China’s official manufacturing PMI fell just slightly for December 2016, after rising for November to the highest since mid-2014. The overall index pulled back to 51.4 from 51.7 the previous month. The subindex for New Orders remained steady at 53.2, matching the highest point since July 2014. These PMI estimates suggest that China’s experience with the “rising dollar” has passed. [...]
In 2003, Nobel laureate Robert Lucas wrote admiringly in his Presidential address for the American Economic Association that the field of economics was itself a put-forward solution to the Great Depression. Such was the calamity that enormous intellectual effort was expanded so as to never repeat it. Though with that belated task there is also, or there at least should [...]
The main policymaking body of the Federal Reserve, the FOMC, has had a tortured relationship with eurodollar futures during this past decade. As I chronicled here in greater detail, starting in early 2007 the committee members decided that the deepest, broadest market in terms of money in human history could not possibly reflect accurate expectations. Ben Bernanke had told Congress [...]
The Office of the Comptroller of the Currency won’t release its collection of bank call reporting for Q3 2016 until January. There is a great deal about the aggregate US bank derivative book in that particular quarter that is of particular interest. Though we will have to wait for that update, there is still some value in reviewing parts of [...]
Did CNY flash crash yesterday? That it is even being contemplated and argued is itself an indication of these times. According to pretty much all market data, CNY fell below 7.0 to the dollar just prior to the US open. It had been trading its usual (for the past week or so) artificial, non-volatile sideways at around 6.96 when for [...]
There are usually ceteris paribus assumptions lurking behind every mistaken impression in economics, including monetary economics. If Central Bank X does Y, where Y is a plus sign it is believed to be “accommodation” or “loosening.” Rarely if ever is there an account of money outside of this condition, except in only the most extreme of circumstances. In the past, [...]
This is a repost; originally published on Dec. 22, 2016. On April 27, 2007, the People’s Bank of China announced that it was raising the statutory ratio for required reserves by 50 bps to 11%. The Chinese had allowed their currency exchange rate to moderately float almost two years earlier, which changed the way monetary policy would have to work. [...]
This is a repost; originally published Dec. 22, 2016. The federal funds rate target is essentially nothing more than a communication tool. You don’t have to take my word for it, the same conclusion has been reached at the level of the FOMC itself. There was, in fact, some debate, though limited in scope, in 2013 and 2014 about changing [...]
Canada’s economy remains the distinct enigma of the developed world, where the binary business cycle breakdown is perhaps most conspicuous. When oil prices first crashed to end 2014 and start 2015, even economists expected Canada’s economy to suffer, so exposed as it was and remains to the energy sector. But after two rough quarters to begin last year, that was [...]
For the 55th consecutive month, the PCE Deflator came in under the 2% inflation target for the Federal Reserve’s inflation mandate. The Bureau of Economic Analysis reported last week that inflation in November 2016 actually decelerated slightly from its meandering pace set more by oil price base effects than $4.5 trillion on the Fed’s balance sheet. Year-over-year the PCE Deflator [...]
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