co·nun·drum - noun: A confusing or difficult problem; a question or problem having only a conjectural answer Merriam-Webster Back in the last Fed tightening cycle, Alan Greenspan described the refusal of long term rates to follow short rates higher a conundrum, something he couldn't really explain. Unlike past periods of tightening, long term rates refused to budge higher as the [...]
Part 1, with the introductory framework, is here. Prior to the crisis, the Basel rules “allowed” (if not downright encouraged since it was bankers that really wrote the rules through regulatory proxies) bank assets to be divided into “buckets” in order to calculate reserve ratios. The entire premise of reserve ratios, Tier 1 capital and all that, was to measure [...]
There is still a lot of what I think is misleading commentary about a couple of very important topics recently. In Europe, there is an overdrive by the ECB to get banks to lend to people and small businesses. That may be an ocean away with a currency difference in between even that, but what the ECB is doing is [...]
The precursor event of every hyperinflationary episode is not as conventional wisdom currently holds. Certainly there are conditions that are present in each and every one, including desperate fiscal imbalances that ultimately become expressed in growing monetarism, but the true cause that turns those troubling circumstances to total and complete wipeout and disaster is tunnel vision. That was what happened [...]
I think there remains a lot of misunderstanding about global finance simply because very few people, including every economist I have seen, realize the systematic arrangement has drastically altered way beyond orthodox comprehension. The eurodollar system that replaced the gold standard has even itself morphed broadly in the past few decades (especially around 1995), and then again in the post-crisis [...]
First, the China Manufacturing “Flash” PMI had “markets” exhaling relief since an increase from 50.2 to 50.5 meant, Manufacturing Rebound Relieves Growth Concerns. A week later, however, that PMI increase disappeared as the final PMI for September came in at an even 50.2 instead – which altered the commentary from “rising” manufacturing to “thankfully” steady manufacturing. So both rising and [...]
After enduring quite a bit of restlessness even into the early part of 2014, the Banco do Brasil (Brazil’s central bank) believed it had regained order in its currency “market.” Going back to the dramatic and global tightening episode around Chairman Bernanke’s taper threats in the middle of 2013, the real was caught in a very dramatic downdraft that has [...]
With credit markets in Europe and the US taking a bit of a pause for profit-taking or reassessment, it is notable that currencies have not. The euro finally broke free of what looked like a steady range, though unfortunately to the downside. While that may be celebrated by orthodox economists in Brussels and elsewhere, it should not as such devaluation [...]
The ECB’s experimentation with negative nominal interest rates is exactly that – an experiment whose range of conclusions spans the full spectrum of possibilities. I have absolutely no doubt at all that they have done enough regression calculations and monte carlo simulations to have estimated “central tendencies”, but at the same time I highly doubt recent developments fell within them. [...]
They say the road to hell is paved with good intentions, but that is not the only ingredient in the asphalt used to make the highway to Perdition. Typically, intent is augmented (or actually degraded) by a degree of incompetence that masquerades as complexity. The breadth of that observation is staggering in the current circumstances as Japanification has seemingly gained [...]
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