Tag Archive: Federal Reserve/Monetary Policy

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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Weekly Market Pulse: Perception vs Reality

It was the best of times, it was the worst of times… Charles Dickens, A Tale of Two Cities Some see the cup as half empty. Some see the cup as half full. I see the cup as too large.

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Inflating Chinese Trade

There was never really any answer given by the Chinese Communists for why their own export data diverged so much from other import estimates gathered by its largest trading partners. Ostensibly different sides of the same thing, it’s not like anyone asked Xi Jinping to weigh in; they report what numbers they have and consider them authoritative.

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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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The Great Eurodollar Famine: The Pendulum of Money Creation Combined With Intermediation

It was one of those signals which mattered more than the seemingly trivial details surrounding the affair. The name MF Global doesn’t mean very much these days, but for a time in late 2011 it came to represent outright fear. Some were even declaring it the next “Lehman.”

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For The Love Of Unemployment Rates

Here we are again. The labor force. The numbers from the BLS are simply staggering. During September 2021, the government believes it shrank for another month, down by 183,000 when compared to August. This means that the Labor Force Participation rate declined slightly to 61.6%, practically the same level in this key metric going back to June.

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Weekly Market Pulse: Inflation Scare?

Bonds sold off again last week with the yield on the 10 year Treasury closing over 1.6% for the first time since early June. The yield is now down just 16 basis points from the high of 1.76% set on March 30. But this rise in rates is at least a little different than the fall that preceded it.

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Tapering Or Calibrating, The Lady’s Not Inflating

We’ve got one central bank over here in America which appears as if its members can’t wait to “taper”, bringing up both the topic and using that particular word as much as possible. Jay Powell’s Federal Reserve obviously intends to buoy confidence by projecting as much when it does cut back on the pace of its (irrelevant) QE6.

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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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Surprise: It Isn’t Consumers Keeping American Factories Busy

US factories are humming along, constrained only by supply issues which might occasionally limit production. That’s the story, anyway. There’s too much business because of them, manufacturers taking in only more orders by the day leaving them struggling to catch up.But what kind of stuff is it that is being ordered from our nation’s factories?

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More About Less New Orders

The inventory saga, planetary in its reach. As you’ve heard, American demand for goods supercharged by the federal government’s helicopter combined with a much more limited capacity to rebound in the logistics of the goods economy left a nightmare for supply chains. As we’ve been writing lately, a highly unusual maybe unprecedented inventory cycle resulted (creating “inflation”).

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An Economy Dividing By Inventory And Labor

Is it delta COVID? Or the widely reported labor shortage? Something has created a soft patch in the presumed indestructible US economy still hopped up on Uncle Sam’s deposits made earlier in the year. And yet, there’s a nagging feeling over how this time, like all previous times, just might be too good to be true, too.

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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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August Avoids Zero In JGB’s

Central banks and their staffs have long been accused of trying to hide inflation. This allegation had been a staple of their critics, those charging reckless monetary policies for creating “too much” money that had allegedly been causing price imbalances all over the financial map.

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Weekly Market Pulse: Not So Evergrande

US stocks sold off last Monday due to fears over the potential – likely – failure of China Evergrande, a real estate developer that has suddenly discovered the perils of leverage. Well that and the perils of being in an industry not currently favored by Xi Jinping. He has declared that houses are for living in not speculating on and ordered the state controlled banks to lend accordingly.

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All Eyes On Inventory

You’ve heard of the virtuous circle in the economy. Risk taking leads to spending/investment/hiring, which then leads to more spending/investment/hiring. Recovery, in other words. In the old days of the 20th century, quite a lot of the circle was rounded out by the inventory cycle. Both recession and recovery would depend upon how much additional product floated up and down the supply chain.

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Weekly Market Pulse: Time For A Taper Tantrum?

The Fed meets this week and is widely expected to say that it is talking about maybe reducing bond purchases sometime later this year or maybe next year or at least, someday. Jerome Powell will hold a press conference at which he’ll tell us that markets have nothing to worry about because even if they taper QE, interest rates aren’t going up for a long, long time.

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August Retail Sales Surprise To The Upside, Because They Were Down?

According to the movie The Princess Bride, the worst classic blunder anyone can make is to get involved in a land war in Asia. No kidding. The second is something about Sicilians and death. There is also, I’ve come to learn, an unspoken third which cautions against chasing down and then trying to break down seasonal adjustments in economic data.Some things are best left just as they are published.

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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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