You've probably read about financial repression in which governments or their agents interfere in the market in an effort to reduce debt. The most obvious recent example is the Fed and other central banks interfering in bond markets and suppressing interest rates. While these central banks generally justify this act on the grounds that it will help the economy as [...]
There should be much closer scrutiny on attaining success through monetary means. As with the Federal Reserve in the United States, the ECB seems to be judged solely on the asset prices of a select group of asset classes. But somewhere, someone should be monitoring the actual efficacy of all of these interventions. I think it tends to get lost [...]
It was only a few months ago that everyone was told to move on, the euro was fixed and the Eurozone was on its way to recovery and eventual prosperity in uniform political solidarity. There was some apprehension because that proclamation was the third made in as many years, but this time was supposed to be different because there were [...]
So, which is it, Larry Fink (Blackrock), "I'm hyperbullish on the US economy" or Federal Express? I don't think they can both be right. Mr. Fink, for his part, is conforming to the sell side script. FDX, for its part, is conforming to the monetarist script - lower earnings, reduce capex, reduce headcount, increase stock buyback. For the record, the [...]
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 [...]
"If Congress allows this meat-cleaver approach to take place, it will jeopardize our military readiness. It will eviscerate job-creating investments in education and energy and medical research. It won’t consider whether we’re cutting some bloated program that has outlived its usefulness or a vital service that Americans depend on every single day.” President Obama on the sequester The President gave [...]
Government spending and inventory builds were good in Q3, according to economists, when they pushed GDP accounting above expectations. Those same two economic accounts dramatically reduced economic activity in Q4, so economists are now intimating that the resulting contraction is something other than real. On the part of government spending, it probably should be ignored and certainly GDP is a [...]
The heavy hand of Federal Reserve policy is apparent in the credit markets as intended. The Fed continues to follow a ZIRP approach that expects low interest rates to create credit production in the banking system that transitions to the real economy as either personal sector or business loans. The first part of that equation has conformed to policy expectations [...]
In the context of the now-permanent establishment of QE, there was little note of the downward revisions to the Fed’s economic “forecast” for both 2012 and 2013. The revisions were minor in the, of course, downward direction, but we just need to give them time to be fully downgraded. Last December, the FOMC said the following with regard to economic [...]
Joe Calhoun recently noticed a bit of a structural shift taking place in the repo market, and he was right to point out the Fed’s role in the process. QE 3 has caused some of the usual “unforeseen” and unintended consequences that ripple through wholesale money markets. I have been highlighting a related drop in swap spreads, particularly the 10 [...]
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