It really is about abnormality. What I mean by that is, contrary to popular imagination fed by the Fed and other central banks, ever since 2008 the inflation paradigm has changed. The first global financial crisis (GFC1) has proven time and again how it wasn’t a one-off, and since it was a monetary breakdown (global dollar shortage) that’s been permanent [...]
According to newly revised BLS benchmarks, the labor market might have been a little bit worse than previously thought during the worst of last year’s contraction. Coming out of it, the initial rebound, at least, seems to have been substantially better – either due to government checks or, more likely, American businesses in the initial reopening phase eager to get [...]
54.3 Deficits + Bond Losses + Inflation Fear = 1937? ———Part 3 Summary———In 1937, like now, circumstantial evidence and biases of central bankers suggested the impending arrival of fierce inflation: huge government deficits, better economic statistics, rising bond yields and excess bank reserves. Yet the underlying condition was of depression and credit illiquidity. ———Episode 54 Intro——— “The pen is mightier [...]
The “too many” Treasury argument which ignited early in 2018 never made a whole lot of sense. It first showed up, believe it or not, in 2016. The idea in both cases was fiscal debt; Uncle Sam’s deficit monster displayed a voracious appetite never in danger of slowing down even though – Economists and central bankers claimed – it would’ve [...]
54b Trigger Warning? China's Yuan and PMI Turn Bad? ———Part 2 Summary———The appreciation of the Chinese yuan against the American dollar has paused. A survey of the Chinese services sector scored a historic low. Are these the first indications of an economic slowdown? A slowdown that is not only Chinese but global? ———Episode 54 Intro——— “The pen is mightier than [...]
This particular part of the hysteria is understandable, if thoroughly unconvincing. Forget the Fed and its bank reserves for moment, whatever those are now and then. The banking system is where it’s at, monetarily speaking, and it is the banking system which seems to have lost its handle on the money printing lever. If we’re focused beyond bank reserves and [...]
Investors like to short bonds, even Treasuries, as much as they might stocks and their ilk. It should be no surprise that profit-maximizing speculators will seek the best risk-adjusted returns wherever and whenever they might perceive them. If one, or a whole bunch, has to first “borrow” a security the one doesn’t own in order to sell something at a [...]
It’s standard textbook stuff. Convention has it that “capital flows” are determined by the portfolio effects of interest rate differentials. Quite simply, if yields aren’t very high for low risk US instruments (like UST’s) or their European counterparts, fixed income managers must go hunting for yields overseas in Emerging Markets who offer fatter returns by comparison. Thus, “capital” is said [...]
Putting some charts and data behind Friday’s extensive essay about bank reserves and inflation intended to further highlight some key parallels…The precursor event to yield caps being imposed in the United States actually took place during the Great Depression. Then – as now – officials at the central bank expected their “money printing” efforts to pay off in the reverse [...]
54a US TIPS Curve Inverts: An Economic Warning? ———Part 1 Summary———The US Treasury inflation-protected security curve has gone upside down. Indeed, it has NEVER been more upside down. What is the Treasury market telling us about the economy's prospects? Also, how long does reflation typically last? Are we closer to its beginning or end? ———Episode 54 Intro——— "The pen is [...]
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