Tag Archives: Banking

When looking at the current state of the Chinese economy it is important to note what happened leading up the ongoing predicament. By managing the USD/CNY exchange rate the Chinese factory worker was essentially funding excess consumption in the United States. One of the many perks enjoyed by global reserve issuer. The factory worker obviously did not do this out of his own volition; on the contrary, he was duped into it by swallowing the propaganda spewed out by party apparatchiks in...

Bar a disastrous NFP print this coming Friday the US Federal Reserve will change the target range for the Federal Reserve (Fed) Bank’s Funds rate from the current level of zero – 25bp to 25 – 50bp on December 16th.  The Fed will effectively raise the overnight interbank rate of interest to around 30bp from an average of only 12bp in 2015. Ironically, that will be seven years, to the day, when the Fed first lowered rates to the current band. During the period of ZIRP madness, the Fed’s...

SWAP spreads recently took a nosedive and are once again trading at negative levels, even for shorter maturities. As can be seen from the chart below, treasury yields, here represented by the 10 year maturity, rose during QE policies programs contradicting the very raison d’être spouted by the central bankers. Interestingly enough we also see the same pattern in SWAP spreads. As QE programs were enacted SWAP spreads started to move upwards, just to rollover as the central bank program...

In last week’s article, we explained how the yield curve could cause GDP to contract in The Yield Curve and GDP – a causal relationship. Some of our readers suggested the analysis was wrong on back of an outdated view of modern money creation. The critics claim modern banks are not dependent on central bank reserves to create additional money; citing a Bank of England article from 2014 (which we have been well aware of) [A] common misconception is that the central bank determines the...