Janet Yellen was apparently “hawkish” again in her latest speech, though the reasons why she may have been continue to elude the media and many markets. In many ways, she doesn’t even know, a fact that she expressed several months ago to likewise very little appreciation. The FOMC may or may not raise rates in the next meeting or the [...]
In the middle of 1919, the United States was beset by a great many imbalances. Having just conducted a wartime economy, almost everything before then had been absorbed by the World War I effort. With fiscal restraint subsumed by national emergency, inflation was the central condition. Given that the Federal Reserve was by then merely a few years old, no [...]
If a central bank is doing something, you can almost be assured that at its theoretical root lies a statement or idea proposed by Milton Friedman in the 1960’s. This is not to say that Friedman would approve of what has been done in his name, even before he died a decade ago he became flustered over what his disciples, [...]
Quantum physics has always had a math problem, one that even in its early days the leading physicists were troubled about. Einstein famously remarked, “God does not play dice with the universe.” Erwin Schrödinger’s thought experiment now known simply as “Schrödinger’s cat” was meant to mock the Copenhagen interpretation rather than help explain it. But we live in an age [...]
Initial jobless claims fell to just 234k for the week of February 4, nearly matching the 233k multi-decade low in mid-November. That brought the 4-week moving average down to just 244k, which was a new low going all the way back to the early 1970’s. Jobless claims seemingly stand in sharp contrast to other labor market figures which have been [...]
The most basic link in finance is that between risk and reward. Just like alchemists who once sought a path to gold from lead, a great deal of modern finance was built around finding a shortcut between them. Discovering the great asymmetry where risks would be low but rewards sky high was the Holy Grail of later 20th century mathematics. [...]
In addition to all the myriad indications of a serious labor market slowdown last year, despite the fact that the unemployment rate has been 5% or less since September 2015, and in all likelihood was that again in January, there is no indication of any acceleration in wages or earnings. None. The labor market just is not as it is [...]
Productivity in Q4 2016 was estimated to have been 1.29%, suggesting that last quarter was merely bad rather than unusually bad as it had been just before. Productivity during what was the near-recession in the three quarters including and after Q4 2015 was negative in all three. That would suggest, strongly, why labor market statistics have uniformly described a rather [...]
The release of the 2011 FOMC transcripts has provided some useful clarity on the thinking of Federal Reserve officials. Unlike in 2008, policymakers were a little better acquainted with wholesale money and its possible points of failure. They never did solve or even identify all of them, of course, but the repo market in particular seems to have finally been [...]
As a practical policy matter, monetary neutrality almost forces all official considerations to the downside. If you believe that money cannot alter the baseline for the economy, then the only time to consider the upside is where it is clearly “overheating.” In addition to placing inordinate importance on determining trend, in the aftermath of the Great “Recession” it has meant [...]
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