Tag Archive: Deflation

They’ve Gone Too Far (or have they?)

2021-01-10

by

2021-01-10

Between November 1998 and February 1999, Japan’s government bond (JGB) market was utterly decimated. You want to find an historical example of a real bond rout (no caps nor exclamations necessary), take a look at what happened during those three exhilarating (if you were a government official) months.

Read More »

Deflation: Friend or Foe?

2020-12-20

by

2020-12-20

Deflation is the most feared economic phenomenon of our time. The reason behind this a priori irrational fear (why should we be afraid of prices going down?) is the Great Depression.

Read More »

Inflation Hysteria #2 (Slack-edotes)

2020-12-13

by

2020-12-13

Macroeconomic slack is such an easy, intuitive concept that only Economists and central bankers (same thing) could possibly mess it up. But mess it up they have. Spending years talking about a labor shortage, and getting the financial media to report this as fact, those at the Federal Reserve, in particular, pointed to this as proof QE and ZIRP had fulfilled the monetary policy mandates – both of them.

Read More »

Deflation Returns To Japan, Part 2

2020-11-23

by

2020-11-23

Japan PMIs, 2018-2020
Japan Finance Minister Taro Aso, who is also Deputy Prime Minister, caused a global stir of sorts back in early June when he appeared to express something like Japanese racial superiority at least with respect to how that country was handling the COVID pandemic.

Read More »

Wait A Minute, What’s This Inversion?

2020-06-28

by

2020-06-28

Eurodollar Futures Curve, 2018-2024
Back in the middle of 2018, this kind of thing was at least straight forward and intuitive. If there was any confusion, it wasn’t related to the mechanics, rather most people just couldn’t handle the possibility this was real. Jay Powell said inflation, rate hikes, and accelerating growth. Absolutely hawkish across-the-board.And yet, all the way back in the middle of June 2018 the eurodollar curve started to say, hold on a minute.

Read More »

Why The FOMC Just Embraced The Stock Bubble (and anything else remotely sounding inflationary)

2020-06-14

by

2020-06-14

Mainstream Models World Bank
The job, as Jay Powell currently sees it, means building up the S&P 500 as sky high as it can go. The FOMC used to pay lip service to valuations, but now everything is different. He’ll signal to all those fund managers by QE raising bank reserves, leading them on in what they all want to believe is “money printing” (that isn’t).

Read More »

No Flight To Recognize Shortage

2020-05-22

by

2020-05-22

If there’s been one small measure of progress, and a needed one, it has been the mainstream finally pushing commentary into the right category. Back in ’08, during the worst of GFC1 you’d hear it all described as “flight to safety.” That, however, didn’t correctly connote the real nature of what was behind the global economy’s dramatic wreckage. Flight to safety, whether Treasuries or dollars, wasn’t it.

Read More »

A Big One For The Big “D”

2020-05-13

by

2020-05-13

CPI less Food & Energy, 1983-2020
From a monetary policy perspective, smooth is what you are aiming for. What central bankers want in this age of expectations management is for a little bit of steady inflation. Why not zero? Because, they decided, policymakers need some margin of error. Since there is no money in monetary policy, it takes time for oblique “stimulus” signals to feed into the psychology of markets and the economy.

Read More »

Another month of falling prices in Switzerland

2019-12-09

by

2019-12-09

Swiss prices fell by 0.1% in November 2019, the sixth time in 12 months. But not everything is cheaper. Prices fell in December 2018 (-0.3%), January 2019 (-0.3), July (-0.5), September (-0.1), October (-0.2%) and November 2019 (-0.1). When combined with the low inflation experienced in the other 6 months the 12-month price drop is -0.1%.

Read More »

Downward Home Prices In The Downturn, Too

2019-10-26

by

2019-10-26

New Home Sales, 2011-2019
The Census Bureau reported today New Home Sales remained at a better than 700k SAAR in September following the big jump over the previous few months. Though the number was slightly lower last month than the month before, it wasn’t meaningfully less. As discussed yesterday, while that might seem the Fed’s rate cut psychology combined with the bond market’s pessimism (reducing the mortgage rate) is having a positive effect, I don’t see it that...

