Tag Archives: currencies

How times have changed. In the middle of 2018, we were told the risks to the global economy were all tilted to the upside. If central bankers weren’t careful, they chanced an uncontrollable inflationary breakout, the kind that would make the last few years of the 2010’s look too much like the 1970’s. Always eager to bottle up the inflation genie, Germany out of everyone actually welcomed negative factors as they built up during the year. From last August: In spite of...

The Census Bureau reported today New Home Sales remained at a better than 700k SAAR in September following the big jump over the previous few months. Though the number was slightly lower last month than the month before, it wasn’t meaningfully less. As discussed yesterday, while that might seem the Fed’s rate cut psychology combined with the bond market’s pessimism (reducing the mortgage rate) is having a positive effect, I don’t see it that way. From yesterday:...

Flash PMI’s from IHS Markit for the US economy were split in October. According to the various sentiment indicators, there’s a little bit of a rebound on the manufacturing side as contrary to the ISM’s estimates for the same sector. Markit reports a sharp uptick in current manufacturing business volumes during this month. The manufacturing index came in at 51.5, up from a revised reading of 51.1 in September based almost entirely on the production subset. But at the...

While things go wrong for Jay Powell in repo, they are going right in housing. Sort of. It’s more than cliché that the real estate sector is interest rate sensitive. It surely is, and much of the Fed’s monetary policy figuratively banks on it. When policymakers talk about interest rate stimulus, they largely mean the mortgage space. Homebuilders, at least, responded in August 2019 to the first rate cut in a decade exactly the way the FOMC had imagined when...

The second most frustrating aspect of trying to analyze global shadow money is how the term “shadow” really applies in this case. It’s not really because banks are being sneaky, desperately maintaining their cover for any number of illicit activities they are regularly accused of undertaking. The money stays in the shadows for the simple reason central bankers don’t know their jobs; even after a somehow Global Financial Crisis in 2008, they don’t realize the full...

China’s growing troubles go way back long before trade wars ever showed up. It was Euro$ #2 that set this course in motion, and then Euro$ #3 which proved the country’s helplessness. It proved it not just to anyone willing to honestly evaluate the situation, it also established the danger to one key faction of Chinese officials. The entire world slowed in 2012 following #2, but until the bottom of #3 it wasn’t really clear what that might mean. For a very long time,...

Because the prevailing theory behind the global slowdown is “trade wars”, most if not all attention is focused on China. While the correct target, everyone is coming it at from the wrong direction. The world awaits a crash in Chinese exports engineered by US tariffs. It’s not happening, at least according to China’s official statistics. The reported numbers aren’t good by any stretch, but they aren’t perhaps as bad as imagined by the constant references to what we...

Despite the name, the Fed doesn’t actually intervene in the US$ repo market. I know they called them overnight repo operations, but that’s only because they mimic repo transactions not because the central bank is conducting them in that specific place. What really happened was FRBNY allotting bank reserves (in exchange for UST, MBS, and agency collateral) only to the 24 primary dealers. These were repos only between those entities and the Federal Reserve. It had...

There will be more opportunities ahead to talk about the not-QE, non-LSAP which as of today still doesn’t have a catchy title. In other words, don’t call it a QE because a QE is an LSAP not an SSAP. The former is a large scale asset purchase plan intended on stimulating the financial system therefore economy. That’s what it intends to do, leaving the issue of what it actually does an open question. The SSAP is what’s coming next. A small scale asset purchase plan...

After constantly running through what the FOMC gets (very) wrong, let’s give them some credit for what they got right. Though this will end up as a backhanded compliment, still. After having spent all of 2018 forecasting accelerating inflation indices, from around New Year’s Day forward policymakers notably changed their tune. Inflation pressures that were in December 2018 building underneath leading officials to fear a harmful breakout, by January 2019 they were...