Before August 2007, US$ money markets operated efficiently and predictably. They behaved according to a rigid hierarchy, which is a good thing no matter how it may sound. This inflexibility in the context of funding markets was exactly what we would want. Arbitrage opportunity was responsible for enforcing the rules. One simple example was the difference between repo and federal [...]
When the Chinese yuan suddenly plummeted in mid-August 2015, the world looked on in stunned confusion. It didn’t make sense. The global economy was about to take off, they thought, and it wouldn’t be doing that without China’s vast anticipated contributions. Such a large move in such a short time frame for a major currency was another big “unexpected.” To [...]
There are surely a lot more interesting and entertaining things to picture. EFF provides us with continuous opportunity to pick at the FOMC’s competence. Even LIBOR and the TED spread are back in play, a rise in both going back to May 29 and that massive, worldwide collateral call. Brazil’s central bank is paying through the nose just so that [...]
How bereft of ideas might they have to be to fall back on IOER? It’s scandalous, really. But the Federal Reserve in terms of intellectual property belongs on the TV program Hoarders. They never throw anything away, so attached do they become to whatever ineffective idea implemented at any time. Practical experience is in their practice impractical evidence. It’s all [...]
The level of Chinese bank reserves fell again in May 2018. Year-over-year, what is technically classified as Deposits of Other Depository Corporations on the PBOC’s liability (money) side of its balance sheet contracted by 1%. This advances a very different trend for reserves, breaking what had been a more continuous and determined effort toward at least minimal growth. The central [...]
Some things are not supposed to be innovative. It’s no surprise that given the high technology of our modern lives that modern humans tend to be drawn to the new and shiny. We’ve marked the advance of society along the lines of big leaps in understanding and doing. Quite easily, we can get lost equating the two, thinking every innovation [...]
Does a year matter? It seems like a sufficient length of time whereby solid conclusions might be reached. While that may be true in a lot of disciplines, it is not so in Economics. Recall that in late June 2017, ECB President Mario Draghi kicked up a minor fury over presumed “hawkish” comments. It triggered a worldwide BOND ROUT!!! as [...]
I don’t know if I should make this a regular feature or not, but IOER is the one monetary policy factor that maybe is easiest enough to understand and therefore the quickest route for the public to get to they really don’t know what they are doing. Federal funds aren’t some obscure way off policy goal, it’s the very lever [...]
That didn’t take long. The Fed’s IOER scheme lasted all of three trading session. That it was broken yesterday of all recent days isn’t surprising, at least when you realize the full range of things going on yesterday. First, a review: The issue this week, perhaps, is again EFF only this time the effective rate is pushing a little too [...]
The origins of the modern unemployment rate were, of course, political in nature. Before, the question was simple: you were either employed or you weren’t. There weren’t so many various stages of condition, a gradation that today is as enthusiastically applied to the very definition of the labor force itself. In August 1937, Congress finally authorized a national survey of [...]
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