One way to read the inversion in eurodollar futures is that the market expects the Federal Reserve to ignore growing economic and financial concerns. There is a very reasonable basis for this structure given recent history. Central bankers and Economists have shown a remarkable, and remarkably consistent, ability to talk themselves out of any negative indications. This is the idea [...]
After the Soviet invasion of Afghanistan in 1979, the Russians became hyperaware of US and NATO countermovements. There was an increase in bellicose rhetoric on both sides, and the Andropov years had left the Soviet leadership weakened by economic stagnation increasingly worried that the US just might launch a first-strike attack. The Communists developed a systematic intelligence approach in response. [...]
The Bank of Japan is run by clowns. All of their major moves have blown up in their faces. The NIRP fiasco of January 2016 was one of the most stupendous moments of technical ineptitude ever displayed by a central bank; and that’s saying something, being able to choose from such a long and prominent list of monetary policy errors. [...]
This will be a fairly quick update as I just posted a Mid-Year Review yesterday that covers a lot of the same ground. There were, as you'll see below, some fairly positive reports since the last update but the markets are not responding to the better data. Markets seem to be more focused on the trade wars and the potential [...]
One of the most disgusting and least self-aware passages in any of the tens of thousands of published pages of FOMC discussions was in reference to the People’s Bank of China. On September 16, 2008, the US central bank’s operating and policy committee was sharing a laugh at the expense of their Chinese counterparts. Some solemnity and internal reflection should [...]
The term "decoupling" was invented in early 2008 really because of oil prices. It was widely believed that though the US economy might stumble that year (because of nothing other than subprime mortgages, naturally) the rest of the world would be insulated from any fallout. EM economies like China's were immune from such folly, they said. Like every other economic [...]
The Russian ruble has fared far and away much better than its EM peers. Compared to something like the Brazilian real, there is no comparison. The ruble has been relatively steady following an initial drop in April with the imposition of sanctions. April 19 came and went, and while that date is displayed prominently across all the key currencies it [...]
Home construction estimates are notoriously variable. They can change oftentimes by a substantial amount on a month-by-month basis, and the numbers are just as frequently subject to serious revisions in the short run. Still, we have to note when there are big moves even in these high frequency series, though keeping in mind no definitive conclusions are available from them [...]
Jerome Powell will make his fourth required appearance of 2018 on Capitol Hill today. The Full Employment and Balanced Growth Act of 1978 required a great many things when it was passed forty years ago, among them a degree of forced monetary competence to be at least displayed publicly by the Federal Reserve. The charade of Congressional testimony is what [...]
It’s funny how these things work. He didn’t actually say the word “taper”, at least not when the frenzy first started. The very idea of the “taper tantrum” was the media’s work, the easy slogan that could be used as shorthand for the conventional explanation. The economy was improving, everyone was told and easily believed, therefore what was supposed to [...]
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