Tag Archive: Deflation

US CPI Reaches Seven On US Goods Prices, With Disinflation Setting In Everywhere Else (incl. US Services)

How is that US Treasury rates out in the independent longer end of the yield curve have now “suffered” a seven percent CPI to go along with double taper and triple maybe quadruple (if the whispers are to be believed) rate hikes this year, yet have weathered all of that allegedly bond-busting brutality with barely a market fluctuation?

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The Historical Monetary Chinese Checklist You Didn’t Know You Needed For Christmas (or the Chinese New Year)

If there is a better, more fitting way to head into the Christmas holiday in the United States than by digging into the finances and monetary flows of the People’s Bank of China, then I just don’t want to know what it is. Contrary to maybe anyone’s rational first impression that this is somehow insane, there’s much we can tell about the state of the world, the whole world and its “dollars”, right from this one key data source.

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Start Long With The (long ago) End of Inflation

With the eurodollar futures curve slightly inverted, the implications of it are somewhat specific to the features of that particular market. And there’s more than enough reason to reasonably suspect this development is more specifically deflationary money than more general economic concerns.

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One Shock Case For ‘Irrational Exuberance’ Reaching A Quarter-Century

Have oil producers shot themselves in the foot, while at the same time stabbing the global economy in the back? It’d be quite a feat if it turns out to be the case, one of those historical oddities that when anyone might honestly look back on it from the future still hung in disbelief. Let’s start by reviewing just the facts.

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Playing Dominoes

That was fast. Just yesterday I said watch out for when the oil curve flips from backwardation to contango. When it does, that’s not a good sign. Generally speaking, it means something has changed with regard to future expectations, at least one of demand, supply, or also money/liquidity.

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Testing The Supply Chain Inflation Hypothesis The Real Money Way

Basic intuition says this is a no-brainer. Producer prices rise, businesses then pass along these higher input costs to their customers in the form of consumer price “inflation” so as to preserve profits. This is the supply chain hypothesis. Statistically, we’d therefore expect the PPI to lead the CPI.And this was expected for much of Economics’ history, taken for granted as one of those self-evident truths (kind of like the Inflation Fairy). After...

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The Productive Use Of Awful Q3 Productivity Estimates Highlights Even More ‘Growth Scare’ Potential

What was it that old Iowa cornfield movie said? If you build it, he will come. Well, this isn’t quite that, rather something more along the lines of: if you reopen it, some will come back to work. Not nearly as snappy, far less likely to sell anyone movie tickets, yet this other tagline might contribute much to our understanding of “growth scare” and its affect on the US labor market.

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This Is A Big One (no, it’s not clickbait)

Stop me if you’ve heard this before: dollar up for reasons no one can explain; yield curve flattening dramatically resisting the BOND ROUT!!! everyone has said is inevitable; a very hawkish Fed increasingly certain about inflation risks; then, the eurodollar curve inverts which blasts Jay Powell’s dreamland in favor of the proper interpretation, deflation, of those first two.

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Short Run TIPS, LT Flat, Basically Awful Real(ity)

Over the past week and a half, Treasury has rolled out the CMB’s (cash management bills; like Treasury bills, special issues not otherwise part of the regular debt rotation) one after another: $60 billion 40-day on the 19th; $60 billion 27-day on the 20th; and $40 billion 48-day just yesterday.

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What *Seems* Inflation Now Is Something Else Entirely

This is yet another one of those crucial recent developments which should contribute much clarity about the economic situation, yet is exploited in other ways (political) adding only more to the general state of economic confusion. The shelves may be empty in a lot of places around the country, leaving anyone with the impression there just aren’t enough goods.

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The Curve Is Missing Something Big

What would it look like if the Treasury market was forced into a cross between 2013 and 2018? I think it might be something like late 2021. Before getting to that, however, we have to get through the business of decoding the yield curve since Economics and the financial media have done such a thorough job of getting it entirely wrong (see: Greenspan below).

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Far Longer And Deeper Than Just The Past Few Months

Hurricane Ida swept up the Gulf of Mexico and slammed into the Louisiana coastline on August 29. The storm would continue to wreak havoc even as it weakened the further inland it traversed. By September 1 and 2, the system was still causing damage and disruption into the Northeast of the United States.

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Perfect Time To Review What Is, And What Is Not, Inflation (and why it matters so much)

It is costing more to live and be, so naturally people are looking for who it is they need to blame. Maybe figure out some way to stop it. You know and feel for the basics since everyone’s perceptions begin with costs of just living. This is what makes the subject of inflation so difficult, even more so in the era of QE.

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What’s The Real Downside To Some of These Key Commodities?

Last night, Autodata reported its first estimates for September auto sales in the US. According to its own as well as those compiled by the Bureau of Economic Analysis (the same government outfit which keeps track of GDP), vehicle sales have been sliding overall ever since April.

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Revisiting The Last Overhang

One reason why I still believe the US most likely would have entered a recession at some point in 2020 even without COVID wasn’t just the yield curve inversion that popped up several months before then. In August of 2019, the small part of the Treasury curve most people pay attention to (2s10s) did send out that dreaded signal, suggesting already to expect contraction in the intermediate term ahead of then. 

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What’s Real Behind Commodities

Inflation is sustained monetary debasement – money printing, if you prefer – that wrecks consumer prices. It is the other of the evil monetary diseases, the one which is far more visible therefore visceral to the consumers pounded by spiraling costs of bare living. Yet, it is the lesser evil by comparison to deflation which insidiously destroys the labor market from the inside out.

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Taper *Without* Tantrum

Whomever actually coined the term “taper”, using it in the context of Federal Reserve QE for the first time, it wasn’t actually Ben Bernanke. On May 22, 2013, the central bank’s Chairman sat in front of Congressman Kevin Brady and used the phrase “step down in our pace of purchases.” No good, at least from the perspective of a media-driven need for a snappy one-word summary.

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CPI’s At Fives Yet Treasury Auctions

A momentous day, for sure, but one lost in what would turn out to be a seemingly endless sea of them. October 8, 2008, right in the thick of the world’s first global financial crisis (how could it have been global, surely not subprime mortgages?) the Federal Reserve took center stage; or tried to.

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Inching Closer To Another Warning, This One From Japan

Central bankers nearly everywhere have succumbed to recovery fever. This has been a common occurrence among their cohort ever since the earliest days of the crisis; the first one. Many of them, or their predecessors, since this standard of fantasyland has gone on for so long, had caught the malady as early as 2007 and 2008 when the world was only falling apart.

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Weekly Market Pulse: As Clear As Mud

Is there anyone left out there who doesn’t know the rate of economic growth is slowing? The 10 year Treasury yield has fallen 45 basis points since peaking in mid-March. 10 year TIPS yields have fallen by the same amount and now reside below -1% again. Copper prices peaked a little later (early May), fell 16% at the recent low and are still down nearly 12% from the highs.

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