What does it mean to be data dependent? The term immediately conjures up the image of studious Economists working their mathematics to perfectly calibrate the proper monetary policy response. It is attached to the Federal Reserve, and other central banks, but its application is much broader. Businesses are, obviously, data dependent and often in the same way as the FOMC. [...]
A few weeks ago, the PBOC stunned many mainstream observers by reducing the RRR. It cut against the preferred narrative that the central bank was “tightening” in anticipation of an economic and therefore inflationary breakout (labor shortages, don’t you know). It didn’t seem to make sense. From the perspective of globally synchronized growth, it wouldn’t. Coming at it instead from [...]
Early last month, Deutsche Bank replaced one CEO pledged to paring back the bank’s ailing franchise with another committed to doing the same thing only more quickly. As I wrote at the time, “Cryan isn’t being ousted because he was wrong, but because he was right.” In comes Christian Sewing whose plans are starting to come into focus. It’s not [...]
Last year’s infatuation with globally synchronized growth was at least understandable. From a certain, narrow point of view, Europe’s economy had accelerated. So, too, it seemed later in the year for the US economy. The Bank of Japan was actually talking about ending QQE with inflation in sight, and the PBOC was purportedly tightening as China’s economy appeared to many [...]
The yearlong wireless data plan nightmare is officially over. For the second month in a row, the CPI for Wireless Telephone Services, which includes any unlimited data at fixed prices, was more stable in its annual comparison. In April 2018, the index was nearly flat to April 2017; down by less than 1%. It was, for once, transitory. What that [...]
There’s one final step to our examination of QE and bank reserves (you’ll need to read through at least Part 1, though Part 2 is worth the time, too). It’s all well and good to try and map out complex subjects using very simple models. That can help illuminate concepts, but we should always strive for validation. The heart of the [...]
Chinese exports rose 12.9% year-over-year in April 2018. Imports were up 20.9%. As always, both numbers sound impressive but they are far short of rates consistent with a growing global economy. China’s participation in global growth, synchronized or not, is a must. The lack of acceleration on the export side tells us a lot about what to expect on the [...]
Despite last month’s substantial revisions that wiped out most of “residual seasonality” from the seasonally adjusted revolving consumer credit series, it still remains for this year. The Federal Reserve staff eliminated the large swings in credit card use pivoting around the Christmas holiday. Consumers buy up a lot of stuff in advance of it, and then spend some several months [...]
Since we’ve already cracked open the accounting, it makes some sense to take our example into an important corollary examination (if you haven’t yet, you’ll need to read through Part 1). In our prior examples, we’ve assumed that the swap of risk-free assets on Bank A’s asset side is a neutral trade. That is, there aren’t any costs or downside [...]
I completely understand the confusion regarding bank reserves. I really do. It’s easy to believe they are money because that’s what you’ve been taught from Day 1. Not only that, the same message is carelessly reinforced in the media every single time QE or any LSAP is referenced. Bank reserves are the aftermath of money printing, therefore = money. That [...]
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