A couple of new developments in China that are worth commenting on. First, what everyone is calling a stealth QE. It isn’t. The central bank bill swap program is instead designed for two purposes at once, neither of which will follow along like an LSAP. The intent in doing this specifically right now suggests something other than stimulus. People are [...]
These things are all related, not that they are in any way connected by conventional thoughts on the subject of the global economy. Two European officials are now on record hinting at an ECB “pause.” There is one already underway in the US, Federal Reserve officials past and present debating how long it might last while markets price probabilities for [...]
A Return To Normalcy In the first two years after a newly elected President takes office he enacts a major tax cut that primarily benefits the wealthy and significantly raises tariffs on imports. His foreign policy is erratic but generally pulls the country back from foreign commitments. He also works to reduce immigration and roll back regulations enacted by his [...]
For the magic trick to work, it has to be credible. The audience has to be given something concrete upon which they will suspend their disbelief. Quantitative Easing was just such a trick, though only the public held onto any basis for success. You still hear it all the time, how QE was “money printing.” That was the trick. It [...]
If there is one small silver lining from 2018’s economic performance, it is that Milton Friedman’s interest rate fallacy is being robustly proven yet again. Many Economists will have you believe that low interest rates, short or long, are stimulus. This is a huge mistake. Here’s what Friedman said in December 1997: As the economy revives, however, interest rates would [...]
A year ago, central bankers were over the moon. From those in the US to those in Europe, with Japanese officials in between, they really thought they had it. There wasn’t much basis for the belief, mind you, merely the fact that positive numbers were registering in all those places at the same time. Like some old Three Stooges movie, [...]
Central bankers will often tell you exactly what you want to know, at least when it comes to their intentions. You can first begin by reading Milton Friedman and Anna Schwartz’s 1963 monetary bible A Monetary History. It’s all in there. From it, central banks all over the world have devised technical schemes intended to hold fast to the old [...]
To be an interested observer of things in the summer of 2013 was to be awash in the awareness of so many contradictions packed into one little piece of history. Forward guidance, for one, recognized the effects of markets. If QE was really effective, interest rates would rise not fall in anticipation of those positive effects. This was, actually, the [...]
Imagine yourself as a rural Chinese farmer. Even the term “farmer” makes it sound better than it really is. This is a life out of the 19th century, subsistence at best the daily struggle just to survive. Flourishing is a dream. Only, you can see just on the other side of the hill the bright reflective lights of one of [...]
This is perhaps the perfect day to review what’s going on in Hong Kong (thanks J. Fraser). I’ll be in Vancouver over the weekend to talk about curves, so why not preface it with a little HKD update. With everyone focused elsewhere, the story of 2017, in my view, wasn’t so big in 2018. For reasons that will further disturb [...]
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