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Tag Archives: asian flu

Durable Goods And 1998

We have arrived at revisions season once again. It’s that time of year when many if not most (I don’t actually keep track) of economic accounts undergo heightened scrutiny. More data is collected from more comprehensive surveys using far larger samples. These are compared to the existing high frequency panels and changes are made as necessary. Sometimes these are substantial, as we’ve been noting for the past half-decade or so. As is the tendency near always on the downside. This year is...

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The Chicago Way Isn’t Even Partway And It’s Still Not Good For Powell, US Economy

In March 1999, Economists James Stock of Harvard and Mark Watson of Princeton published a paper in the Journal of Monetary Economics seeking answers for an inflation problem. For many years, it had been accepted that the unemployment rate was the only measure of economic activity necessary to infer inflation. The implications were enormous, especially in the age of interest rate targeting when central banks operated via expectations instead of money. This shift, among other things, meant...

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Curves Rhyme, Too

People have started to look back fondly upon the Asian flu. It was as global disaster, a dollar shortage which spread all across mostly Asia but not exclusively. The reason why it is talked about positively nowadays is LTCM and rate cuts. Popular myth has it that Greenspan’s Fed properly handled any economic fallout due to the former by enacting the latter. Beginning September 1998, faced with “overseas turmoil”, the FOMC began a series of only three rate cuts. According to convention, this...

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Inflation Falls Again, Dot-com-like

US inflation in January 2019 was, according to the CPI, the lowest in years. At just 1.55% year-over-year, the index hadn’t suggested this level since September 2016 right at the outset of what would become Reflation #3. Having hyped expectations over that interim, US policymakers now have to face the repercussions of unwinding the hysteria. Live by oil, now die by oil. The process has been exactly the same in each month. The energy component once amplifying the headline has turned around to...

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COT Blue: Biggest Warning Yet

The problem, or one of them anyway, with so many glaring market warnings is that it becomes difficult to keep up with all of them. You tend to focus on those right in front of you, the more immediate and visible. Oil is everything for reflation, and therefore its untimely end, so naturally the WTI curve gets all the unlovable love. And while we pay a lot of attention to the yield curve, there is less emphasis on some of the mechanics behind it. The Treasury futures market sort of runs the...

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Brazil Money Math

On June 10, 2013, Brazil’s central bank announced an allotment of 40,000 currency swap contracts at auction. This was the second operation carried out in short order that month, following weakness in the real, Brazil’s currency (BRL), against the dollar. In order to forestall any further declines, central bank intervention has long been a frontline tool in EM arsenals. But why swaps? After all, Brazil as many others in the same situation had spent about two decades amassing huge stockpiles of...

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BOND ROUT!!!! (Now With Additional Exclamations)

Ten years ago today, one of Carlyle Group’s mortgage funds, Carlyle Capital Corp (CCC), was seized by creditors. Precipitated by dwindling liquidity, the fund’s effective insolvency would amplify those global “dollar” pressures and lead to Bear Stearns’ untimely demise mere days later. The fund’s corporate parent issued a statement on March 6, 2008, that read: The last few days have created a market environment where the repo counterparties’ margin prices for our AAA-rated U.S. government...

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Still No Up

The Asian flu of the late 1990’s might have been more accurately described as the Asian dollar flu. It was the first major global test of the mature eurodollar system, and it was a severe disruption in the global economy. It doesn’t register as much here in the United States because of the dot-com bubble and the popular imagination about Alan Greenspan’s monetary stewardship in general. But even in our domestic economy, the Asian dollar flu registered. Industry was scaled back as global...

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