Irving Fisher was a prolific economic writer and thinker. In addition to decomposing bond yields into growth and inflation expectations, he also came up with something called the money illusion. He ever went so far as to write a book on the idea, published in 1928, for all his imagination called simply The Money Illusion.At issue is, essentially, human nature. [...]
150.2 History Lesson: Inflation vs. Bond Yields vs. CPI———Ep 150.1 Summary———We review the 1950s, 1960s, 1970s, 2000s and 2010s to study how bond yields reacted to persistent and pervasive monetary expansion, stagnation and contraction as well as how bond markets handled transitory consumer price shocks due to supply/demand imbalances. ———Sponsor———Macropiece Theater with Alistair Cooke (i.e. Emil Kalinowski) reading the latest [...]
150.1 Huge 1950s CPI-Surge was Transitory, Not Inflation ———Ep 150.1 Summary———An early-1950s US consumer buying-binge sent the Consumer Price Index soaring. Inflation!? No. It was a transitory supply/demand imbalance brought on by (geo)political factors. The bond market knew it and didn't overreact. And what about the Federal Reserve? They overreacted. ———Sponsor———Macropiece Theater with Alistair Cooke (i.e. Emil Kalinowski) reading the latest [...]
We already covered the yield curve’s reaction given today’s whopping consumer price levels. How about strictly inflation expectations in the market? TIPS, breakevens and such.Unsurprisingly, shorter-term breakevens (5s) jumped 12 bps to a new high of 308 bps (boosted considerably following the auction on October 21st). Pulling up the rest of the inflation “curve”, the 10-year breakeven added a “mere” [...]
The BLS said today its Consumer Price Index rose by 6.2% in October 2021 when compared to October 2020. This was the largest annual increase since Alan Greenspan was giving up on M2 three decades ago. Perhaps most concerning, after having taken a few months “off” prices re-accelerated last month reigniting fears of a 70s-style monetary runaway.But, as we saw [...]
Some call it the accordion effect while others refer to it in terms of a bullwhip. Whatever the terminology, the supply chain mess has created a set of perverse incentives leading to a positive feedback loop: the greater the mess, the longer the times for delivery, the more product gets ordered if in only to increase the chance something, anything [...]
Representatives in Congress from both parties were understandably apoplectic. Amidst the world’s worst monetary chaos since the Great Collapse after October 1929, legislators had been told by everyone from central bankers to all the right Economists how laws needed to passed right away, no delay, which would give the Bush Administration authority to buy up the “toxic waste” each had [...]
Have hedge funds acted rashly, perhaps stupidly? There is a segment of the population media that very much wants people to think so. According to recent data, fund speculators have gone long short-term US Treasuries, particularly the 2-year (as well as eurodollar futures), since early October. And not just long the short end, the most in almost seven years!What idiots, [...]
While most people were still digesting the headline US BLS report and its unemployment rate’s latest dip on Friday, over in Germany a few hours before the American release the other country’s economic bean counters at deStatis had already published some puzzling, seemingly inconsistent data. Measuring total industrial output, Industrial Production, the Germans said theirs had declined by a substantial [...]
Jay Powell and his group have been talking taper for months. The build up has been excruciating to some, if only because this central banker adjustment is supposed to mean something. Something especially big specially to bonds who just can’t thrive, everyone says, without the “monetization” of QE. With first less and then no Fed, who will buy them? Too [...]
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