Category Archive: 5.) The United States

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Bi-Weekly Economic Review: Maximum Optimism?

2017-10-07

The economic reports of the last two weeks were generally of a more positive tone. The majority of reports were better than expected although it must be noted that many of those reports were of the sentiment variety, reflecting optimism about the future that may or may not prove warranted. Markets have certainly responded to the dreams of tax reform dancing in investors’ heads with US stock markets providing a steady stream of all time highs, bond...

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Surprise! The Rules Will Change (But Not to Your Benefit)

2017-10-06

by Charles Hugh Smith

2017-10-06

Aggregate balance sheet of Central Banks, 2000 - 2017

These expedient fixes end up crippling the mechanisms that are needed to actually solve the systemic sources of the crisis. We can add a third certainty to the two standard ones (death and taxes): The rules will suddenly change when a financial crisis strikes. Why is this a certainty? The answer is complex, as it draws on human nature, politics and the structure of societies/economies ruled by centralized states (governments). The Core Imperative...

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US: Reflation Check

2017-10-05

by Jeffrey P. Snider

2017-10-05

There is a difference between reflation and recovery. The terms are similar and relate to the same things, but in many ways the latter requires first the former. To get to recovery, the economy must reflate if in contraction it was beaten down in money as well as cyclical forces. In the Great Crash of 1929 and after, reflation was required because of the wholesale devastation of the money supply.

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This Chart Defines the 21st Century Economy

2017-10-04

by Charles Hugh Smith

2017-10-04

Household Income Inequality, 1980 - 2014

There is nothing inevitable about such vast, fast-rising income-wealth inequality; it is the only possible output of our financial and pay-to-play political system. One chart defines the 21st century economy and thus its socio-political system: the chart of soaring wealth/income inequality. This chart doesn't show a modest widening in the gap between the super-wealthy (top 1/10th of 1%) and everyone else: there is a veritable Grand Canyon between...

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Stagnation Is Not Just the New Normal–It’s Official Policy

2017-10-04

by Charles Hugh Smith

2017-10-04

Japan is a global leader is how to gracefully manage stagnation. Although our leadership is too polite to say it out loud, they've embraced stagnation as the new quasi-official policy. The reason is tragi-comically obvious: any real reform would threaten the income streams gushing into untouchably powerful self-serving elites and fiefdoms.

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Eurozone: Distinct Lack of Good Faith

2017-10-03

by Jeffrey P. Snider

2017-10-03

European Growth Baseline, Jan 1995 - 2017

The erosion of social order in any historical or geographic context is gradual; until it isn’t. Germany has always followed a keen sense of this process, having experienced it to every possible extreme between the World Wars. Hyperinflationary collapse doesn’t happen overnight; it took three years for the Weimar mark to disintegrate, and then Weimar Germany. Even Nazism wasn’t all it once. What was required was continued denial especially on the...

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Location Transformation or HIBORMania

2017-10-01

by Jeffrey P. Snider

2017-10-01

The Communist Chinese established their independence on September 21, 1949. The grand ceremony commemorating the political change was held in Tiananmen Square on October 1 that year. The following day, October 2, the Resolution on the National Day of the People’s Republic of China was passed making October 1to be China’s National holiday. It typically kicks off the second of China’s Golden Week holidays. The first relates to the Chinese New Year...

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It Was Collateral, Not That We Needed Any More Proof

2017-09-30

by Jeffrey P. Snider

2017-09-30

Eleven days ago, we asked a question about Treasury bills and haircuts. Specifically, we wanted to know if the spike in the 4-week bill’s equivalent yield was enough to trigger haircut adjustments, and therefore disrupt the collateral chain downstream. Within two days of that move in bills, the GC market for UST 10s had gone insane.To be honest, it was a rhetorical exercise.

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The Real Estate View For A Second Lost Decade

2017-09-29

by Jeffrey P. Snider

2017-09-29

US Existing Home Sales, Jan 2011 - Jul 2017

The National Association of Realtor (NAR) reports today that sales of existing homes in the US were down 1.7% in August 2017 from July. At a seasonally-adjusted annual rate of 5.35 million, that’s the lowest pace for resales since July 2016. It is yet another data point reflecting the almost certain end of “reflation” in the economic sense.

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Why The Fed’s Balance Sheet Reduction Is As Irrelevant As Its Expansion

2017-09-27

by Jeffrey P. Snider

2017-09-27

Japan Monetary Base, Jan 2013 - 2017, US Versus Canada Real GDP, 2007 - 2017

The FOMC is widely expected to vote in favor of reducing the system’s balance sheet this week. The possibility has been called historic and momentous, though it may be for reasons that aren’t very kind to these central bankers. Having started to swell almost ten years ago, it’s a big deal only in that after so much time here they still are having these kinds of discussions.

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PBOC RMB Restraint Derives From Experience Plus ‘Dollar’ Constraint

2017-09-27

by Jeffrey P. Snider

2017-09-27

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

2017-09-26

by Joseph Y. Calhoun

2017-09-26

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)

2017-09-26

by Jeffrey P. Snider

2017-09-26

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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Global Asset Allocation Update: Step Away From The Portfolio

2017-09-25

by Joseph Y. Calhoun

2017-09-25

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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Expectations and Acceptance of Potential

2017-09-23

by Jeffrey P. Snider

2017-09-23

University of Michigan Consumer Confidence, Jan 1997 - 2017

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

2017-09-23

by Jeffrey P. Snider

2017-09-23

US Industrial Production, Jan 2010 - Jul 2017

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’

2017-09-22

by Jeffrey P. Snider

2017-09-22

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

2017-09-22

by Jeffrey P. Snider

2017-09-22

US Consumer Price Index, Jan 2016 - Aug 2017

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

2017-09-21

by Jeffrey P. Snider

2017-09-21

China Fixed Asses Investment, 2014 - 2016

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”

2017-09-20

by Charles Hugh Smith

2017-09-20

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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