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Tag Archives: Bill Dudley

Are Central Banks Ready To Break Their Codependency?

Breaking our radio silence as we couldn’t help ourselves after reading former NY Fed President William Dudley’s piece imploring the Fed to stop enabling Trump’s  trade war. It sounds like central bankers are starting to realize they are, and have been, enabling the bad behavior of the politicos, who do not have the backbone to make the politically tough choices to fix their economies through the difficult but necessary structural reforms.  The central banks have been the only game in...

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Does A Second Floor Make An Effective Ceiling?

For central bankers like Bill Dudley and Ben Bernanke, the Global Financial Crisis was a godsend. So much had been a disaster it was hard to pin down specific failures. Where does one begin? Practically everything went wrong, so take your pick. The Financial Crisis Inquiry Commission (FCIC) did its part pointing the finger at those greedy Wall Street bankers and the toxic waste of their subprime mortgages. The saga of IOER proves there’s so much more to the story. For his part, Dr. Bernanke...

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The Fallacious Doctrine of ‘Abundant Reserves’

It wasn’t the first time it had happened, but to that point it did suggest something had changed. Things were going wrong and afterward the very idea of wrong took on an even more disastrous nature. On Monday, September 29, 2008, the Dow Jones Industrial Average plummeted nearly 778 points. It was the largest single day’s point loss in the index’s history. As luck would have it, this was a record that would stand until early February 2018. In percentage terms, the penultimate trading day in...

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The Transitory Story, I Repeat, The Transitory Story

Understand what the word “transitory” truly means in this context. It is no different than Ben Bernanke saying, essentially, subprime is contained. To the Fed Chairman in early 2007, this one little corner of the mortgage market in an otherwise booming economy was a transitory blip that booming economy would easily withstand. Just eight days before Bernanke would testify confidently before Congress, the FOMC had met to discuss their lying eyes. The eurodollar futures market was, in the...

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When The Problem Lies In The One Place Nobody Looks

It’s the most testable of all hypothesis, yet the one which no one wants to test. The central bank is central. All the textbooks say it. You’ve been taught to believe it from your first introduction to Economics and finance. Whatever happens, you aren’t supposed to fight the Fed. The US central bank unleashed powerful, novel liquidity programs, an ultra-loose response to growing crisis. Global panic happened anyway. Its officials assured full economic recovery from the genius of bond buying....

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What Bond Bull Really Means

As the saying goes, the plural of anecdotes is not data. It might also be said that the plethora of anecdotes does not make for accurate news. Before around mid-December 2018, media outlets particularly those like Bloomberg and the Wall Street Journal anxious to vindicate the technocrats at the Federal Reserve couldn’t print enough stories about the labor shortage. Barely a day would pass without an article describing the desperate situation for US businesses. Forced to compete for workers,...

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The Politics of Spreading Inversion(s)

Clothed in immense self-denial, hung up on absurd self-confidence, Federal Reserve officials gathered on August 7, 2007, to discuss how things really weren’t as bad as everyone seemed to think. There were several key conversations taking place at the FOMC meeting held then all leading nowhere. Policymakers would literally laugh off obvious distress in crucial markets. Here’s one example: MR. POOLE. I have two questions. First, does the New York Fed have what I might call material nonpublic...

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Chart of the Week: The Dreaded Full Frown

I’m going to break my personal convention and use the bulk of the colors in the eurodollar futures spectrum, not just the single EDM’s (June) contained within each. The current front month is January 2019, and its quoted price as I write this is 97.2475. The EDH (March) 2019 contract trades at 97.29 currently and it will drop off the board on March 18. Three-month LIBOR was fixed yesterday at a fraction higher than 2.80%, meaning that if it stays around or above that level someone is losing...

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Unexpected?

Now that the slowdown is being absorbed and even talked about openly, it will require a period of heavy CYA. This part is, or at least it has been at each of the past downturns, quite easy for its practitioners. It was all so “unexpected”, you see. Nobody could have seen it coming, therefore it just showed up out of nowhere unpredictably spoiling the heretofore unbreakable, incorruptible boom everyone was talking about just last week. A prime example from yesterday’s...

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Official Hedging Begins (Again)

The term “overseas turmoil” didn’t ever make into the official language, it was only through careful innuendo that things like FOMC meeting minutes would ever refer to the idea. It was a different story in the media, where the phrase gained its own currency. Ironically, it was the US currency behind it, which nobody could explain at the time. The most dramatic announcement to that effect came in August 2015 under Chinese authority. Before that summer, everyone was sure the first rate hike was...

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