Tag Archive: Monetary Policy

If Bitcoin Is A Bubble…

Our earlier articles on bitcoin discuss the crypto asset as a currency and a commodity. Both papers focused on the consequences of bitcoin’s defining feature: the asymptotic supply limit of 21 million coins. This gives it an unusual juxtaposition of demand uncertainty and supply certainty (as well as inelasticity). As a currency, it gives rise to a tension between its use as a store of value and as medium of exchange.

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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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Global Asset Allocation Update

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. The extreme overbought condition of the US stock market persists so I will continue to hold a modest amount of cash. There are some minor changes within the portfolios but the overall allocation is unchanged.

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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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In Unprecedented Intervention, Swiss Central Bank Bails Out Firm That Prints Swiss Banknotes

  In the most ironic story of the day, the company that makes the paper that Swiss banknotes are printed on was just bailed out by the money-printing, stock-purchasing, plunge-protecting, savior-of-global equities…Swiss National Bank. While The SNB has a long and checkered history of buying shares in companies… as we have detailed numerous times.

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Jim Grant: “Markets Trust Too Much In The Presence Of Central Banks”

James Grant, Wall Street expert and editor of the renowned investment newsletter «Grant’s Interest Rate Observer», warns of the unseen consequences of super low interest rate and questions the extraordinary actions of the Swiss National Bank. Nearly ten years after the financial crisis, extraordinary monetary policy has become the norm.

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Year-end Rate Hike Once Again Proves To Be Launchpad For Gold Price

Year-end rate hike once again proves to be launchpad for gold price. FOMC follows through on much anticipated rate-hike of 0.25%. Spot gold responds by heading for biggest gain in three weeks, rising by over 1%. Final meeting for Federal Reserve Chair Janet Yellen. Yellen does not expect Trump's tax-cut package to result in significant, strong growth for US economy. No concern for bitcoin which 'plays a very small role in the payment system'.

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Demographic Dysphoria: Swiss Village Offers Families Over $70,000 To Live There

Across the world, demographic dysphoria is taking shape, creating numerous headaches for governments. To avoid the next economic downturn, governments are searching for creative measures to increase population growth and deliver a sustainable economy. In Europe, a near decade of excessive monetary policy coupled with a massive influx of refugees have not been able to reverse negative population growth– first spotted in 2012.

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SNB: It’s A Bonfire Of The Absurdities

This week’s letter will take a look at the growing number of ridiculous, inane, and otherwise nonsensical absurdities that fill the daily economic headlines. I have gone from the occasional smile to scratching my head now and then to “WTF” moments several times a week.

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Can’t Hide From The CPI

On the vital matter of missing symmetry, consumer price indices across the world keep suggesting there remains none. Recoveries were called “V” shaped for a reason. Any economy knocked down would be as intense in getting back up, normal cyclical forces creating momentum for that to (only) happen. In the context of the past three years, symmetry is still nowhere to be found.

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Is This The Best Way To Bet On The Fed Losing Control Of The Bond Market?

Authored by Kevin Muir via The Macro Tourist blog, Lately, one of my biggest duds of a call has been for the yield curve to steepen. Sure, I have all sorts of fancy reasons why it should steepen, but reality glares back at me in black and white on my P&L run. Sometimes fighting with the market is an exercise in futility.

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Why Small States Are Better

Andreas Marquart and Philipp Bagus (see their mises.org author pages here and here) were recently interviewed about their new book by the Austrian Economics Center. Unfortunately for English-language readers, the book is only available in German. Nevertheless, the interview offers some valuable insights.

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Dollar Surge Continues Ahead Of Jobs Report; Europe Dips As Catalan Fears Return

World stocks eased back from record highs and fell for the first time in eight days, as jitters about Catalonia’s independence push returned while bets on higher U.S. interest rates sent the dollar to its highest since mid August; S&P 500 futures were modestly in the red - as they have been every day this week before levitating to record highs - ahead of hurricane-distorted nonfarm payrolls data (full preview here). U.S. jobs report will also be...

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US: Reflation Check

There is a difference between reflation and recovery. The terms are similar and relate to the same things, but in many ways the latter requires first the former.  To get to recovery, the economy must reflate if in contraction it was beaten down in money as well as cyclical forces. In the Great Crash of 1929 and after, reflation was required because of the wholesale devastation of the money supply. 

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Fed’s Asset Bubbles Now At The Mercy Of The Rest Of The World’s Central Bankers

"Like watching paint dry," is how The Fed describes the beginning of the end of its experiment with massively inflating its balance sheet to save the world. As former fund manager Richard Breslow notes, however, Yellen's decision today means the risk-suppression boot is on the other foot (or feet) of The SNB, The ECB, and The BoJ; as he writes, "have no fear, The SNB knows what it's doing."

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The CPI Comes Home

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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2017 Is Two-Thirds Done And Still No Payroll Pickup

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

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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United States: Still No Up

The Asian flu of the late 1990’s might have been more accurately described as the Asian dollar flu. It was the first major global test of the mature eurodollar system, and it was a severe disruption in the global economy. It doesn’t register as much here in the United States because of the dot-com bubble and the popular imagination about Alan Greenspan’s monetary stewardship in general.

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Data Dependent: Interest Rates Have Nowhere To Go

In October 2015, Federal Reserve Vice Chairman Bill Dudley admitted that the US economy might be slowing. In the typically understated fashion befitting the usual clownshow, he merely was acknowledging what was by then pretty obvious to anyone outside the economics profession.

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