Economy

Vital Lessons Still Not Learned: Be Careful About GFC2

By |2020-03-27T16:41:55-04:00March 27th, 2020|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

It’s one of those crisis-level-of-illiquidity things that if you heard about it in normal times it would make you shake your head in disbelief. During a full-blown meltdown maybe it’s not standard stuff, but given the chaotic conditions it doesn’t seem so preposterous, either. Negative convexity is an otherwise benign phenomenon in fixed income that when combined with a lack [...]

It’s Not About Jobless Claims Today, It’s About What Will Hamper Job Growth In A Few Months

By |2020-03-26T17:45:09-04:00March 26th, 2020|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

You’ve no doubt heard about the jobless claims number. At an incomprehensible 3.28 million Americans filing for unemployment for the first time, this level far exceeded the wildest expectations as the economic costs of the shutdown continue to come in far more like the worst case. And as bad as 3mm is, the real hidden number is likely much higher. [...]

Collateral Shortage Goes Global, Hinting At The Way The (euro)Dollar Reaches Its Eventual End

By |2020-03-25T18:56:44-04:00March 25th, 2020|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Government securities have become so scarce that it is driving down repo rates. A collateral shortage that has become so acute, money dealers won’t part with their stock of government securities no matter what the price. Stop me if you’ve heard this before. Except, we’re talking about Japan and JGB’s here rather than UST’s. The trick is that both types [...]

Not Good: Eurodollar Futures Curve Sells Off, At The FRONT

By |2020-03-25T13:21:01-04:00March 25th, 2020|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

If the Fed has promised to print an unlimited supply of money, then why are inflation expectations at crisis lows and falling? At the same time, there are still-growing signs of illiquidity and an interbank crackup. Bazooka after bazooka, yet they don’t seem to be having much effect. That’s true domestically but more so offshore. You may have seen references [...]

Three Short Run Factors Don’t Make A Long Run Difference

By |2020-03-24T19:28:45-04:00March 24th, 2020|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

There are three things the markets have going for them right now, and none of them have anything to do with the Federal Reserve. More and more conditions resemble the early thirties in that respect, meaning no respect for monetary powers. This isn’t to say we are repeating the Great Depression, only that the paths available to the system to [...]

MAKING SENSE (podcast)

By |2020-03-25T13:22:22-04:00March 24th, 2020|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

Joining me for my inaugural podcast to try to make sense of this GFC2 (and more) is my colleague and fellow monetary enthusiast Emil Kalinowski. We talk repo, collateral, and why there are only dudzookas from the Fed.  It's also the start and tip of the ice berg for what we hope will become a much bigger project: an expansive, [...]

What If The Economy Wasn’t In A Good Place Entering Its Shutdown?

By |2020-03-24T16:06:09-04:00March 24th, 2020|Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

Why didn’t they think about this first? All of a sudden, with markets in the toilet (especially stocks), everyone is itching to get the economy back up and running. The first real peeks at what’s happened to it (as we’ll see in a minute) have definitely contributed to what seems to be an about-face. Many are starting to ask if [...]

Collateral Shortage > Bond Vigilantism (and it’s not even close)

By |2020-03-23T19:22:36-04:00March 23rd, 2020|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Faced with severe economic distress and a global market meltdown, they promised that it would be big. Massive fiscal “stimulus”, however, might come at a price. In the short run it was necessary, according to the orthodox view. When a crisis shows up you don’t worry about how to pay for things. Once all is said and done, the current [...]

Right on Cue, Low Money Rates Are Not What You Might Think

By |2020-03-23T17:12:12-04:00March 23rd, 2020|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

For several weeks now, the Federal Reserve has launched one bazooka after another. Officials there keep reassuring the markets, and the public, they’ve got an unlimited toolkit. However, the fact that they feel it necessary to keep showing you is a warning sign, especially how quickly each one is forgotten and overshadowed by the latest Big New Thing. The reason [...]