With several parts of the “reflation” trade rolling over, it is worth noting that one of the last of them to join in what may be growing reconsideration or doubt is inflation breakevens. In the 5-year and 10-year maturities, breakevens were at their lowest point on February 9, 2016, and have been moving higher ever since. However, we have to [...]
The whole point of any “stimulus” is to buy time. The idea is to keep the economy busy or, in the case of more purely monetary policy, happy during that time so that the economy on the demand side can on its own heal. In the parlance of orthodox economics, “stimulus” reduces the output gap, the difference between current output [...]
On February 8, 2007, exactly one decade ago today, shares of New Century Financial, a former darling of not just Wall Street but the mainstream, plunged 37% in panicky trading. The day before, February 7, New Century reported expectations for loan production for 2007 to be 20% below 2006 levels. But the real bombshell was the reasoning for that guidance, [...]
China’s Foreign Exchange Agency reported a $12 billion drawdown in that country’s foreign “reserves” holdings during January 2017. That was considerably less than the past three months, where all three saw more than $40 billion pulled out, nearly $70 billion in just November. These results are not in any way surprising, and are actually quite consistent with observed behavior during [...]
There were no surprises in the updated JOLTS estimates for December 2016, just more of the same sideways. The level of Job Openings was 5.501 million (SA), practically unchanged from November’s 5.505 million. The BLS estimates that Job Openings have been stuck at around that level since April 2015. In terms of Hires, that series, too, was practically unchanged in [...]
US exports grew by 5.6% year-over-year (NSA) in December, the fourth gain in the past five months. It was the highest growth rate since October 2013. On the incoming trade side, imports advanced 2.4% year-over-year after rising 5.1% in November. Those were the first consecutive monthly increases since the last two months of 2014. The trade figures add further evidence [...]
With JPY pushing above its recent resistance (for whatever might have caused it), it is useful to determine if that is an idiosyncratic change or whether there are other “dollar” indications that support a possible breakout. This is especially true given what I think is causing the move in JPY, namely that “reflation” had been initially predicated on ideas of [...]
As noted earlier, the Bank of Japan has a whole host of problems over its QQE with YCC attachments. Japan’s central bank has belatedly discovered Finance 101, where being one-dimensional doesn’t actually help the cause of “stimulus.” For far too long official policy has been lower, lower, and lower, whether that was carried out in JGB yields or whether it [...]
The Bank of Japan had announced another acronym with which to add to QQE, a term that already includes an extra “Q”, on September 21, 2016. It was a bizarre engagement, like something out of a TV advertisement for laundry detergent or diet supplements where the central bank marketed the same QQE that you always knew and loved but now [...]
QE and ZIRP were monetary experiments, though that is not how they were presented. In public, QE in particular was given a subtext of certainty, that Ben Bernanke’s Fed (or Mario Draghi’s ECB) knew exactly what it took to get the job done and furthermore would get right at it. It was a job that all Americans of all kinds [...]
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