Tag Archives: Economics

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 fiscal year 2014, which ended September 30 2014, the Federal government of the United States reported a cumulative deficit of US$484 billion, while the total debt outstanding increased by more than a trillion dollars. For fiscal year 2015, the difference was negligible because the US Treasury conducted so called emergency measures to adhere to the Congressional imposed debt ceiling. As soon as Congressional leaders agreed among themselves, the debt ceiling was raised and US debt...

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 Some of our readers suggested the analysis was wrong on back of an outdated view of modern money creation.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...