Eurobonds are not a perfect substitute, but they may be someone’s only alternative. In some ways, Reflation #3’s weakness can be found originating in this context. The “rising dollar”, or eurodollar squeeze, of 2014-16 was a failure and even run on credit-based dollar funding offshore. If banks won’t deliver dollars, what’s left? Bonds. There has been an offshore Eurobond market [...]
In December 2006, just weeks before the outbreak of “unforeseen” crisis, then-Federal Reserve Chairman Ben Bernanke discussed the breathtaking advance of China’s economy. He was in Beijing for a monetary conference, and the unofficial theme of his speech, as I read it, was “you can do better.” While economic gains were substantial, he said, they were uneven. To keep China [...]
On December 8, 1940, Winston Churchill wrote to Franklin Roosevelt. The situation was indeed grim, France having fallen to the Germans and the United Kingdom pushed right off Continental Europe. Defeats in the Pacific were some of the worst in the long history of the British Nation. The battle was now raging over English skies, the island isolated in every [...]
In June 2003, while discussing the vote that would take the federal funds rate to its then-lowest point, 1%, Alan Greenspan committed what may have been the greatest monetary sin of modern times. The focus for much of the discussion was Japan, that country’s central bank pioneering at that early date all the things the Fed and other majors would [...]
Just like Jay Powell is surely hoping for some help from Mother Nature, the central bankers at the BoJ have to be wishing for more on their side of the Pacific. The US Federal Reserve will be looking for a repeat of last year’s Harvey and Irma effects out of Florence. It looks like they’ll need them. Japanese officials have [...]
Last year around this time, the tropics provided some unintentional basis for what would become hysteria. Hurricane Harvey by soaking a major metropolitan area with a biblical amount of rainfall delighted Keynesians everywhere. So much destruction, so much economic growth potential on the rebuild. Then Irma flirted with the Gulf Coast spine of Florida for good measure. For several months, [...]
On June 10, 2013, Brazil’s central bank announced an allotment of 40,000 currency swap contracts at auction. This was the second operation carried out in short order that month, following weakness in the real, Brazil’s currency (BRL), against the dollar. In order to forestall any further declines, central bank intervention has long been a frontline tool in EM arsenals. But [...]
You never quite know what you’re going to get with each monthly update. High frequency data tends to be noisy anyway, more so in the more exotic series. Following a month where something really changes, however, you aren’t quite sure if it will turn out to be nothing more than a phantom. Does last month’s big number get revised down [...]
What has changed in China? Many if not most in the West haven’t yet caught on because they can’t conceive of where all this might be heading. One literal change was the appointment of Yi Gang as head of the People’s Bank of China. Not only did he replace longtime chief Zhou Xiaochuan, Yi’s elevation broke an even lengthier unwritten [...]
If everything was going to plan, non-standard monetary policy at the zero lower bound (QE) would have raised inflation expectations increasing the level of aggregate demand as businesses and consumers ramped up their activities in anticipation of higher costs. The more this “overheating” goes on, the more forceful it becomes. Eventually, by virtue of the Phillips Curve, aggregate demand is [...]
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