Tag Archive: Federal Reserve/Monetary Policy

The CPI Comes Home

2017-09-22

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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

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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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Harvey’s Muted (Price) Impact On Oil

2017-09-19

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2017-09-19

US Crude Oil Stocks, Nov 2016 - Sep 2017
The impact of Hurricane Harvey on the Gulf energy region is becoming clear. There have been no surprises to date, even though the storm did considerable damage and shuttered or disrupted significant capacity. Most of that related to gasoline, which Americans have been feeling in pump prices.

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When You Are Prevented From Connecting The Dots That You See

2017-09-18

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2017-09-18

US Real Personal Income, Jan 2010 - Jul 2017
In its first run, the Federal Reserve was actually two distinct parts. There were the twelve bank branches scattered throughout the country, each headed by almost always a banker of local character. Often opposed to them was the Board in DC. In those early days the policy establishment in Washington had little active role. Monetary policy was itself a product of the branches, the Discount Rate, for example, often being different in each and every...

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The JOLTS of Drugs

2017-09-17

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2017-09-17

US Overdose Deaths Involving Opioids, 2000 - 2015
Princeton University economist Alan Krueger recently published and presented his paper for Brookings on the opioid crisis and its genesis. Having been declared a national emergency, there are as many economic as well as health issues related to the tragedy. Economists especially those at the Federal Reserve are keen to see this drug abuse as socio-demographic in nature so as to be absolved from failing in their primary task should it be found...

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COT Report: Black (Crude) and Blue (UST’s)

2017-09-15

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2017-09-15

Crude Oil, Jan 2006 - Jun 2017
Over the past month, crude prices have been pinned in a range $50 to the high side and ~$46 at the low. In the futures market, the price of crude is usually set by the money managers (how net long they shift). As discussed before, there have been notable exceptions to this paradigm including some big ones this year.

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Canada’s RHINO(s)

2017-09-14

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2017-09-14

Canadian GDP, 1961 - 2016
The Bank of Canada “raised rates” again today, this time surprising markets and economists who were expecting more distance between the first and second policy adjustments. The central bank paid typical lip service to being data dependent. It has a vested interest if you, as any Canadian reader, believe that to be a fact.

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US Export/Import: ‘Something’ Is Still Out There

2017-09-13

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2017-09-13

US Real Personal Income, Jan 2010 - Jul 2017
In January 2016, just as the wave of “global turmoil” was cresting on domestic as well as foreign shores, retired Federal Reserve Chairman Ben Bernanke was giving a series of lectures for the IMF. His topic wasn’t really the so-called taper tantrum of 2013 but it really was. Even ideologically blinded economists like Bernanke could see how one might have followed the other; the roots of 2016 in 2013.

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Global PMI Roundup; August 2017

2017-09-10

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2017-09-10

Stanbic Bank Kenya PMI, Jan 2014 - 2017
The first few days of any calendar month are now flooded with PMI data. Mostly due to Markit’s ongoing and increasing partnerships, we now have access to economic or business sentiment from and for almost anywhere in the world. It isn’t clear, however, if that is a good or useful development. For example, we can see quite plainly that there is a whole bunch of trouble brewing in Kenya. The Stanbic Bank/Markit Kenya PMI fell to a record low 42.0 in...

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Now Capex?

2017-09-09

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2017-09-09

Total Construction Spending, Jan 1994 - 2017
Of all the high frequency data the Personal Savings Rate is probably the least reliable. It is subject to both regular and benchmark revisions that can change the estimates drastically one way or the other. One step up from that statistic is the figures for Construction Spending. The initial monthly estimates don’t survive very long, and lately they have been quite weak in the first run only to be revised sharply higher over subsequent months.

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Toward The Housing Bubble, Or Great Depression?

2017-09-08

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2017-09-08

US Personal Savings Rate, Jan 2000 - 2017
During the middle 2000’s, one more curious economic extreme presented itself in an otherwise ocean of extremes. Though economists were still thinking about the Great “Moderation”, the trend for the Personal Savings Rate was anything but moderate, indicated a distinct lack of modesty on the part of consumers. In early 2006, the Bureau of Economic Analysis calculated that the rate had been negative for all of 2005. It was the first time in seventy...

