The central bank monolith is revealed to fracturing. The most evident appearance of that was the Bank of Japan’s recent surprise, where the vote to increase QQE was 5-4. But it has been more than Japan where divergences in policymaker positions are apparent. That includes, of course, the ECB, though not due to the Germany/not-Germany divide that has been a [...]
Thomas Carlyle, Scottish philosopher, coined the phrase “dismal science” in economics to describe his inability to get the slaves in the West Indies to conform to any rational order of thought about the subjects. Supply and demand never held that men should be so subjugated when in fact Carlyle believed, as so many “experts” did, that certain men should. The [...]
As if it needed further clarification, the FOMC has gone its own way publicly against pretty much everything else because there is no other course that could even possibly end Hollywood-style. The constant reference to “slack” in the labor market is what gives this away. A potential reduction in labor slack would mean emphasis on inflation rather than unemployment. However, [...]
We have clearly entered unchartered financial and economic terrain, a sentiment that applies so broadly as to lose almost all meaning. In fact, the world has strayed off the beaten path for so long “we” have little memory of what “normal” actually feels and looks like. The latest figment toward that direction is the growing errors of orthodoxy as it [...]
The problem with European monetarism is not that it is trying to swim against the tide of fragmented “markets” and national boundaries that represent very real hurdles in terms of legal and systemic bottlenecks. For the most part, everything that the ECB has tried, including a great deal that predates the bright spotlight on Mario Draghi, has led to precisely [...]
We will find out Sunday if all the rumors are correct (and by how much) about a significant portion of European banks either failing or still with their “feet wet” after the usual comedy of the stress tests. You never really know with these types of weighty events, as there are all sorts of biases and trading considerations in where [...]
The reason I have been characterizing the ECB’s actions since this summer as “desperate” is entirely due to the fact they are simply redoing things and expecting everyone to simply assume they are acting anew. That may not be entirely the case with their obsession with Eonia (more on that below), but narrowing the corridor has been the active policy [...]
As much as there has been movement and drama in US credit, the same can be said of European credit. That is, of course, no surprise given the vast linkages between the two, but that does not necessarily diminish the European “flavor” of those home “markets.” Most attention is paid to Germany and its bund market, and for very good [...]
Yesterday, in the wake of some intense credit market drama, St. Louis Fed President James Bullard acknowledged the obvious. Quoted in the Wall Street Journal, Bullard showed just how upside down these “markets” have become. “Inflation expectations are dropping in the U.S., and that is something that a central bank cannot abide,” Mr. Bullard said. Referring to the process of [...]
The PBOC continues along with its path of “targeting” liquidity rather than “flooding” as has been done in the past. Expectations for Chinese action, however, seem to be resistant to getting that message. This is not something that is just now being applied, as if a sudden and unanticipated change in thinking. The entire default drama at the beginning of [...]
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