There was considerable attention given to Janet Yellen’s appeal toward “optimal control” language in prior speeches and toward her confirmation. The idea is such that the newly committed 2% inflation target does not need to be a “rule.” Under optimal control, the FOMC may tolerate an inflation rate above that target if it allowed unemployment to decline at a quicker [...]
I suppose when your entire task derives from regression-based statistics, there is the tendency to incorporate straight lines into even your own thought patterns. Of course, that leads to self-reinforcing bias and should be canceled by some governing process. Usually that governing process takes the form of applied knowledge (as opposed to math-based knowledge) and plain common sense. In a [...]
In more typical climates you would come to believe that a decided lack of volatility in credit markets would be welcomed as an unmitigated positive. Credit is not supposed to be beset by whirlwinds from the political world, reflecting a more traditional paradigm when banks were simply custodial agents rather than proprietary hedge funds. The banking system was never supposed [...]
Mortgage rates have swung back to a 2-month high, a unfortunate concurrent timing to Janet Yellen’s recent assurance that the FOMC remains in full support of the mortgage market. Taper is not tightening to her, so the 53% decline in the monthly issuance of MBS and agency securities in February against May 2013 (before the taper word was released) must [...]
I quoted Janet Yellen’s statement from her first press conference yesterday, but it bears repeating: These sizable and still increasing holdings will continue to put downward pressure on longer‐term interest rates, support mortgage markets, and make financial conditions more accommodative, helping to support job creation and a return of inflation to the committee's objective. We saw new home construction data [...]
There was nothing surprising in Federal Reserve Chairman Janet Yellen’s press conference yesterday. While some “investors” may have been shocked about where policy was headed, some parts of the credit markets have been anticipating this course right along (more on that later). Whatever may be expectations for QE and “forward guidance”, the FOMC is using the unemployment rate to provide [...]
Whether it has been the American version or that pioneered by the Bank of Japan, QE is first and foremost an experiment in psychological manipulation. All central banks derive most of their “authority” from moral suasion, that old textbook “axiom” of getting market participants to act in the manner in which you only threaten. QE is different in that it [...]
What is most disheartening about the current political formulation on economics is the bipartisan acceptance of “inflation.” It comes from both the left and the right. That is in full part due to the orthodoxy of the economic “profession.” Despite being drastically wrong about pretty much everything for most of the past few decades (never saw a bubble they didn’t [...]
Given the slide in activity at the nation’s retail outlets in September, and the worries that are going to persist over tapering mortgage refis, the economy probably did not need another setback. More specifically, the “wrong” side of the bifurcated economy is bracing for cutbacks in SNAP benefits. Part of the ARRA (remember the “stimulus” bill in 2009? That it [...]
If the government shutdown ends in the near future, there will be a data dump unlike anything we have seen before. The September jobs report at the end of October the same time as retail sales and US imports/exports, etc. The backup in data crunching to fit survey results into seasonally adjusted output may delay the timing of the more [...]
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