. The actions of the Fed were, to my mind anyway, pretty much as expected but apparently the algorithms that move markets today were singing from a different hymnal.

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Abe and BOJ

BOJ is unlikely to change policy. A snap election suggests continuity of policy. US 10-year yield remains one of most important drivers of the exchange rate.

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Expectations and Acceptance of Potential

The University of Michigan reports that consumer confidence in September slipped a little from August. Their Index of Consumer Sentiment registered 95.3 in the latest month, down from 96.8 in the prior one. Both of those readings are in line with confidence estimates going back to early 2014 when consumer sentiment supposedly surged.

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IP Weathers Storms But Not Cars

In late August 2006, ABC News asked more than a dozen prominent economists to evaluate the impacts of hurricane Katrina on the US economy. The cataclysmic storm made landfall on August 29, 2005, devastating the city of New Orleans and the surrounding Gulf coast. The cost in human terms was unthinkable, and many were concerned, as people always are, that in economic terms the country might end up in similar devastation.

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Retail Sales and the End of ‘Reflation’

There will be an irresistible urge to the make this about the weather, but more and more data shows it’s not any singular instance. Nor is it transitory. What does prove to be temporary time and again is the upside. The economy gets hit (by “dollar” events), bounces back a little, and then goes right back into the dumps. This, it seems, is the limited extent of cyclicality in these times.

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The CPI Comes Home

There seems to be an intense if at times acrimonious debate raging inside the Federal Reserve right now. The differences go down to its very core philosophies. Just over a week ago, Vice Chairman Stanley Fischer abruptly resigned from the Board of Governors even though many believed he was a possible candidate to replace Chairman Yellen at the end of her term next year. His letter of resignation only cited “personal reasons.”

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A Clear Anchor

All the way back in January I calculated the total size of China’s 2016 fiscal “stimulus.” Starting in January 2016, authorities conducted what was an enormous spending program. As it had twice before, the government directed increased “investment” from State-owned Enterprises (SOE). By my back-of-the-envelope numbers, the scale of this fiscal side program was about RMB 1.45 trillion, or nearly 2% of GDP

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Dear Jamie Dimon: Predict the Crash that Takes Down Your Produces-Nothing, Parasitic Bank and We’ll Listen to your Bitcoin “Prediction”

This is the begging-for-the-overthrow-of-a-corrupt-status-quo economy we have thanks to the Federal Reserve giving the J.P. Morgans and Jamie Dimons of the world the means to skim and scam the bottom 95%. Dear Jamie Dimon: quick quiz: which words/phrases are associated with you and your employer, J.P. Morgan?

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Harvey’s Muted (Price) Impact On Oil

The impact of Hurricane Harvey on the Gulf energy region is becoming clear. There have been no surprises to date, even though the storm did considerable damage and shuttered or disrupted significant capacity. Most of that related to gasoline, which Americans have been feeling in pump prices.

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Yes, This Time It Is Different: But Not in Good Ways

Yes, this time it's different: all the foundations of a healthy economy are crumbling into quicksand. The rallying cry of Permanent Bulls is this time it's different. That's absolutely true, but it isn't bullish--it's terrifically, terribly bearish. Why is this time it's different bearish going forward? The basic answer is that nothing that is structurally broken has actually been fixed, and the policy "fixes" have fatally weakened the global...

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When You Are Prevented From Connecting The Dots That You See

In its first run, the Federal Reserve was actually two distinct parts. There were the twelve bank branches scattered throughout the country, each headed by almost always a banker of local character. Often opposed to them was the Board in DC. In those early days the policy establishment in Washington had little active role. Monetary policy was itself a product of the branches, the Discount Rate, for example, often being different in each and every...

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The JOLTS of Drugs

Princeton University economist Alan Krueger recently published and presented his paper for Brookings on the opioid crisis and its genesis. Having been declared a national emergency, there are as many economic as well as health issues related to the tragedy. Economists especially those at the Federal Reserve are keen to see this drug abuse as socio-demographic in nature so as to be absolved from failing in their primary task should it be found...

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Housing Bubble Symmetry: Look Out Below

Housing markets are one itsy-bitsy recession away from a collapse in domestic and foreign demand by marginal buyers. There are two attractive delusions that are ever-present in financial markets:One is this time it's different, because of unique conditions that have never ever manifested before in the history of the world, and the second is there are no cycles, they are illusions created by cherry-picked data; furthermore, markets are now...

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Emerging Markets: What has Changed

China plans to issue its first USD-denominated bond since 2004. China’s largest banks banned North Koreans from opening new accounts. The UN Security Council approved new sanctions on North Korea. Relations between Poland and the European Commission remain tense. Brazil’s central bank appears to be signaling discomfort with ongoing BRL strength.

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The Real Reason Wages Have Stagnated: Our Economy is Optimized for Financialization

Labor's share of the national income is in freefall as a direct result of the optimization of financialization. The Achilles Heel of our socio-economic system is the secular stagnation of earned income, i.e. wages and salaries. Stagnating wages undermine every aspect of our economy: consumption, credit, taxation and perhaps most importantly, the unspoken social contract that the benefits of productivity and increasing wealth will be distributed...

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Les «diamants de sang» zimbabwéens circulent librement sur les marchés internationaux. La Tribune

L’ONG britannique Global Witness vient de publier ce 11 septembre un rapport explosif qui met à nu des opérations de détournement des revenus du secteur minier zimbabwéen par l’élite militaire et politique du pays pour financer les opérations répressives du régime du président Mugabe.

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