Category Archive: 5.) The United States

2017-12-22

The PBOC has two seemingly competing objectives that in reality are one and the same. Overnight, China’s central bank raised two of its money rates. The rate it charges mostly the biggest banks for access to the Medium-term Lending Facility (MLF) was increased by 5 bps to 3.25%. In addition, its reverse repo interest settings were also moved up by 5 bps each at the various tenors (to 2.50% for the 7-day, 2.80% for the 28-day).

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Retail Sales Bounce (Way) Too Much

2017-12-21

2017-12-21

Retail sales had a good month of November, or at least what counts as decent over the last five and a half years. Total retail sales (unadjusted) rose 6.35% last month, up from 4.9% (revised higher) in October. It was the highest rate of growth since the 29-day month of February 2016. For retailers, what matters is that it comes at the start of the Christmas shopping season.

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Fed’s enthusiasm on tax cut plans remains limited

2017-12-20

2017-12-20

The 13 December Fed decision – and Chair Yellen’s last press conference – was much as expected. The Fed hiked rates 25bps, bringing the interest rate on excess reserves to 1.5%. Meanwhile, Fed officials maintained their rate-hiking forecasts for next year: three rate increases, according to the ‘dot plot’.

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Bi-Weekly Economic Review: Animal Spirits Haunt The Market

2017-12-20

by Joseph Y. Calhoun

2017-12-20

The economic data over the last two weeks continued the better than expected trend. Some of the data was quite good and makes one wonder if maybe, just maybe, we are finally ready to break out of the economic doldrums. Is it possible that all that new normal, secular stagnation stuff was just a lack of animal spirits?

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Slow wage growth to keep Fed on prudent normalisation track

2017-12-17

2017-12-17

The November employment report showed another ‘Goldilocks’ set of conditions for investors: employment growth remained firm, especially in cyclical sectors like manufacturing and construction. At the same time, wage growth stayed soft – which means the Federal Reserve is unlikely to shift its current prudent communication on interest -rate hikes (although it is still very likely to hike 25bps on 13 December).

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Could Central Banks Dump Gold in Favor of Bitcoin?

2017-12-17

2017-12-17

Bank of Japan Balance Sheet, 2000 - 2017

All of which brings us to the "crazy" idea of backing fiat currencies with cryptocurrencies, an idea I first floated back in 2013, long before the current crypto-craze emerged. Exhibit One: here's your typical central bank, creating trillions of units of currency every year, backed by nothing but trust in the authority of the government, created at the whim of a handful of people in a room and distributed to their cronies, or at the behest of their...

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The Rug Yank Phase of Fed Policy

2017-12-17

by MN Gordon

2017-12-17

The political differences of today’s two leading parties are not over ultimate questions of principle. Rather, they are over opposing answers to the question of how a goal can be achieved with the least sacrifice. For lawmakers, the goal is to promise the populace something for nothing, while pretending to make good on it.

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Fed rate unlikely to move much above 2 percent next year

2017-12-16

2017-12-16

The Federal Reserve is probably looking back at 2017 with satisfaction. After on the rate rise expected on 13 December, it will have pushed through the three rate hikes it signalled earlier in the year. For once, it has not under-delivered. Meanwhile, the gradual, ‘passive’ decline in the Fed’s balance sheet has been mostly ignored by markets. In fact, broader financial conditions have eased this year despite the Fed’s monetary tightening....

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Chart of the Week: Collateral

2017-12-16

2017-12-16

It’s been a week of quite righteous focus on collateral. The 4-week bill equivalent yield closes it at just 114 bps, with only three days left before the RRP “floor” is moved up by the FOMC to 125 bps. That’s too much premium in price, though we know why given what FRBNY reported for repo fails last week.

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The Stock Market and the FOMC

2017-12-16

by Pater Tenebrarum

2017-12-16

Dow Price in Dollars and Gold, 1800 - 2017

As the final FOMC announcement of the year approaches, we want to briefly return to the topic of how the meeting tends to affect the stock market from a statistical perspective. As long time readers may recall, the typical performance of the stock market in the trading days immediately ahead of FOMC announcements was quite remarkable in recent decades. We are referring to the Seaonax event study of the average (or seasonal) performance across a...

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A crucial step towards US tax cuts

2017-12-15

2017-12-15

With the approval of the Senate tax bill in the early hours of Saturday 2 December, a key step has been taken toward tax cuts. The next chapter in the process is to reconcile this version with the House of Representatives’ tax bill, most likely in a ‘conference committee ’ from which a final version will emerge.

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Defining The Economy Through Payrolls

2017-12-15

2017-12-15

The year 2000 was a transition year in a lot of ways. Though Y2K amounted to mild mass hysteria, people did have to get used to writing the date with 20 in front of the year rather than 19. It was a new millennium (depending on your view of Year 0) that seemed to have started off under the best possible terms. Not only were stocks on fire at the outset, the economy was, too.

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A Radical Critique of Universal Basic Income

2017-12-12

2017-12-12

This critique reveals the unintended consequences of UBI. Readers have been asking me what I thought of Universal Basic Income (UBI) as the solution to the systemic problem of jobs being replaced by automation.To answer this question, I realized I had to start by taking a fresh look at work and its role in human life and society. And since UBI is fundamentally a distribution of money, I also needed to take a fresh look at our system of money.

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Giant Sucking Sound Sucks (Far) More Than US Industry Now

2017-12-11

2017-12-11

Case Study in Conundrum, Jan 1997 - 2004

There are two possibilities with regard to stubbornly weak US imports in 2017. The first is the more obvious, meaning that the domestic goods economy despite its upturn last year isn’t actually doing anything positive other than no longer being in contraction. The second would be tremendously helpful given the circumstances of American labor in the whole 21st century so far. In other words, perhaps US consumers really are buying at a healthy pace,...

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Reduced Trade Terms Salute The Flattened Curve

2017-12-10

2017-12-10

The Census Bureau reported earlier today that US imports of foreign goods jumped 9.9% year-over-year in October. That is the second largest increase since February 2012, just less than the 12% import growth recorded for January earlier this year.

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Bi-Weekly Economic Review: Who You Gonna Believe?

2017-12-07

by Joseph Y. Calhoun

2017-12-07

We’ve had a pretty good run of data recently and with the tax bill passing the Senate one would expect to see markets react positively, to reflect renewed optimism about economic growth. We have improving economic data on pretty much a global basis. It isn’t a boom by any stretch of the imagination but there is no doubt that the rate of change has recently been more positive.

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The Cost Basis of our Economy is Spiraling Out of Control

2017-12-06

2017-12-06

What will it take to radically reduce the cost basis of our economy? If we had to choose one "big picture" reason why the vast majority of households are losing ground, it would either be the stagnation of income or the spiraling out of control cost basis of our economy, that is, the essential foundational expenses of households, government and enterprise.

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Stock Market 2018: The Tao vs. Central Banks

2017-12-04