Tag Archives: Liquidity

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....

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...

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...

I guess in some ways it’s a race against the clock. What the optimists are really saying is the equivalent of the old eighties neo-Keynesian notion of filling in the troughs. That’s what government spending and monetary “stimulus” intend to accomplish, to limit the downside in a bid to buy time. Time for what? The economy to heal on its own. Fill up the bathtub, so to speak, with artificial stimulus water (aggregate demand) until such time as the basin stops...

Discussion of Antonio Fatás’ chapter in Elena Carletti, Stijn Claessens, Antonio Fatás, Xavier Vives, The Bank Business Model in the Post-Covid-19 World, CEPR/IESE report, London, June 2020. PDF. Antonio’s chapter offers a rich overview of the dramatic changes in the world of money and banking that we have seen in recent years. I focus on two themes: the nature of money and how it relates to these developments, and the government’s response to the structural changes we observe. I...

Just a quick update to add a little more data and color to my last Friday’s swap line criticism so hopefully you can better see how there is intentional activity behind them. Since a few people have asked, I’ll break them out with a little more detail. While the volume of swaps outstanding at the Fed has, in total, remained relatively constant (suspiciously, if you ask me), the underlying tenor of them has not. Meaning, there is purpose. It’s not like everyone...

Sometimes the news drives the price action, but sometimes the price action drives the news.  If the initial rally in US stocks after the FOMC meeting had been sustained and if the dollar had continued to decline, observers would drawing a different conclusion. Because of the sell-off in risk assets, many observers are blaming the Fed’s pessimism. I do not see it that way. The median Fed GDP forecast for this year and next is above the OECD’s newest forecasts, for...

Jackie Pang from Meigu TV called and wanted to talk about the seeming disconnect between Wall Street and Main Street. In this nearly 4.5 minute clip that she posted here, she gave me plenty of time to explain what I make of it. At the beginning of the year, as the S&P 500 was making new record highs, many observers wondered about the connection. The growing disparity of wealth and income may also raise questions about the linkages between Wall Street and Main...

Count me among the bond vigilantes. On the issue of supply I yield (pun intended) to no one. The US government is the brokest entity humanity has ever conceived – and that was before March 2020. There will be a time, if nothing is done, where this will matter a great deal. That time isn’t today nor is it tomorrow or anytime soon because it’s the demand side which is so confusing and misdirected. Realizing this is true does not cancel your vigilantism. For two years...

As I’ve said, it is a threefold failure of statistical models. The first being those which showed the economy was in good to great shape at the start of this thing. Widely used and even more widely cited, thanks to Jay Powell and his 2019 rate cuts plus “repo” operations the calculations suggested the system was robust. Because of this set of numbers, officials here as well as elsewhere around the world chose the most extreme form of pandemic mitigations, trusting...