Jay Powell has had his mind changed for him. Why? Not even a year ago he was downplaying things like federal funds. The rise in that one anachronistic rate was inconsistent with a healthy financial system poised for the good times that come with serious economic acceleration. Quite the opposite, actually. To dismiss the obvious contrary signal, in very place [...]
I’ve been writing since October when China reopened from that month’s Golden Week holiday that big dollar problems were imminent. You needn’t have taken my word for it, the PBOC said as much. Not directly, of course, but in interpreting the central bank’s anticipated behavior left little doubt. Over the next few months, more and more it seemed as if [...]
No Federal Reserve Chairman under its current configuration can say QE didn’t work. Those words will never pass the lips of whoever it may be occupying that position. The world’s bond markets, however, are trying very hard to make this resistance as uncomfortable as possible. The one thing central bankers here along with everywhere else LSAP's were unleashed could try [...]
In case you missed it, the rate cuts have already started. They actually began last year among the major economies in India. If we are counting only DM countries, then Australia and New Zealand are first out of the gate; the latter smaller country beating the larger former by around a month. In a way, it is fitting how even [...]
Trade wars are rapidly turning into subprime mortgages. A few billion in tariffs will have wrecked the entire global economy, they’ll claim. Just like all that toxic waste subprime mortgage fiasco led inevitably to the Great “Recession” and global panic. Neither will be true, except insofar as both were symptoms of the far greater cause. The other thing actually responsible [...]
The celebration was premature. As usual, people were extrapolating reflation into recovery. Getting relatively better after being really bad is not the same as truly healing. Reflation is a necessary but by itself insufficient condition for normalcy. The latter requires the former as a first step and then needs enough momentum (of opportunity) to carry it through only then completing [...]
One year ago today, something huge broke inside the global monetary system. Exactly what, we may never know. I believe it was something to do with collateral and securities lending, the kinds of things that brought AIG to its knees in what doesn’t seem like all that long ago. In a rush, over several days, everyone around the world piled [...]
Tomorrow will be one year since the global monetary system broke. Or, for the sake of accuracy, broke again this for the fourth time. There had been warnings going all the way back to September 2017 about how all was not right in the realm of reserve currency. These would take on added importance at the outset of 2018, an [...]
By far, the biggest problem in Economics is that it has no sense of itself. There are no self-correction mechanisms embedded within the discipline to make it disciplined. Without having any objective goals from which to measure, the goal is itself. Nobel Prize winning economist Ronald Coase talked about this deficiency in his Nobel Lecture: This neglect of other aspects [...]
Two on the same day, likely not coincidence. The next stage of “dovishness” may be upon us. It won’t be rate cuts; those won’t happen until all other excuses have been exhausted first. Jay Powell’s confused gang won’t give in until kicking and screaming there’s really nothing else left. The Fed “pause” isn’t working. To up the ante a bit, [...]
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