Part 1 is here, Orderly or Not (short version: not). Also noted yesterday, the Fed sees no risks of bubble trouble because they are looking at it all from the 2008 perspective. That is completely wrong-headed; if there is a “next one” it will have nothing to do with subprime mortgages, or even mortgages and real estate. By March 2007, [...]
I generally remain noncommittal about giving specific predictions about the future because there is simply no way toward predilection. We can think about probabilities as a guide for analysis, particularly in setting investment guidelines, but to offer targets for factors like GDP or some stock index is pointless. Even now, with all that is taking place of economic unraveling, there [...]
You may have heard recently about the Transportation Safety Administration’s record for safety measures in airline transportation. The task with which the government agency is charged has become a bit of a joke, with public perception almost of a gang of thieves running a sanctioned-criminal enterprise. The groping and stealing are held back, with apathy and inertia on its side, [...]
To preserve any idea that the US is not heading into recession, the FOMC is now wholly reliant on statistical processes within the BEA’s use of the Census Bureau’s updated ARIMA-X13 modeling system. It is amazing to see this policy body that once proclaimed, unequivocally and forcefully, that it could perform the monetary equivalent of sorcery and alchemy reduced to [...]
So far the heavy buying after yesterday’s FOMC admission has held on the eurodollar curve. Most of the contracts along the curve have only given back a few bps after the 15-25 bps moves everywhere yesterday afternoon. The salient interpretation of trading along these lines is one of deep and abiding concerns over “dollar” liquidity and the economy. With the [...]
The FOMC has been talking, so we hear, about changing “forward guidance” to indicate a potential rate hike sooner rather than later. They had already changed the basis of “forward guidance” back in September which largely negated what forward guidance actually meant. The concept is only pliable in the manner in which monetary theory has to follow “rational expectations.” Whenever [...]
The dissection of the economy as it exists right now is usually limited to a narrow cross section of only GDP and the unemployment rate. As long as both are moving in the “right” direction, even if relatively sluggishly, the mass conclusion is that a recovery is in force and will remain so absent any “shock.” Theoretically, that owes to [...]
In March 2009, only two days after the exact bottom in US stocks, Alan Greenspan took the pages of the Wall Street Journal to declare, declaratively, that the Fed was not to blame for the catastrophe. His “evidence” was based on this single supposition: The second, and far more credible, explanation [for the housing bubble] agrees that it was indeed [...]
I have to thank my colleague Joe Calhoun for passing alone a very topical article written by Nassim Taleb and Gregory Treverton in Foreign Affairs. Taleb is, of course, well-known for his “black swan”, but it is really far more than that as it gets to the failure of modern economics as nothing more than a study of statistics. Conventional [...]
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