The stock market takes off in holiday celebration of the FOMC being even less clear than it really has been in some time; perhaps going all the way back to Alan Greenspan’s intentional mush. Equity “investors” are happy that the Fed may be happy about the economy, even though there is nothing in actual markets (outside of stocks) to suggest [...]
It seems Charles Dickens had a flair for 21st century economics all the way back in the 19th century. Writing in his book Little Dorrit (thanks to W Krauss for the reminder) he observed that credit systems tended to be, “…a person who can’t pay, gets another person who can’t pay, to guarantee that he can pay.” The first person [...]
The primary monetary channel for “stimulating demand” has traditionally fallen through real estate. Mortgage finance is the largest private source of financialism, reaching directly to people’s personal economy. The price appreciation of houses and the availability of mortgage credit are seen by orthodox economics as the basis for marginal “demand” changes in a theoretical philosophy that prizes nothing but activity [...]
The growing sense of an economic cliff is based on three major factors, all of them in massive markets as opposed to manipulated and ill-suited statistics. The most obvious are oil prices and the UST curve (and related curve mechanics) as they have turned to prices and shapes not seen since the worst of the last crisis. The third, “dollar” [...]
Commentary has not been able to ignore changes in the Fed’s balance sheet mechanics with all the potential systemic shifts occurring as QE ends and the FOMC contemplates going even further. As I said last week, the total balance of bank “reserves” declined but not due to anything other than an operational test of the Fed’s Term Deposit Facility (TDF). [...]
Now that QE is history (for the fourth time) there are a number of misconceptions about what is taking place at the Fed. All the action is located at FRBNY, which only makes the tangled spread of accounting classifications that much worse. Interbank activity has never been much of a widespread, household concept, so the relevance to current circumstances only [...]
Most people have at least a passing familiarity with the basic concepts of finance. These are intuitive aspects that count almost like Platonic qualities of “truth”, existing as almost transcendent reality upon which human construction is based. In this particular case I am talking about money and time value. The reason a yield curve takes the shape that it does [...]
As if it needed further reinforcement, the actions of the PBOC follow a simple script – huge monetarism doesn’t work and is ultimately harmful. That is why “reform” in China is being turned into something unrecognizable to the world’s stock investors especially at a time when China’s economy is expressly vulnerable. Only a week or so ago, China’s researchers issued [...]
“Dollar” credit markets are completely unconvinced by the Establishment Survey that economic growth is at hand. Not only has this bearish/tightening trend been in place for over a year, uninterrupted too, it has actually picked up in the wake of last week’s “unquestionable” payroll expansion. The bearishness continues on all fronts, in tandem with oil prices which is not a [...]
One last of piece of evidence tying QE to liquidity disruptions in 2014, and the big buying “crash” of October 15, is the “flow” of “dollars” presented by TIC. My contention from last week was that the decay in systemic liquidity (repo) began not in May 2013 with the introduction of the “taper” concept, but a few months earlier when [...]
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