It took a little longer than I expected, but it finally happened. FRBNY reports this morning that as of yesterday afternoon the effective federal funds rate was 2.41%. You’ll note that IOER, the ceiling, is still set 10 bps under the target upper boundary of 2.50%. Some quick math, that means EFF was yesterday 1 bps above IOER. The joke [...]
This will serve mostly as an update to what is going on inside the Chinese monetary system. The PBOC’s balance sheet numbers for February 2019 are exactly what we’ve come to expect, ironically confirmed today on the domestic end by the FOMC's dreaded dovishness. Therefore, rather than rewrite the same commentary for why this continues to happen I’ll just link [...]
Officials at the Federal Reserve have already announced they are undertaking an exhaustive review of their policies. Small wonder, the way things are turning out in 2019. It’s another year where they’ll have to apologize for so much over-optimism. Inflation hysteria seems like such a very long time ago, and so brief of a reprieve. What should really bother central [...]
If “rate hikes” and QT are the world’s big problem in 2019, then why is the FOMC announcing the end of “rate hikes” and QT failing to have a positive effect? The answer will surprise most people. Central banks, dominated by central bankers who are Economists, meaning statisticians, are always behind. They do not lead. Monetary policy, which has no [...]
Color them confused. They just can’t figure out why the world is going the wrong way, and in so many places. An upheaval here or political modification there, that’s the world as it always has been. Everywhere, though? There are no safe places anymore. There are populists all over the global, rising in between reborn strongmen. The liberal order appears [...]
According to Germany’s Zentrum für Europäische Wirtschaftsforschung, or ZEW, the slump in the country’s economy has now reached its fourteenth month. The institute’s sentiment index has improved in the last two, but only slightly. As of the latest calculation released today, it stands at -3.6. That’s up from -24.7 back in October, though sentiment had likewise improved at one point [...]
Even on a six-month cumulative basis, it is rare to find a negative number. These are reserved for the big ones, the market-shaking events that either perform an inflection or confirm one as it reaches pretty hard depths. The world being the way that it is, you just don’t see the whole forced into outright selling (on net) US$ assets. [...]
What is Japanification? There are all sorts of ways to explain what the term can mean. The simplest is a single word, which for me is “sideways.” We live in a non-linear world meaning one where compounding is the biggest factor. Albert Einstein probably never said compound interest is the most powerful force in the universe, but the reason the [...]
Quick review: stocks hit a bit of a rough patch right during the height of inflation hysteria. At the end of January 2018, just as the US unemployment rate had finally achieved the very center of attention, global markets were rocked by instability. Unexpectedly, of course. Over the next several weeks, share prices sagged and people blamed it on a [...]
As economic data for 2019 comes in, the numbers continue to suggest more slowing especially in the goods economy. Perhaps what happened during that October-December window was a soft patch. Even if that was the case, we should still expect second and third order effects to follow along from it. Starting with Europe first, Germany’s deStatis had earlier reported factory [...]
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