Tag Archive: Federal Reserve/Monetary Policy

Central Bank Transparency, Or Doing Deliberate Dollar Deals With The Devil

The advent of open and transparent central banks is a relatively new one. For most of their history, these quasi-government institutions operated in secret and they liked it that way. As late as October 1993, for example, Alan Greenspan was testifying before Congress intentionally trying to cloud the issue as to whether verbatim transcripts of FOMC meetings actually existed.

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What About 2.62 percent?

There’s nothing especially special about 2.62%. It’s a level pretty much like any other, given significance by only one phrase: the highest since 2014. It sounds impressive, which is the point. But that only lasts until you remember the same thing was said not all that long ago.

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The Blatant Dishonesty of the ‘Boom’

Why do humans tend to behave in herds? It’s a fundamental question that only recently have researchers been able to better understand. On the one hand, it doesn’t take an advanced degree in some neurological science to see the basis behind it; survival for our ancestors often meant getting along with the crowd. There are times when that very trait applies still.

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U.S. Unemployment: The Dissonance Book

I’ve found the word “dissonance” has become more common in regular usage beyond just my own. Whether that’s a function of my limited observational capacities or something more meaningful than personal bias isn’t at all clear. Still, the word does seem to fit in economic terms more and more as we carry on uncorrected by meaningful context.

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Good or Bad, But Surely Not Transitory

When Federal Reserve officials first started last year to mention wireless network data plans as a possible explanation for a fifth year of “transitory” factors holding back consumer price inflation, it seemed a bit transparent. One of the reasons for immediately doubting their sincerity was the history of that particular piece of the CPI (or PCE Deflator).

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Is Un-Humming A Word? It Might Need To Become One

Industrial Production in the US was up 3.6% year-over-year in December 2017. That’s the best for American industry since November 2014 when annual IP growth was 3.7%. That’s ultimately the problem, though, given all that has happened this year. In other words, despite a clear boost the past few months from storm effects, as well as huge contributions from the mining (crude oil) sector, American production at its best can only manage to reflect...

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Retail Sales, Consumer Sentiment, And The Aftermath Of Hurricanes

Consumer confidence has been sky-high for some time now, with the major indices tracking various definitions of it at or just near highs not seen since the dot-com era. Economists place a lot of emphasis on confidence in all its forms, including that of consumers, and there is good reason for them to do so; or there was in the past.

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The Dea(r)th of Economic Momentum

For the fourth quarter as a whole, Chinese exports rose by just less than 10% year-over-year. That’s the highest quarterly rate in more than three years, up from 6.3% and 6.0% in Q2 2017 and Q3, respectively. That acceleration is, predictably, being celebrated as a meaningful leap in global economic fortunes. Instead, it highlights China’s grand predicament, one that country just cannot seem to escape.

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Inflation Correlations and China’s Brief, Disappointing Porcine Nightmare

Two years ago, China was gripped by what was described as an epic pig problem. For most Chinese people, pork is a main staple so rapidly rising pig prices could have presented a serious challenge to an economy already at that time besieged by massive negative forces. It was another headache officials in that country really didn’t need.

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The Conspicuous Rush To Import

According to the Census Bureau, US companies have been importing foreign goods at a relentless pace. In estimates released last week, seasonally-adjusted US imports jumped to $204 billion in November 2017. That’s a record high finally surpassing the $200 billion mark for the first time, as well as the peaks for both 2014 and 2007.

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The Reluctant Labor Force Is Reluctant For A Reason (and it’s not booming growth)

In 2017, the BLS estimates that just 861k Americans were added to the official labor force, the denominator, of course, for the unemployment rate. That’s out of an increase of 1.4 million in the Civilian Non-Institutional Population, the overall prospective pool of workers. Both of those rises were about half the rate experienced in 2016.

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The Great Risk of So Many Dinosaurs

The Treasury Borrowing Advisory Committee (TBAC) was established a long time ago in the maelstrom of World War II budgetary as well as wartime conflagration. That made sense. To fight all over the world, the government required creative help in figuring out how to sell an amount of bonds it hadn’t needed (in proportional terms) since the Civil War. A twenty-person committee made up of money dealer bank professionals and leaders was one of the few...

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Industrial production: The Chinese Appear To Be Rushed

While the Western world was off for Christmas and New Year’s, the Chinese appeared to have taken advantage of what was a pretty clear buildup of “dollars” in Hong Kong. Going back to early November, HKD had resumed its downward trend indicative of (strained) funding moving again in that direction (if it was more normal funding, HKD wouldn’t move let alone as much as it has). China’s currency, however, was curiously restrained during that...

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Bi-Weekly Economic Review: Housing Market Accelerates

The economy ended 2017 with current growth just slightly above trend. In general the reports of the last two weeks of the year were pretty good with housing a standout performer going into the new year. We are still trying to get past the impact – positive and negative – from the hurricanes a few months ago though so it is probably prudent to wait for more evidence before making any definitive pronouncements about the economy.

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The Economy Likes Its IP Less Lumpy

Industrial Production rose 3.4% year-over-year in November 2017, the highest growth rate in exactly three years. The increase was boosted by the aftermath of Harvey and Irma, leaving more doubt than optimism for where US industry is in 2017. For one thing, of that 3.4% growth rate, more than two-thirds was attributable to just two months.

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Chinese Are Not Tightening, Though They Would Be Thrilled If You Thought That

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

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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Chart of the Week: Collateral

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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China Exports and Industrial Production: Revisiting Once More The True Worst Case

As weird as it may seem at first, the primary economic problem right now is that the global economy looks like it is growing again. There is no doubt that it continues on an upturn, but the mere fact that whatever economic statistic has a positive sign in front of it ends up being classified as some variant of strong. That’s how this works in mainstream analysis, this absence of any sort of gradation where if it’s negative it’s bad (though in 2015...

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Defining The Economy Through Payrolls

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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