Read More »

China’s Dollar Problem Puts the Sync In Globally Synchronized Downturn

2019-10-18

by

2019-10-18

China Exports, 2006-2019
Because the prevailing theory behind the global slowdown is “trade wars”, most if not all attention is focused on China. While the correct target, everyone is coming it at from the wrong direction. The world awaits a crash in Chinese exports engineered by US tariffs. It’s not happening, at least according to China’s official statistics.

Read More »

Deflation Is Everywhere—If You Know Where to Look, Report 18 Aug

2019-08-19

by

2019-08-19

Gold and Silver Price
At a shopping mall recently, we observed an interesting deal at Sketchers. If you buy two pairs of shoes, the second is 30% off. Sketchers has long offered deals like this (sometimes 50% off). This is a sign of deflation. Regular readers know to wait for the punchline. Manufacturer Gives Away Its Margins

Read More »

As Chinese Factory Deflation Sets In, A ‘Dovish’ Powell Leans on ‘Uncertainty’

2019-07-14

by

2019-07-14

China Price Stability, 2007-2019
It’s a clever bit of misdirection. In one of the last interviews he gave before passing away, Milton Friedman talked about the true strength of central banks. It wasn’t money and monetary policy, instead he admitted that what they’re really good at is PR. Maybe that’s why you really can’t tell the difference Greenspan to Bernanke to Yellen to Powell no matter what happens.

Read More »

Nonmonetary Cause of Lower Prices, Report 5 May

2019-05-07

by

2019-05-07

Gold and Silver Price
Over the past several weeks, we have debunked the idea that purchasing power—i.e. what a dollar can buy—is intrinsic to the currency itself. We have discussed a large non-monetary force that drives up prices. Governments at every level force producers to add useless ingredients, via regulation, taxation, labor law, environmentalism, etc.

Read More »

Lost In Translation

2019-02-08

by

2019-02-08

Japan - JGB's 2016-2019
Since I don’t speak Japanese, I’m left to wonder if there is an intent to embellish the translation. Whoever is responsible for writing in English what is written by the Bank of Japan in Japanese, they are at times surely seeking out attention. However its monetary policy may be described in the original language, for us it has become so very clownish.

Read More »

Fear Or Reflation Gold?

2019-02-04

by

2019-02-04

Dollar Correlations 2016-2019
Gold is on fire, but why is it on fire? When the precious metals’ price falls, Stage 2, we have a pretty good idea what that means (collateral). But when it goes the other way, reflation or fear of deflation? Stage 1 or Stage 3? If it is Stage 1 reflation based on something like the Fed’s turnaround, then we would expect to find US$ markets trading in exactly the same way.

Read More »

Insight Japan

2019-01-16

by

2019-01-16

Japan CPI Food, Jan 2013 - 2019
As I wrote yesterday, “In the West, consumer prices overall are pushed around by oil. In the East, by food.” In neither case is inflation buoyed by “money printing.” Central banks both West and East are doing things, of course, but none of them amount to increasing the effective supply of money. Failure of inflation, more so economy, the predictable cost.

Read More »

Rate of Change

2019-01-13

by

2019-01-13

Labor Curves
We’ve got to change our ornithological nomenclature. Hawks become doves because they are chickens underneath. Doves became hawks for reasons they don’t really understand. A fingers-crossed policy isn’t a robust one, so there really was no reason to expect the economy to be that way.

Read More »

China Going Back To 2011

2018-12-13

by

2018-12-13

China PBOC Balance Sheet and CPI, Nov 2006 - 2018
The enormous setback hadn’t yet been fully appreciated in March 2012 when China’s Premiere Wen Jiabao spoke to and on behalf of the country’s Communist governing State Council. Despite it having been four years since Bear Stearns had grabbed the whole world’s attention (for reasons the whole world wouldn’t fully comprehend, specifically as to why the whole world would need to care about the shadow “dollar” business of one US investment “bank”) the...

Read More »

A Golden Renaissance, Report 25 Nov 2018

2018-11-26

by

2018-11-26

Gold and Silver Price
There is the freedom of speech battle, with the forces of darkness advancing all over. For example, in Pakistan, there are killings of journalists. Saudi Arabia apparently had journalist Khashoggi killed. New Zealand now can force travellers to provide the password to their phones so the government can go through all your data, presumably including your gmail, Onedrive, Evernote, and WhatsApp.

Read More »