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2017 Is Two-Thirds Done And Still No Payroll Pickup

2017-09-07

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2017-09-07

Establishment Survey, Jan 2010 - Jul 2017
The payroll report for August 2017 thoroughly disappointed. The monthly change for the headline Establishment Survey was just +156k. The BLS also revised lower the headline estimate in each of the previous two months, estimating for July a gain of only +189k. The 6-month average, which matters more given the noisiness of the statistic, is just +160k or about the same as when the Federal Reserve contemplated starting a third round of QE back in 2012.

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Proving Q2 GDP The Anomaly, Incomes Yet Again Fail To Accelerate

2017-09-05

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2017-09-05

Real Personal Income excl. Transfer Receipts 2014 - 2017
One day after reporting a slightly better number for Q2 GDP, the BEA reports today that there is little reason to suspect it was anything more or lasting. The data for Personal Income and Spending shows that the dominant condition since 2012 remains in effect – “good” quarters, or whatever passes for one these days, are the anomaly. There still is no meaningful rebound in income.

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The Two Parts of Bubbles

2017-09-04

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2017-09-04

Profits & Valuations 1949-1999
What makes a stock bubble is really two parts. Most people might think those two parts are money and mania, but actually money supply plays no direct role. Perceptions about money do, even if mistaken as to what really takes place monetarily from time to time. In fact, for a bubble that would make sense; people are betting in stocks on one monetary view that isn’t real, and therefore prices don’t match what’s really going on.

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Moscow Rules (for ‘dollars’)

2017-09-02

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2017-09-02

China & 'Dollars', Jan 2005 - 2017
In Ian Fleming’s 1959 spy novel Goldfinger, he makes mention of the Moscow Rules. These were rules-of-thumb for clandestine agents working during the Cold War in the Soviet capital, a notoriously difficult assignment. Among the quips included in the catalog were, “everyone is potentially under opposition control” and “do not harass the opposition.” Fleming’s book added another, “Once is an accident. Twice is coincidence. Three times is an enemy...

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Deja Vu

2017-09-01

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2017-09-01

Central Bank Rate Decomposition
According to orthodox theory, if interest rates are falling because of term premiums then that equates to stimulus. Term premiums are what economists have invented so as to undertake Fisherian decomposition of interest rates (so that they can try to understand the bond market; as you might guess it doesn’t work any better). It is, they claim, the additional premium a bond investor demands so as to hold a security that much longer (more return to...

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Currency Risk That Isn’t About Exchange Values (Eurodollar University)

2017-08-31

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2017-08-31

Eurodollar University
This week the Bureau of Economic Analysis will release updated estimates for Q2 GDP as well as Personal Consumption Expenditures (PCE) and Personal Incomes for July. Accompanying those latter two accounts is the currently preferred inflation standard for the US economy. The PCE Deflator finally hit 2% and in two consecutive months, after revisions, earlier this year.

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Bi-Weekly Economic Review: Don’t Underestimate Gridlock

2017-08-30

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2017-08-30

Bi-weekly
The economic reports released since the last update were slightly more upbeat than the previous period. The economic surprises have largely been on the positive side but there were some major disappointments as well. The economy has been doing this for several years now, one part of the economy waxing while another wanes and the overall trajectory not much changed. Indeed, the broad Chicago Fed National Activity index probably says it all, coming...

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United States Durable Goods In July; Rinse, Repeat

2017-08-27

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2017-08-27

US Durable Goods Orders, Jul 1993 - 2017
The Census Bureau reported today updated estimates for Durable Goods in July 2017. Quite frankly, nothing has changed so minimal commentary is all that is required. The aircraft anomaly from last month faded, leaving total new orders of $229.2 billion (seasonally-adjusted). That is less than in May before the Boeing surge, and less even than estimated order volume in March 2017.

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United States: The Fed Tries To Tighten By Rates, But The System Instead Tightens By Repo

2017-08-23

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2017-08-23

U.S. Treasury CMT Yields, Jan 2017-Aug 2017
The Fed voted for the first federal funds increase in almost a decade on December 15, 2015. It was the official end of ZIRP, and though taking so many additional years to happen, to many it marked the start of recovery. The yield on the 2-year Treasury Note was 98 bps that day.

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