Tag Archive: Monetary Policy

Why Aren’t Bond Yields Flyin’ Upward? Bidin’ Bond Time Trumps Jay

It’s always something. There’s forever some mystery factor standing in the way. On the topic of inflation, for years it was one “transitory” issue after another. The media, on behalf of the central bankers it holds up as a technocratic ideal, would report these at face value. The more obvious explanation, the argument with all the evidence, just couldn’t be true otherwise it’d collapse the technocracy right down to the ground.And so it was also in...

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This Has To Be A Joke, Because If It’s Not…

After thinking about it all day, I’m still not quite sure this isn’t a joke; a high-brow commitment of utterly brilliant performance art, the kind of Four-D masterpiece of hilarious deception that Andy Kaufman would’ve gone nuts over. I mean, it has to be, right?I’m talking, of course, about Jackson Hole and Jay Powell’s reportedly genius masterstroke.

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Fama 2: No Inflation For Old Central Banks

The Bureau of Labor Statistics reported that the core CPI in July 2020 jumped by the most (+0.62%) in almost thirty years. After having dropped month-over-month for three months in a row for the first time in its history, it has posted back to back gains the latest of which pushing the index back above its February level.

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Eugene Fama’s Efficient View of Stimulus Porn

The key word in the whole thing is “bias.” For a very long time, people working in and around the finance industry have sought to gain tremendous advantages. No explanation for the motive is required. Charts, waves, technical (sounding) analysis and so on.

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A Second JOLTS

What happens when we are stunned and dazed? We filter out the noise to focus on the bare basics by getting back to our instincts, acting reflexively based upon our deeply held beliefs and especially training. When faced with a crisis and there’s no time to really think, shorthand will have to suffice.

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“Unabhängigkeit der Nationalbank (Independence of the SNB),” FuW, 2020

Von verschiedenen Seiten werden Ansprüche an den Gewinn der Nationalbank gestellt. Es sollte in der Kompetenz der SNB liegen, zu entscheiden, welchen Teil ihrer Bilanz sie nicht zur Erfüllung ihrer Aufgaben benötigt.

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“Monetäre Staatsfinanzierung mit Folgen (Monetary Financing of Government),” Die Volkswirtschaft, 2020

Die Volkswirtschaft, 24 July 2020. PDF. Clarifying the connections between outright monetary financing, QE, the distribution of seignorage profits, the relationship between fiscal and monetary policy, and central bank independence.

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Wait A Minute, What’s This Inversion?

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.

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From QE to Eternity: The Backdoor Yield Caps

So, you’re convinced that low rates are powerful stimulus. You believe, like any good standing Economist, that reduced interest costs can only lead to more credit across-the-board. That with more credit will emerge more economic activity and, better, activity of the inflationary variety. A recovery, in other words. Ceteris paribus. What happens, however, if you also believe you’ve been responsible for bringing rates down all across the curve…and...

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“Wenn die Notenbank den Staat finanziert (When the Central Bank Finances the State),” FAS, 2020

Monetary deficit financing is the norm—after all, central banks distribute their profits. Monetary financing occurs in the context of regular open market operations and QE and, hyper charged, with helicopter drops. The question is not whether monetary policy should finance the government, but why it does so, and to what extent. Fiscal and monetary policy are inherently connected; what constitutes monetary policy is defined by objectives.

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A Big One For The Big “D”

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.

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We All Know Who’s On First, But What’s On Second?

It wasn’t entirely unexpected, though when it was announced it was still quite a lot to take in. On September 1, 2005, the Bureau of Economic Analysis (BEA) reported that the nation’s personal savings rate had turned negative during the month of July. The press release announcing the number, in trying to explain the result was reduced instead to a tautology, “The negative personal saving reflects personal outlays that exceed disposable personal...

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GDP + GFC = Fragile

March 15 was when it all began to come down. Not the stock market; that had been in freefall already, beset by the rolling destruction of fire sale liquidations emanating out of the repo market (collateral side first). No matter what the Federal Reserve did or announced, there was no stopping the runaway devastation.

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The Greenspan Bell

What set me off down the rabbit hole trying to chase modern money’s proliferation of products originally was the distinct lack of curiosity on the subject. This was the nineties, after all, where economic growth grew on trees. Reportedly. Why on Earth would anyone purposefully go looking for the tiniest cracks in the dam?

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Is Now a Good Time to Buy Gold? Market Report 16 March

We got hate mail after publishing Silver Backwardation Returns. It seems that someone thought backwardation means silver is a backward idea, or a bad bet. “You are a *&%#! idiot,” cursed he. “Silver is the most underpriced asset on the planet,” he offered as his sole supporting evidence. He doesn’t know that backwardation means scarcity, not that a commodity’s price is too high.

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The Greenspan Moon Cult

Taking another look at what I wrote about repo and the latest developments yesterday, it may be worthwhile to spend some additional time on the “why” as it pertains to so much determined official blindness, an unshakeable devotion to otherwise easily explained lunar events.

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Schaetze To That

When Mario Draghi sat down for his scheduled press conference on April 4, 2012, it was a key moment and he knew it. The ECB had finished up the second of its “massive” LTRO auctions only weeks before. Draghi was still relatively new to the job, having taken over for Jean-Claude Trichet the prior November amidst substantial turmoil.

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Your Unofficial Europe QE Preview

The thing about R* is mostly that it doesn’t really make much sense when you stop and think about it; which you aren’t meant to do. It is a reaction to unanticipated reality, a world that has turned out very differently than it “should” have. Central bankers are our best and brightest, allegedly, they certainly feel that way about themselves, yet the evidence is clearly lacking.

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The Obligatory Europe QE Review

If Mario Draghi wanted to wow them, this wasn’t it. Maybe he couldn’t, handcuffed already by what seems to have been significant dissent in the ranks. And not just the Germans this time. Widespread dissatisfaction with what is now an idea whose time may have finally arrived.

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Monthly Macro Monitor: Does Anyone Not Know About The Yield Curve?

The yield curve’s inverted! The yield curve’s inverted! That was the news I awoke to last Wednesday on CNBC as the 10 year Treasury note yield dipped below the 2 year yield for the first time since 2007. That’s the sign everyone has been waiting for, the definitive recession signal that says get out while the getting is good.

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