The repo rate above the federal funds rate is an assault on everything we’ve been taught. There is supposed to be a risk-driven hierarchy that governs financial markets, every single one of them. The global economy depends on it. If you are judged to be a higher risk, that’s who pays the higher interest rate. But repo is lower risk. [...]
We’ve seen this all before. Three times. When things started to look better in the Spring of 2015, for example, “better” was more so a term of art. Another way of saying green shoots is “not as bad” or “no longer accelerating to the downside.” These have very different connotations and therefore to make an optimistic case there needs to [...]
It is, if you haven’t noticed, that time of year again. 'Tis the season for green shoots. In the Northern Hemisphere, winter gives way to spring. The flowers start to bloom and humans living here are naturally optimistic for the change of seasons. There is a reason how for ages this time of year has been associated with rebirth. In [...]
May 29. May 29. May 29. It keeps showing up everywhere. Not only does it appear as an inflection on so many important market charts, we keep finding it in economic accounts, too. There is so much to corroborate what can only have been a real and striking event. This contrasts, of course, with the mainstream narrative. Last year the [...]
Most of the best circuses used to have three main rings. Nowadays, we can only get the occasional show for two on the same day. It is a rare treat when central bankers from two major jurisdictions compete for the world’s misapprehending attention. Today is one of those days: Mario Draghi and the ECB as the warmup act for the [...]
To most people, this inflation business seems pretty silly. There are those who argue that any inflation index whether the CPI, PCE Deflator or some other approach yet to be devised can accurately capture the concept. And they are absolutely right to question the enterprise. Most people feel inflation in the things they do most; food, health insurance, the cost [...]
The eurodollar era saw not one but two credit bubbles. The first has been studied to death, though almost always getting it wrong. The Great Financial Crisis has been laid at the doorstep of subprime, a bunch of greedy Wall Street bankers insufficiently regulated to have not known any better. That was just a symptom of the first. The housing [...]
The IMF becomes the latest mainstream organization to abandon the recovery. It wasn’t really much of one to begin with, mostly just the hope that an uptick in growth would lead to the long sought, and necessary, completion. Globally synchronized growth in 2017 was supposed to mean a plausible pathway toward it. The IMF’s World Economic Outlook (WEO) said in [...]
It’s the forward-looking indicators right now that look the worst. This is why we think Euro$ #4 is still closer to its beginning than its end. Even though it may be entering its fifth quarter of existence here in Q2 2019, these things are long processes that take a lot of time to fully play out. Euro$ #3, for example, [...]
Japan is the very model of fiscal irresponsibility. If ever there was a bond vigilante, surely they would have a Japanese address. At the end of what was the Bank of Japan’s 133rd fiscal year, on March 31, 2018, Japan’s central bank reported total assets of ¥528,285,679,854,140. Of which, ¥448,326,107,324,120 was Japanese government bonds (JGB). Officials became increasingly confident these [...]
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