Orthodox economic theory assigns recession to some exogenous “shock.” Without it, an economy is supposed to grow indefinitely along its trend or potential baseline so long as NAIRU (non-accelerating inflation rate of unemployment) is maintained. As you can imagine, economists and policymakers spend most of their time on that latter part which is one reason, though more so ideology, that [...]
There is one part missing from the narrative sketched out in home resales being subjected to monetary imbalance. It is a compelling explanation for what we find as the most striking aspect of existing home sales, namely the curious lack of depth among sellers. It’s as if despite rising prices there is a seller strike where a significant part of [...]
Existing home sales as reported by the National Association of Realtors fell 7.1% in February 2016 from the month before. It was a very large decline but followed a two-month surge beginning December 2015; which itself came after an unusually large decline in November. In other words, housing and home sales seems to be that much more volatile of late. [...]
The Bank of Japan had previously “disappointed” last December when it failed to announced more “stimulus.” Setting aside who might actually have been frustrated by the lack of renewed distortions, the Japanese central bank did make some minor alterations to its QQE regime at that time. They expanded the list of eligible collateral and extended the average remaining maturity range [...]
The only immediate silver lining may be in the end the most fruitful of long-term prospects. Central bankers have done us a profound favor by overplaying their hand time and again. The catalog of false statements and expectations is long and getting longer. The ECB then assured “us” that this was different and that the LTRO’s, massive as they were, [...]
The prevailing view is that the ECB will add to QE tomorrow in accompaniment of a further negative deposit rate floor. Whether or not Draghi and his orthodox economists have the gall to shunt the MRO midpoint below zero remains an open question, but what is less uncertain is that despite just about a full year of actual QE there [...]
Having established the farcical nature of wage interpretations on the shortest time scale, a wider contextual framework leads in the same direction of doubt. The point of any interest rate hike for monetary policymakers is to head off “inflation” before it gets out of hand; the economy “overheating.” Having undertaken sufficient (it is assumed) stimulus to surpass whatever hysteresis calculations, [...]
When the unemployment rate tumbled toward 5% and now below it, economists thought that was overheating. For monetary policy, that was much of the basis for adjusting Fed communication (not rate hikes, as credit and funding markets are doing the opposite). Despite the “best jobs market in decades”, however, confirmation of that robust labor agenda is scarce at best and [...]
As I often write, in Japan it is far more difficult to hide the failure of “stimulus.” There are varying degrees of visibility in that regard around the QE world, but they all share negative redistribution as the base alloy. That’s why Janet Yellen may be merely uncomfortable and Mario Draghi increasingly brooding, but Haruhiko Kuroda was just pushed to [...]
JP Morgan reported late last month that its total exposure to oil & gas credit (directly on its books, I would assume) is $44 billion, or which $19 billion is currently rated junk. There was no update as to junk or junk-like corporates beyond energy, which in the end might be the more pressing concern. The old joke is that [...]
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