You have to wonder, given the circumstances today, if there is such a thing as a perpetual Minsky phase. The Minsky moment was first theorized as a point in the “cycle” in which borrowers, lustily seeking geometric leverage progression, begin to experience trouble simply maintaining debt. From there bidders are increasingly more difficult to find, making price momentum suspect, and [...]
If you haven’t discerned to this point, funding markets are incredibly complex and intricately linked across innumerable network nodes that make precise estimations, even analysis, equally difficult and complex. The primary nodule as it relates to global finance is geographically centered in London, as the eurodollar market largely operates there. With the “US dollar” as the reserve currency (I use [...]
I’ve gotten a few emails asking for more detail on why the market structure seems to have changed or evolved since about 1990, particularly that relation to the Federal Reserve’s full implementation of interest rate targeting. Coincidence and correlation is not always causation, so it is useful to unpack the full chain of circumstances between them to get a better [...]
Since monetary policy depends on credit to realize any kind of “wealth effect”, debt issuance and levels are thus secondary indications of non-organic consumer or household funds availability. Rising mortgage levels are not only consistent with rising home prices, but also the tendency of mortgages in that situation to allow home owners to capture and then use excess home equity [...]
Not really much different to report from the Durable Goods numbers. There is a curious near-stasis present in the trends and patterns in each of these data series. For some reason, they want to follow and match the Great Recession as if there existed an economic template or programmed auto-pilot – which would really confound policymakers since this is decidedly [...]
I have never liked the word “inflation” in any context. It is far too subjective despite the various ideological attachments that have been assigned. However, humans, as economic agents, perceive “inflation” and it has very real effects on economic decisions and performance, so it has to be accounted for in some way. Inflation in the conventional economics sense is narrowly [...]
For Bernanke and QE 3 (the MBS strand) there was only good news in Q1 ’13 GDP. Residential housing “investment”, i.e., housing-related construction, was revised upward to a 14% growth rate from 12.1%. That meant the frothy real estate “markets” provided 0.34% of the 1.8% growth rate in Q1 GDP. Unfortunately, that was less than the 0.41% provided in Q4, [...]
With everything going on in Japan and the US credit markets, Europe has slipped somewhat from the headlines. Part of that is now universal recognition of the durable depression facing the entire continent, no more denials about containment or rapid rebounds. But politicians and policymakers have still maintained that the currency portion of the crisis is over, and that the [...]
Joe should have known better than to ask, but for the sake of keeping this a blog post and not a full-blown research essay I will oversimplify as much as possible. In most media, the Swiss currency is treated like every other – as a function of, or tied to, the local economy. Thus currency moves are related to how [...]
The justification of ZIRP/QE has been largely based, in the real economy outside subsidizing bank lending, on the premise that low interest rates stir additional or incremental borrowing. The distortion of the domestic economy in the United States since the mid-1970’s toward consumption in the household sector has been a function of this assumed dynamic. It remains the textbook approach [...]
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