Yesterday, the FOMC altered its view of household spending and business capex. It wasn’t a huge difference, they never are. Figuratively, these sorts of downgrades are little by little even though if things were ever to go the right way the language upgrades wouldn’t be subject to so much reservation. There isn’t much in the official statements anyway, just a [...]
It’s the most testable of all hypothesis, yet the one which no one wants to test. The central bank is central. All the textbooks say it. You’ve been taught to believe it from your first introduction to Economics and finance. Whatever happens, you aren’t supposed to fight the Fed. The US central bank unleashed powerful, novel liquidity programs, an ultra-loose [...]
Gold, in my worldview, can be a “heads I win, tails you lose” proposition. If it goes up, that’s fear. Nothing good. If it goes down, that’s collateral. In many ways, worse. Either way, it is only bad, right? Not always. There are times when rising gold signals inflation, more properly reflation perceptions. Determining which is which is the real [...]
It is the shadows what really matter. A big enough problem in them would affect pretty much everything, including far off, out-of-the-way places like federal funds. Thus, if we observe weird things going on there we can infer more serious issues back where it does mean something. In 2013 and 2014, the Federal Reserve was hugely optimistic. FOMC officials didn’t [...]
On August 12, 1985, Japan Airways flight 123 left Tokyo’s Haneda Airport on its way to a scheduled arrival in Osaka. Twelve minutes into the flight, the aircraft, a Boeing 747, suffered catastrophic failure when an aft pressure bulkhead burst. The airplane had been improperly repaired from a tailstrike (the tail of the aircraft actually hitting the runway pavement) seven [...]
Over the last several years, we’ve been bombarded with mainstream stories about how interest rates have nowhere to go but up. Inflation, recovery, and most of all fundamentals. Who in their right mind is going to buy all this government debt! The supply is rising and, according to these people, the demand can only be falling. There is nothing in [...]
These things are actually quite related, though I understand how it might not appear to be that way at first. As noted earlier today, the Fed (yet again) proves it has no idea how global money markets work. They can’t even get federal funds right after two technical adjustments to IOER (the joke). But as esoteric as all that may [...]
More than any conundrum in the bond market, the Federal Reserve has one on its hand much closer to home. Its home, anyway. The effective federal funds rate (EFF) has been stapled to IOER for each of the last fifty trading days. No variation whatsoever. EFF had converged with IOER back in October. A lot of ugly things began to [...]
I really like Joe Calhoun’s theoretical framework in explaining what we try to do here. Like a game of Poker, we are playing against everyone else at the table unlike Black Jack where you are largely playing yourself. It helps explain why I can say the FOMC is irrelevant while at the same time I spend so much time (all [...]
The news was one of those instances when you could see they were trying a little too hard. It didn’t make any sense, not anyway in the context to which it was delivered. On September 21, unnamed German officials were supposedly championing a megamerger in the banking sector. The country’s two largest financial institutions might be brought together to save [...]
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