Back on February 23, Federal Reserve Chairman Jay Powell stopped by (in a virtual, Zoom sense) the Senate Banking Committee to testify as required by law. In the Q&A portion, he was asked the following by Montana’s Senator Steve Daines: SENATOR DAINES. I just was looking at the T bill chart and noticing since the 1st of February, the one month rates have dropped in half from 0.06 to today 0.03, two months went from 0.07, to 0.02. We’re starting to get into that...Read More »
If the Fed’s Not In Consumer Prices, Then How About Producer Prices?
It’s not just that there isn’t much inflation evident in consumer prices. Rather, it’s a pretty big deal given the deluge of so much “money printing” this year, begun three-quarters of a year before, that consumer prices are increasing at some of the slowest rates in the data. Trillions in bank reserves, sure, but actual money can only be missing. U.S. CPI Services Core Fed, Jan 1985 - -2020 - Click to enlarge U.S. CPI Services Core percentile, Jan 2009 - 2020...Read More »
Consumers, Too; (Un)Confident To Re-engage
There is a lot of evidence which shows some basis for expectations-based monetary policy. Much of what becomes a recession or worse is due to the psychological impacts upon businesses (who invest and hire) as well as workers being consumers (who earn and then spend). Once the snowball of macro contraction begins rolling downhill, rational prudence dictates some degree of caution on all parts (pro-cyclicality). Bathed in the unearned glow of the Great “Moderation”,...Read More »
Where Is It, Chairman Powell?
Where is it, Chairman Powell? After spending months deliberately hyping a “flood” of digital money printing, and then unleashing average inflation targeting making Americans believe the central bank will be wickedly irresponsible when it comes to consumer prices, the evidence portrays a very different set of circumstance. Inflationary pressures were supposed to have been visible by now, seven months and counting, when instead it is disinflation which is most evident...Read More »
What’s Going On, And Why Late August?
This isn’t about COVID. It’s been building since the end of August, a shift in mood, perception, and reality that began turning things several months before even then. With markets fickle yet again, a lot today, what’s going on here? What you’ll hear or have already heard is something about Europe and more lockdowns, fears about a second wave of the pandemic. No, that doesn’t fit the herdlike change in direction you can observe across many different markets (below)....Read More »
Why Aren’t Bond Yields Flyin’ Upward? Bidin’ Bond Time Trumps Jay
It’s always something. There’s forever some mystery factor standing in the way. On the topic of inflation, for years it was one “transitory” issue after another. The media, on behalf of the central bankers it holds up as a technocratic ideal, would report these at face value. The more obvious explanation, the argument with all the evidence, just couldn’t be true otherwise it’d collapse the technocracy right down to the ground. And so it was also in the bond market....Read More »
If Dollar Is Fixed By Jay’s Flood, Why So Many TIC-ked At Corporates in July?
When the eurodollar system worked, or at least appeared to, not only did the overflow of real effective (if virtual and confusing) currency “weaken” the US dollar’s exchange value, its enormous excess showed up as more and more foreign holdings of US$ assets. Mostly US Treasuries, especially in official hands, but not entirely those. That much is perfectly clear; you can actually see the difference on every chart despite all the QE’s and trillions in bank reserves...Read More »
There is no oil in the CPI’s consumer basket, yet oil prices largely determine the rate by which overall consumer prices are increasing (or not). WTI sets the baseline which then becomes the price of motor fuel (gasoline) becoming the energy segment. As energy goes, so do headline CPI measurements. CPI Changes on Energy, 1995-2020 - Click to enlarge And that’s a huge problem…if you are Jay Powell. We’ve been making a big deal out of him making a huge deal out of...Read More »
Powell Would Ask For His Money Back, If The Fed Did Money
Since the unnecessary destruction brought about by GFC2 in March 2020, there have been two detectable, short run trendline upward moves in nominal Treasury yields. Both were predictably classified across the entire financial media as the guaranteed first steps toward the “inevitable” BOND ROUT!!!! Each has been characterized as the handywork of master monetary tactician Jay Powell. There is some truth underlying, only stripped of all that hyperbole. These backups in...Read More »
Wait A Minute, What’s This Inversion?
Back in the middle of 2018, this kind of thing was at least straight forward and intuitive. If there was any confusion, it wasn’t related to the mechanics, rather most people just couldn’t handle the possibility this was real. Jay Powell said inflation, rate hikes, and accelerating growth. Absolutely hawkish across-the-board. And yet, all the way back in the middle of June 2018 the eurodollar curve started to say, hold on a minute. That’s the part which caused so...Read More »